difference between nps and eps
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I dedicate this project to my father and mother and am indebted
towards the Almighty to lead me whenever I needed His support.
Last but not the least, to all my friends who supported me in all
aspect of life!!!!!
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ACKNOWLEDGEMENT
“The Marvelous richness of human experience would lose some thing of rewarding joy if
there were no limitations to overcome. The hilltop hour would not be half so wonderful if
there were no dark valleys to traverse”
This project is a product of the invaluable insights, facts and experience I had with
various people. The experience was more than what was visualized as.
A special note of gratitude goes to Mr. P.K. Dhirsamanta (Dy. Manager, NEPFT,
NALCO) and Mr. A.K. Rout (Senior Manager), NEPFT NALCO for his advice and
encouragement that helped me makes this project a reality.
I am deeply indebted to Ms. Kakoli Sen (Faculty), for her constant source of inspiration
and guidance throughout this project.
My heartful thanks to Ms Shegorika Lalchandani, (Faculty), for her advice and
encouragement that helped me to make this project a reality.
Most of all, I express my thanks to “GOD ALMIGHTY” and my family members
especially my father Mr. Swadesh Ranjan Pattnaik without whose love, blessing, support
and strength I could not have complete this project.
Sandeep Ranjan Pattnaik
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EXECUTIVE SUMMARY
During these six weeks of internship at Nalco, I came across various practical skills
which are very much different from that knowledge that are imparted to us in the
classroom teaching. I am very much obliged to my project mentor in the organization
who not only gave me the idea about how to design and equip a good project but also
passed on the information beyond the bound of the curricula of our project.
Here the project revolves around a vital element of society – Social Security which is
most important duty on the part of government to provide it to its citizen. Social Securitycaters to the universal human need for reassurance and support in times of
unemployment, illness, disability, death and old age. The State bears the primary
responsibility for developing appropriate systems for providing protection and assistance
to its workforce and their families. Public support systems for social security in India
have gained prominence over traditional family support in tune with the trends of
urbanization and work place migrations. The dependence on social security varies as per
the need and income status.
In India, both Social Insurance and the Social assistance programs provide for Social
Security needs of workers in the contingencies of sickness, maternity, employment,
injury occupational disease, old age and death. So far as Social Insurance programs are
concerned the following schemes are in existence.
In this project, I have tried to bring out the pros and cons of the EPS – 95 and NPS –
2009. For this project, what will be a better place to pursue this project other than
NALCO, a Navaratna PSU which created a bench-mark within the PSU by adopting NPS
– 2009? Now PFRDA has advised other PSU to follow the footprint of NALCO and
adopt NPS – 2009. Even other PSU have approach NALCO for the know-how from
NALCO regarding NPS – 2009. Recently a conference was conducted at Delhi regardingthe social security and NPS – 2009 where it was been decided that Nalco will guide other
PSU in regards to the NPS – 2009.
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Table of Content
Sl. No Title Pg No
1. ALUMINUM SECTOR 6 – 9
2. NALCO 10 -19
3. FINANCIAL OVERVIEW OF NALCO 20-23
4. PEER GROUP COMPARISON AND SWOT ANALYSIS OF NALCO 24-25
5. EXPANSION PROGRAMMES 25
6. NALCO – A LEAP AHEAD 26
7. GUIDELINES OF CSR FOR CPSEs 27-30
8. NALCO CSR 331
9. SOCIAL SECURITY 32-39
10. EMPLOYEES’ PENSION SCHEME -1995 40- 46
11. NEW PENSION SCHEME – 2009 47-67
12. STATEMENT OF PROBLEM 68
13. OBJECTIVE OF STUDY 68 – 69
14. METHODOLOGY 69 – 70
15. FACTS AND FINDING OF NPS – 2009 70
16. RESULTS/FINDINGS 70
17. CONCLUSION AND RECOMMENDATION 71
18. ANNEXURE – I AND II 72 – 75
19. REFERENCES 76
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Aluminum Sector - An Overview
Aluminum Industry in India is a highly concentrated industry with the top 5 companies
constituting the majority of the country’s production. With the growing demand of
aluminum in India and world market, the Indian aluminum industry is also growing at an
enviable pace. In fact, the production of aluminum is currently outpacing the demand.
Moreover, India has huge reserves of high-grade bauxite and it caters to about 5% of the
world aluminum demand of 54 million tonnes. World aluminum growth rate seems to
touch 4.9%. India has huge reserves of bauxite spread across Odisha, Madhya Pradesh,
Jharkhand and other states. Large reserves of good quality alumina and proximity ot
Asian markets have attracted global aluminum reserves of good quality alumina and
proximity to Asian markets have attracted global aluminum producers in the world
towards India. The availability of cheap labors has given the Indian an edge over its
peers. India serves as a ready market for perpetually aluminum demanding nations like
China. Aluminum Industry in India is a highly concentrated industry with the top 5
companies constituting the majority of the country’s production. With the growing
demand of aluminum in India and world market, the Indian aluminum industry is also
growing at an enviable pace. In fact, the production of aluminum is currently outpacing
the demand.
Though India’s per capita consumption of aluminum stands too low (under 1 kg)
comparing to the per capita consumption of other countries like US and Europe (range
from 25 to 30 kgs), Japan (15 kgs), Taiwan (10 kgs) and China (3 kgs), the demand isgrowing gradually. In India, the industries that require aluminum most include power
(44%), consumer durables, transportation (10-12%), construction (17%) and packaging
etc.
The Indian aluminum industry is dominated by four or five companies that constitute the
majority of India’s aluminum production. Following are the major players in the Indian
aluminum industry –
Hindustan Aluminum Company(HINDALCO)
National Aluminum Company(NALCO)
Bharat Aluminum Company(BALCO)
Madras Aluminum Company(MALCO)
Indian Aluminum Company(INDAL)
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Hindalco: Hindalco, an Aditya Birla Group flagship company is the biggest player in the
aluminum industry in India with around 39% of market share.. Hindalco has its
aluminum plant at Renukoot in Uttar Pradesh. It has various aluminum products with a
market share of 42% in primary aluminum, 20% in extrusions, 63% in rolled products,
31% in wheel and 44% in foil.
Sterlite Industries: The aluminum business of Sterlite Industries Limited comprises of
two aluminum giants – MALCO and BALCO. While BALCO is a partially integrated
producer of aluminum, Malco is a fully integrated producer of aluminum. Sterlite has got
a market share of around 32%.
NALCO: It is one of the leading aluminum producers in India. Government of India has
stake of 81.15% in this company. Its aluminum refinery is located at Damanjodi. It alsohas a smelter located at Angul, Odisha. Currently, NALCO is concentrating on a capex
program to increase its production from 345,000 tonnes to 460,000 tonnes.
SOME OTHER COMPANIES IN THIS SECTOR –
Hindustan Zinc
Jindal Stainless
Kennametal India
INDAL
Sujana Metal Products
Ratnamani Metals
ALUMINUM-STRUCTURE
The Aluminum industry in India can be classified as:
(a) The primary producers who produce ingots and billets (primary form of
Aluminum) using bauxite.
(b) The secondary producers who add value to the ingots and billets to produce
semi-fabricated products..
All the primary producers have integrated forward into the manufacture of high
value semi-fabricated products like rods, rolled products, extrusions and foils.
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Regulated till 1989
Until 1989, the Aluminum Control Order (ACO) required all domestic
manufacturers to ensure that atleast 50% of their ingot production was electrical
grade, for use by the transmission power industry. The government fixed ingot
prices on the basis of a Retention Pricing Mechanism, taking into consideration
the average retention prices of all producers and a minimum return on equity.
The above control resulted in a skewed product mix and shortages of aluminum
for other sectors. The problem was further compounded by the vulnerable
financial position of State Electricity Boards (the main users of electrical grade
aluminum) and high import and excise duties. The producers resorted to inflated
prices for other types of Aluminum to compensate for the disadvantages they
suffered because of this regulation.
The ACO was scrapped in 1989 and in 1991 the government lifted restrictions oncapacity additions resulting in a free market environment.
Aluminum – Inputs
The aluminum industry in India can be classified as: Captive power, ample bauxitereserves, coupled with cheap labour costs make Indian companies amongst the
most competitive Aluminum producers globally.
The main raw material for the manufacture of Aluminum includes bauxite, causticsoda, calcined petroleum coke, coal tar pitch, and LS/FS furnace oil. The
production process for manufacture of Aluminum is briefly outlined below.
The mined bauxite ore is mixed with caustic liquor and is refined to produce
alumina. This is then smelted (through electrolysis in a smelter) to obtain
Aluminum. Depending on the quality of bauxite, 2.5 – 3 tonnes are required for
manufacture of 1 tonne of alumina. In turn, 2 tonnes of alumina are required for
manufacture of 1 tonne of Aluminum.
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Salient features of Indian Aluminum Industry
Highly concentrated industry with only five primary plants in the country
Controlled by two private groups and one public sector unit Bayer-Hall-Heroult technology used by all producers
Electricity, coal and furnace oil are primary energy inputs
All plants have their own captive power units for cheaper and un-interrupted power Supply
Energy cost is 40% of manufacturing cost for metal and 30% for rolled products
Plants have set internal target of 1 – 2% reduction in specific energy consumptionin the next 5 – 8 years
Energy management is a critical focus in all the plants
Two plants have declared formal energy policy
Each plant has an Energy Management Cell Achievements in energy conservation are highlighted in the Annual Report of the
Company.
Energy targets are based on best energy figures achieved in their sector / regionand by the plant itself in the past
Generally, government policies were rated as conducive to energy management
‘Task Force’ formed by BEE in this sector to work as catalyst in promoting energyefficiency
High cost of technology is the main barrier in achieving high energy efficiency
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NATIONAL ALUMINUM COMPANY LIMITED (NALCO)
National Aluminum Company Limited (NALCO) is considered to be the turning point in
the history of Indian Aluminum Industry. In a major leap forward, NALCO has not only
addressed the need of self-sufficiency in aluminum but also given the country a
technological edge in producing the strategic metal as per world standard. It is India’slargest integrated public sector producer of alumina and second largest producer of
aluminum. Its combination of modern assets, excellent logistics, cheap power and captive
port facilities has all contribution to making it one of the lowest-cost producers of
alumina in the world.
In Orissa, for setting up Asia's largest integrated alumina-Aluminum complex in 1981,
National Aluminum Company Limited acquired 7263 acres of land at Damanjodi in
Koraput district and 4057 acres at Angul. During the inception of the company, 635
families in 51 villages were displaced - 600 families in Damanjodi sector and 35 families
in Angul sector. From these 635 displaced families, employment has been provided to
625 nominees. Confusion regarding educational background and nomination status of balance 10 families has been taken up at appropriate level. Besides, 1495 families were
substantially affected (i.e. parting with one third or more land) in Angul sector. Even
from these, jobs have been provided to 1060 persons. Nalco has also been sponsoring ITI
training to such persons and 543 have been technically trained so far. Apart from
financial compensation, employment and rehabilitation packages, Nalco has also spent
more than Rs. 100 crore towards various social sector development activities. Creation of
infrastructure in the surrounding villages for communication, education, health care and
drinking water gets priority in the periphery development plans of the company.
Community participation in innovative farming, social forestry and sanitation programs
apart, encouragement to sports, art, culture and literature are all part of Nalco's deepinvolvement with the life of the community. Successful operations of the company have
led to employment and income generation for the local people in many significant ways. It was incorporated as a public sector enterprise of the Government of India in 1981
under the Ministry of Mines. Government of India had a share of around Rs 1289 crore in
the total funding of Rs 2408 crore as Capital Cost and the rest of Rs 1119 crore has been
met by Euro-Dollar loan a consortium of International Banks. It boasts of some of the
world’s latest and finest technology in the Aluminum manufacturing industry.
Commissioned during 1985-87, NALCO has emerged to be a star performer in
production and export of alumina and aluminum, and more significantly, in propelling a
self-sustained growth. It has made the country more than self sufficient in alumina and
aluminum needs and has quite impressive export figures as well. Being the largest
exporter of the metal in the country, it has its own section of port facility at
Visakhapatnam. All units of NALCO employ the latest in technology and are some of the
advanced manufacturing units in the world.
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The main units of NALCO are at Damanjodi (Mines and refinery complex) and NALCO
nagar, Angul (Smelter and Captive Power Plant Complex). The Bauxite mines are
situated atop a set of five mountains called Panchpatmalli. These mines are open cast
mines. The refinery complex for producing bauxite is located in Damanjodi. The
company’s headquarter are located in Bhubaneswar, which is the capital of Odisha.
NALCO is considered to be the one of the best profit making PSU n India and reapsimpressively huge benefits every year. It is expanding by currently employing new
projects. The ongoing second phase of expansion is set to make it the sixth largest
producer of the metal in the world.
The company has numerous awards to its credit, some of them being prestigious awards
and recognitions. The company received Indira Priyadarshini Vrikshamitran Award from
Government of India for its contribution in the field of afforestation and wasteland
development. The 960 MW Captive Power Plant of the Company also received the
prestigious Indira Gandhi Paryavaran Puraskar for the year for the year 2000 from
Government of India for its outstanding contributions in the field of environment
management. Besides these, the Company and its Units have received various National,State and Institutional awards for excellence in Safety and Environment Management.
NALCO received ISO 9001:2000 awards and OHSAS 140001 for its excellence in
production technology and occupational health and safety systems respectively.
Share Holding Pattern/Ownership Pattern
The huge chunk of the share is held by Government while the rest is distributed among
the FIIs, DIIs and other investors. Before the recent divestment, the scenario was slightly
87%
5% 5%3%
Percentage of Holding
Promoter FII DII Other
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different. The Government holding was 87.11%, FII was 5%, DII was4.5% and the rest
of 2.39%. But the recent divestment has been done to meet the future expansion policy.
Vision of NALCO:
To be a company of global repute in Metals and Energy Sectors.
Mission of NALCO: To achieve sustainable growth in business through diversification, innovation and
global competitive edge.
To continuously develop human resources, create safe working conditions,improve productivity and quality and reduce cost and waste
To satisfy the customers and shareholders, employees and all other stakeholders.
To be a good corporate citizen, protecting and enhancing the environment as wellas discharging social responsibility in order to ensure sustainable growth.
To intensify Research and Development for technology development.
HR Vision of NALCO:To attain organizational excellence through trust, openness, commitment, creativity,
innovation and providing opportunities for growth, well being and professional
enrichment.
HR Mission of NALCO:To create a learning and knowledge based organizational through continuous innovation,
evaluation and realignment HR practices with the business strategies and to attract,
nurture and retain talent. To inculcate a spirit of creativity, quest for learning, to create aresponsive and competent work force and inspiring and motivational organizational
climate.
HR Philosophy of NALCO:The philosophy of NALCO in the field of human resources and management has been:
To attract competent personnel with growth potential and develop their skill andcapability in a congenial work and social environment through opportunities for
training, recognition, career advancement and other incentives.
To develop and nurture favorable attitude among employees and to obtain their
best contribution to the organization by providing stable employment, safeworking conditions, job satisfaction, quick redress of grievances and through good
pay and welfare amenities, commensurate with the company’s capacity to spend
and the government guideli9nes.
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To foster fellowship and sense of belongingness among all sections of employeesthrough closer association of employees with the management and by encouraging
healthy trade union practices.
Human Resources at NALCO
(As on March, 2010)
Units Permanent (as on March 2010)
Non-Permanent
Worker
Mines 4934000 Contract
Workers
and
12,000 Casual
Workers to whom
Payment were made
on daily basis.
Alumina 1806
Smelter 3160
Captive Power Plant 1456
Port (Visakhapatnam) 60
Corporate 383
Delhi 44
Kolkata 26
Chennai 17
Mumbai 14
Total 7459
Mines Alumina Smelter Captive Power Plant
Port (Vizag) Corporate Delhi Kolkata
Chennai Mumbai
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Quality Policy at NALCO
“Quality will form the core of our business philosophy. Meeting the needs and
expectations of the customer and consistently improving our systems and works ethos
will be our chosen path in achieving excellence in business and fulfilling our social
obligations.”
Guiding Principles:
To ensure a healthy return on investment by maximizing Operational efficiency,
Capacity utilization and Productivity.
To continually improve and redesign Systems, Processes and Practices in order to
ensure error prevention and improve response time.
To adopt internal Customer focus as a means to external customer satisfaction. To treat human resource as the key to the Quality excellence and ensure
development, involvement and satisfaction of employees.
To ensure high quality of inputs through proactive interaction of employees.
To meet obligations towards the society as a responsible corporate citizen.
To provide value for money to all stake holders.
To follow ethical business philosophy at all times.
Commitment:
We declare ourselves to the Quality Policy and Objectives of the Company in letter ad
spirit and commit to continuously to their fulfillment.
Social Accountability Policy
We at NALCO are committed to provide a socially accountable work environment to all
employees and uphold ethical business practices by respecting employees’ rights.
We shall achieve these by adopting a company wide culture, which will help to promote:
Involvement of all employees in sustenance of SA 8000 standard;
Continual improvement initiatives in all social issues;
Learning and training opportunities to all employees;
Fulfillment of relevant statutory rules and regulations, ILO requirements,
applicable international instruments and their interpretation.
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Occupational Health and Safety Policy
NALCO is committed a Safe, Healthy and Sustainable work environment in all its
operations. This shall be achieved by:
Focusing on prevention of Accident and Occupational Health Issue.
Complying with all legal requirement and other requirements related to Safety and
Occupational Health of persons and establishing clearly defined goals and
procedures to achieve the same.
Ensuring Safety and Health of all employees and contract workers in its premises,
including those involved in transportation, cleaning and other such activities.
Conducting Periodic Safety Audit, Environment Audits, Health Check-ups and
Risk Assessment by both internal and external qualified persons.
Considering aspects related to Safety and Health of the personnel as well as the
environmental issues at the time of procurement of equipment and selection of
technologies.
Ensuring health of persons in the peripheral locations, likely to be affected by our
operations.
Periodically monitoring and reviewing safety and occupational health issues at
relevant levels, including the highest levels.
Communicating Safety Hazards and health related issues to all concerned through
suitable means, including training. Involving the workmen in Policy implementation as well as identification of
potential issues.
Considering Health and Safety performance of individual at different levels during
their career advancement, as per NALCO’s policy.
Establishing and maintaining suitable set-up with competent persons to monitor
and bring to the notice of the management any issues related to unsafe conditions
and practices.
Striving for continual improvements, exceeding statutory compliance levels,
wherever feasible.
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Environment Policy
In recognition of the interests of the society in securing sustainable industrial growth,
compatible with wholesome environment, National Aluminum Company Limited
(NALCO) affirms that it assigns high importance to promotion and maintenance of a
pollution-free environment in all its activities.
To use non-polluting and environment-friendly technology.
To monitor regularly air, water, land, noise and other environmental parameters.
To constantly improve upon the standards of pollution control and provide a
leadership in the environment management.
To develop employees’ awareness on environmental responsibilities and
encourage adherence to sound environmental practices.
To work closely with Government and local authorities to prevent or minimize
adverse consequences of the industrial activities on the environmental practices.
To comply with all applicable laws governing environment protection through
appropriate mechanisms.
To actively participate in social welfare and environmental development activities
of the locality around its Units.
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BAUXITE MINE
A fully mechanized open-cast mine of 48, 00,000 tonne per annum, on Panchpatmali hills
of Koraput district in Odisha, serves feed-stock to the Alumina Refinery at Damanjodi,
located 16 km downhill. The transportation is done through a 14.6 km long single flight ,
multi-curve, cable belt conveyor of 1800 TPH(Tonne per Hour) capacity. The mining
capacity has been expanded to 63,00,000 TPA.
Area of Deposit : 16 Sq. Km
Resource : 310 million tonnes
Mineralogy : Over 90 % gibbsitic
Ore Quality : Alumina 45%, Silica 2%
Ore Thickness : 14 mtr (avg.)
Alumina Refinery
The 15,75,000 TPA energy efficient Alumina Refinery, having three parallel stream of
equal capacity, located in the picturesque valley of Damanjodi. The Refinery provides
alumina to the Company’s Smelter at Anugul and exports the balance alumina to
overseas markets through Visakhapatnam Port. Presently, it is being expanded to
21,00,000 TPA capacity.
Smelter Plant
The 3,45,000 TPA capacity and Alumina Smelter, located at Anugul in Orissa, is based
on advanced technology of smelting and pollution control. Its capacity is being further
expanded to 4,60,000 TPA.
Some of the key features of the Plant include:
180 KA cell technology
Manufacturing of carbon anodes, bus bars, anode stems etc
Integrated facilities for manufacturing Ingots, Sows, Billets, Wire Rods, Strips andRolled Products. Advanced 180 KA cell technology
Micro-processor based pot regulation system
Fume treatment plant with dry-scrubbing system for pollution control
and fluoride salt recovery
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Integrated facility for manufacturing carbon anodes, bus bars, anode
stems etc.4 x 35 tone and 4 x 45 tone furnaces and 2 x 15 TPH and 2 x 20 TPH
ingot casting machines
4 x 45 tonne furnaces and 2 x 9.5 tph wire rod mills
2 x 45 tonne furnaces and 60/42 per drop billet casting machine 2 x 1.5 tonne induction furnace with a 4 tph alloy ingot casting machine
26,000 tpa strip casting machines
CAPTIVE POWER PLANT
Close to the Aluminium Smelter at Angul, a Captive Power Plant of 720 MW capacity,
comprising 6 x 120 MW clusters, has been established for firm supply of power to the
Smelter.
Presently, the capacity is being expanded to 960 MW.
The salient features:
Micro-processor based burner management system for optimum thermal efficiency
Computer controlled data acquisition system for on-line monitoring
Automatic turbine run-up system
Specially designed barrel type high pressure turbine
Electrostatic precipitators with advanced intelligent controllers
Wet disposal of ash
The water for the Plant is drawn from River Brahmani through a 7 km long doublecircuit pipeline. The coal demand is met from a mine of 3.5 million tpa capacity
opened up for Nalco at Bharatpur in Talcher by Mahanadi Coalfields Limited. The
Power Plant is inter-connected with the State Grid.
Port Facilities
On the inner harbor of Visakhapatnam Port on the Bay of Bengal, NALCO has
established mechanized storage and ship handling facilities for exporting alumina in bulk
and importing caustic soda. This facility can handle ships up to 35,000 DWT.
Ship Loading Rate : 2200 TPH
Alumina Storage : 3 x 25,000 tonnes
Besides, Nalco exports from the port of Paradeep and Kolkata.
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Rolled Products Unit
After acquisition and merger of International Aluminum Product Ltd.(IAPL), Nalco has
started production from this 50,000 TPA plant. The Rolled Production Unit is presently
producing standard coils and sheets. Besides, it has facilities to produce foil stock, fin
stock, cable wrap stock, coil stock and closure stock for a variety of end uses.
Products Manufactured by NALCO:
Aluminum Metal: Standard Ingots (each approx. 20/22.5 kgs)
Sows Ingots (each max 750 kgs)
Billet (in four sizes: 127+/- 1.5mm, 152+/- 1.5mm,178+/- 1.5mm,
203+/- 1.5mm)
Wire Rods (in coil form : 9.5/11.95 mm dia, weight approx. 2 MT)
Alloy wire rods ( Max. width 1600 mm, gauge 6 – 10 mm)
Cast Strips
Alumina Hydrate:
Calcined Alumina
Alumina Hydrate
Zeolite-A
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Financial Overview of Nalco
To give a better picture of the company’s performance, it is better on our part to give
some graphical representation of the performance of the company not only on the
financial part but on the part of production and sales for the better understanding to the
evaluator of the project.
PRODUCTION and SALES
ALUMINA(in ‘000 MTs)
0
200
400
600
800
1000
1200
1400
1600
2005-06 2006-07 2007-08 2008-09
Production 1590 1475 1576 1577
Export 863 774 860 852
A x i s T i t l e
Chart Title
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ALUMINUM
(in ‘000 MTs)
0
50
100
150
200
250
300
350
400
2005-06 2006-07 2007-08 2008-09
Production 359 359 360 361
Export Sales 96 93 101 82
Domestic Sales 258 263 252 271
A x i s T
i t l e
Chart Title
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POWER
(in ‘000 MTs)
2005-06 2006-07 2007-08 2008-09
Generation 5679 5968 5609 5541
Sales 322 421 129 81
Consumption 5357 5547 5480 5460
0
1000
2000
3000
4000
5000
60007000
A x i s T i t l e
Chart Title
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FINANCIAL PERFORMANCE
Turnover and Net Profit(Rs. in Crore)
Sales Turnover(Rs. in Crore)
0
1000
2000
3000
4000
5000
6000
7000
2005-06 2006-07 2007-08 2008-09
Sales Turnover 5324 6515 5474 5531
Net Profit 1562 2381 1632 1272
A x i s T i t l e
Chart Title
2005-06 2006-07 2007-08 2008-09
Export 2306 2586 2134 2085
Domestic 3018 3929 3340 3446
0
5001000
1500
2000
2500
3000
3500
4000
4500
A x i s T i t l e
Chart Title
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Dividend Payment(Rs. in Crore)
Expenditure Breakdown(Rs. in crore)
0
10
20
30
40
50
60
70
80
322.00 483.00 387.00 322.00
2005-06 2006-07 2007-08 2008-09
% of Dividend
% of Dividend
18%
20%
7%
35%
7%13%
Rs. in Crore
Raw Material Staff Cost Repair and Maintenance
Power and Fuel Depreciation Others
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PEER GROUP COMPARISON
NAME OF THE
COMPANY
CURRENT
MARKET
PRICE
MARKET
CAPITALIZATION(Rs.
in million) EPS(Rs.) P/E P/B.V. DIVIDEND
NALCO 367.00 236461.77 8.13 45.18 2.42 60
HINDALCO 138.45 265297.50 7.16 19.34 1.12 135
CENTURY
EXTRUSIONS 5.85 468.00 0.54 10.83 1.72 10.00
GUJURAT FOIL 63.05 517.10 3.51 17.96 3.92 0.00
*FIGURE AS ON 11TH FEBRUARY, 2010
SWOT ANALYSIS OF NALCO
STRENGTH:
1. Availability of huge deposit of bauxite
2. “state of the art” technology
3. Huge power production.
4. Low energy consumption
5. Maintenance of production and quality of metal production
6. Presently it is the market leader
7. High profitability leader.
8. Co-ordination among the various department thereby decreasing the chances ofconflict
9. Increased customer satisfaction
10. Last but not the least, the feather of NAVRATNA status studded to the crown of
NALCO.
Weakness:
1. High transportation cost from the refinery to the smelter.
2. Prices of Aluminum depend upon London Metal Exchange quotes.
3. The cash reserves are increasing each year without any further utilization or
investment.
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Opportunity:
1. Growth of the potential domestic market
2. Widespread uses of Alumina for various purposes
3. Utilization of the idle cash reserves in other booming sector like Nuclear Power or
in further expansions.
4. Identifying the prospect of setting up manufacturing units in foreign countries as
well as looking for new source of raw material in foreign countries.
Threat:
1. Instability of the LME quotes.
2. High tax rate imposed on the metal.
3. Devaluation of the rupee leading to the increase of the debt amount
4. Dumping of the metal at low cost by the European countries.5. Depressed LME prices resulting in more import of metal thereby decreasing
demand of product from NALCO.
6. Rejection of LP
Expansion Programme
In order to strengthen its business and increase market share, the company has been
pursuing expansion programs on a sustained basis. Soon after the completion of first
expansion, the Company launched its 2nd
phase expansion commenced on October 2004,
which involved fresh investment of more than Rs. 4402 Crore. The ongoing expansion
will raise the capacities of its various segments:
Unit Original Capacities
After 1st Phase
Expansion
After 2nd Phase
Expansion
Bauxite Mines 24,00,000 MT 48,00,000 MT 63,00,000 MT
Alumina Refinery 8,00,000 MT 15,75,000 MT 21,00,000 MT
Aluminum Smelter 2,30,000 MT 3,45,000 MT 4,60,000 MT
Power Plant 600 MW 960 MW 1200 MW
The Company is now planning for 3
rd
phase expansion at an investment of Rs.6000Crore, which will further increase Aluminum Smelter capacity to 5.80 Lakh tonnes and
power generation to 1400 MW per annum.
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NALCO – “A Leap Ahead”
New era has begun. With the advancement of 21st century, Nalco has begun to change its
course of operation to cope up with the flow of modernization. Nalco has started the
process to design itself as a 21st century company. Nalco has designed a plan for its
horizontal as well as its vertical expansion along with the diversification of its operation.
The company is planning to utilize its unused cash reserves so as to decrease the cash
burden on itself. Nalco is planning to raise a part of the amount of the total funding from
public issue of Nalco’s shar e. The company is going for the issuance of FPO. The fund
raised from the FPO will be utilized for the purpose of both expansion as well as the
diversification. The company is going to divide its operation into three parts at corporate
level – Nalco Power, Nalco Metals and Nalco International.
1. Nalco Power:
Nalco is planning to invest about Rs. 1000 Crore in future project of state-run
Nuclear Power Corporation of India Limited (NPCIL). The two companies had
entered into an agreement to team up with each other for setting up nuclear power
plant in different part of India.
2. Nalco Metals:
Nalco metals will constitute the operation starting from mining of bauxite from
Panchpatmalli, Damanjodi to the production of Aluminum metals in the Smelter in
Angul. Nalco is considering of buying coal, copper, uranium and bauxite mines in
Nambia. It will also be operated under the head of Nalco Metals.
3.
Nalco International:
Nalco International will look after the operation of its own International trade
houses which will be set up at Dubai and Singapore. The export of minerals and
aluminum metals produced in the manufacturing unit will be exported to this
Trade houses and from this houses they will be forwarded to its consumer
countries as per the demand.
\NALCO
NALCO
POWER
NALCO
METALS NALCO
INTERNATIONAL
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GUIDELINES ON CORPORATE SOCIAL RESPONSIBILITY
FOR CENTRAL PUBLIC SECTOR ENTERPRISES (CPSE)
CHANGE IN APPROACH
With the rapidly changing corporate environment, more functional autonomy, operationalfreedom etc., CPSEs today are required to adopt CSR as a strategic tool for sustainable
growth.
CSR, in the present context, means not only investment of funds for social activities but
also integration of business processes with social processes.
NEED FOR LINKAGE WITH COMMUNITY
An Enterprise needs to address the concerns of the society in which the enterprise is
operating. There should be free interaction between enterprises and community
leaders. In order to address the social needs of the community, viable projects need to beidentified to meet its requirements.
OVERARCHING CONCEPT
CPSEs may approach Corporate Social Responsibility as a professional management
process, with a long-term strategy, integrating it with corporate strategies. CSR activities
may be planned in parallel to the business plan, looking at every possible opportunity to
link and integrate business plans with the social and environmental concerns available.
PLANNING THE CSR INITIATIVE
A long-term Corporate Social Responsibility Plan needs to be prepared matching
with the long-term business plan;
This may be broken down into short-term and medium term plans, specifying
activities to be undertaken, budgets allocated, responsibilities and authorities
defined, and measurable results expected
IMPLEMENTATION
The Plan must clarify implementation guidelines involving:
Participation of Voluntary Organizations, Specialist Organizations and
Community-Based Organizations;
Base-line Surveys;
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Documentation of the experience;
Setting up a CSR Hub with participation of Department of PE, SCOPE and
CPSEs;
Monitoring and Evaluation;
Lessons learnt for future use.
THRUST AREAS
Areas related to the business of the PSE as a natural corollary to the business;
Assistance to be mostly project based rather than donation, so as to generate
community goodwill, create social impact and visibility;
Finalizing of time-frames and various milestones before commencement of a
project; Involving of suppliers in order to ensure that the supply-chain also follows the
CSR principles;
Emphasis on principles of Sustainable Development, based on the immediate and
long-term social and environmental consequences of the activities undertaken;
Improvement of the existing ecological conditions;
Ensuring skill enhancement and employment generation by co-creating value with
local institutions and people.
ACTIVITIES THAT WILL NOT COUNT AS CSR
Benefits to staff
Grants to organization/institutions
IMPLEMENTATION MODALITIES
CSR Activities to be carried out by Specialist Agencies;
Such activities generally not to be conducted by CPSE employees / staff;
Specialist Agencies to include NGOs, Institutes, Academic Organizations, Civil
Society / Community-based Organizations, Trusts, Missions etc., who haverequisite expertise;
Utmost efforts to be made to find out the reliability, and track record of the NGOs
/ Organizations entrusted with CSR activities;
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Initiatives of State Governments as well as Central Government Departments /
Agencies could be dovetailed/ synergized with CSR activities;
Avoidance of any duplication of CSR activities by the CPSEs, the State
Governments and local level Programs.
FUNDING
The CSR budget to be mandatorily created through a Board Resolution as a percentage of
net profit in the following manner:
TYPE OF CPSES EXPENDITURE RANGE FOR CSR
Net Profit in a Financial Year (Previous Year) (% of profit)
i. Less than Rs. 100 crore 3% – 5%
ii. 100 crore to Rs. 500 crore 2% – 3% (Subject to a Min. of 3 cr)
iii. 500 crore and above 0.5% – 2%
The CSR Budget to be fixed for each financial year. This funding not to lapse –
must be transferred to a CSR Fund, which will accumulate – as in the case of non-
lapsable pool for North East.
In case CPSEs have different Profit Centers like Factories / Plant locations, they
may be allocated separate CSR budgets to be spent by them under the Annual CSR
Budget allocations.
MONITORING
Monitoring of the CSR projects is very crucial and needs to be a periodic activity
of the Enterprise;
The Board of CPSEs should discuss the implementation of CSR activities in their
Board meetings;
The CPSE should bring a separate paragraph / chapter in the Annual Report on the
implementation of CSR activities / projects including the facts relating to physical
and financial progress
The implementation of CSR guidelines to form a part of the Memorandum ofUnderstanding to be signed between CPSE and the Government;
The performance of CSR should be monitored by the Ministry / Department on
regular basis;
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In MoU Guidelines from 2010-11 onwards, 20% has been earmarked out of the
non-financial parameters for performance under CSR.
For proper monitoring of CSR activities, companies may appoint a CSR
committee or a Social Audit Committee or a suitable, credible agency to critically
assess fulfillment of social obligations. CSR projects should also be evaluated by an independent external agency. This
evaluation should be both concurrent and final.
MONITORING & EVALUATION BASELINE SURVEYS AND
DOCUMENTATION
Impacts made may be quantified to the best possible extent with reference to base
line data, which need to be created by the CPSEs before the start of any project.
Hence, Base-line Surveys mandatory.
The documentation relating to CSR approaches, policies, programs, expenditures,
procurement, etc. to be put in the public domain, particularly through the internet.
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NALCO CSR – “It is not the Charity, It is the Responsibility”
Nalco has always tried to prove itself a responsible and star corporate citizen of the
country. It has always tried to deliver its duty more than its expectation towards the
society. The company has adopted a policy of playing a catalytic role in improving the
quality of the life of people living in the peripheral villages, in collaboration with the
local government authorities. These activities includes: creation of infrastructures for
communication, education and health care, water supply apart from undertaking social
forestry, organizing rural sports and supporting cultural activities. Even before the land is
acquired and foundation-stone is laid for a project, the company launches its CSR
activities in the area to create a favorable mood among the local people towards the
project.
As a policy NALCO allocates 1% of its net profit per year for the periphery development
activities of the succeeding year. Out of this allocable fund, 40% is allocated for the
Damanjodi, 40% towards Angul and the rest 20% is for other areas. Around Rs.136.87
Crore has been allocated towards the periphery development including the special
projects. Nalco has created a trust within the local people towards the company. It will
foster the relation between the company and the people of the local area. Nalco has set up
a Corporate Social Responsibility Foundation and has doubled the allocated money from
1% of its net profit to 2%
. Nalco is now playing a vital role in the economic development of the area where it
operates. Rehabilitation of displaced families, employment and income generation for
local people, development of infrastructure, environment care and humanitarian goodwill
missions have earned Nalco a special place in the hearts of the local people of the area
where Nalco operates.
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PROJECT
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INTRODUCTION
Social Security protects not just the subscriber but also his/her entire family by giving
benefit packages in financial security and health care. Social Security schemes are
designed to guarantee at least long term sustenance to families when the earning member
retires, dies or suffers a disability. Thus the main strength of the Social Security system is
that it acts as a facilitator – it helps people to plan their own future through insurance and
assistance. The success of Social Security schemes however requires the active support
and involvement of employees and employers.
The term “Social Security” is of almost indefinite connotation as it covers several
measures of protection against various contingencies “from Womb to Tomb” or “from
the Cradle to the Grave”. “It is a scheme of social insur ance against interruption and
destruction of earning power and for special expenditure arising at birth, marriage or
death. It is an attack on five giants namely, Want, Disease, Ignorance, Squalor and
Idleness” The concept of Social Security is as old as c ivilization itself. The concept of old
age, disability and survivor’s protection, as an essential ingredient of Social Security, was
included in the objectives of International Labor Organization, set up after the First
World War in 1919. The oldest institution of social security in the history of mankind is
family. Closely connected by flesh and blood, inspired by the tales of filial devotion,
fraternal affection and parental sacrifice and encouraged by various religions, every
member of the family consider it as a part of his duty to share his weal and woe with
other members. Income from family property and family labor was pooled together and
was used for the maintenance of all members, whether protective or non-protective. The
family is supposed to look after physical needs of its member including food, shelter,
clothing as well as providing comfort and love acceptance and approval. The break-up of
the joint family system following emergence of the urbanization and industrialization has
resulted in the need for social security through the society.
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Main Characteristics of Social Assistance
It provides for selected social dependency needs.
The entire cost of the Scheme is borne by the State.
It applies uniform and statutory means test. It may follow from the above study
that the social assurance has the following features
a. It is a device for providing social security benefit for special cases.
b. Assistance is granted by the state from its own fund directly or through
some appropriate Organization.
c. Assistance is granted as a matter of right.
d. The financial resources of social assistance scheme are of the limited order
and benefits given can be only for a short duration of time.
e. It is granted to those persons who fulfill certain prescribed conditions and
f. Social Assistance is supplemented rather than substitutive to social
insurance.
The purpose of social security:- The fundamental purpose is to give individuals and
families the confidence that their level of living and quality of life will not, so far as
possible, be eroded by any social or economic eventuality. This involves prevention of
the occurrence of contingencies which involve loss of substantial reduction of income.
According to International Labor Organization, there are nine branches of social security
benefits which are – Medical Care, Sickness Benefit, Unemployment Benefit, Old age
benefit, Employment injury benefit, family benefit, Maternity benefit, invalidity benefitand survivor benefit. In the life of man, there are two stages of dependency – childhood
and old age and in the intervening years of adult life, there are likely to occur spells
during which he can not earn his living. Illness enters into every one’s experience and
apprehension of it is felt at all ages. A person who falls sick is threatened with two stages
of unemployment, at first because he cannot work and later because he would have lost
his job. Similarly every body is exposed to a certain number of risks or contingencies viz.
Unemployment, Sickness, Invalidity, Maternity, Employment Injury, Old age and death
of the bread winner. For the great majority of those who have nothing to live on but their
earnings, any one of these risks on contingencies, resulting inevitably in loss of incomeand is liable to plunge workers and their family into extreme poverty.
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Social Security System in India
The constitution of India lays down, in its directive principles (Article-41) “the State shall
within the limits of its economic capacity and development, make effective provisions for
securing the right to work, to education and to public assistance in case of
unemployment, old age, sickness and disablement and in other cases of undeserved want”
In India, both social insurance and social assistance programs provide for Social Security
needs of workers in the contingencies of sickness, maternity, employment, inquiry
occupational disease, old age and death. So far as Social Insurance programs are
concerned the following schemes are in existence.
The principal Social Security Laws enacted centrally in India are the following
The Workmen’s Compensation Act, 1923
The Employees’ State Insurance Act, 1948
The Employees’ Provident Fund and Miscellaneous Provision Act, 1952
The Coal Mines Provident Fund Act
Provident Fund for Tea Plantation in the State of Assam
Seamen’s Provident Fund
The Maternity Benefit Act, 1961
The payment of Gratuity Act, 1972
In addition, a number of social assistance scheme both central and state Government
schemes – provide social assistance benefits for the welfare of specific categories of
workers. Most of these schemes cater to the 90% of the work force which is in the
unorganized sector, for whom the benefits of a Contributory Social Insurance Scheme is
yet to be extended, as is provided to worker in the unorganized sector. Today Social
Security exists for employees in Organized Sector whereas it is absent in the unorganized
sector. In the employee category, the complete responsibility of social security is given to
the Employer and State’s assistance is negligible. Out of 400 million workforces in India,
about 8% of them are brought under the PF/Pension legislation. The Government of India
is very keen to extend this benefit to the unorganized sector.
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Social Security Laws
The Workmen’s Compensation Act, 1923
The Workmen’s Compensation Act is the first piece of legislation towards social
security. It deals with compensation for workers who are injured in the course ofduty. The scheme of the Workmen’s Compensation Act is not to compensate the
worker in lieu of wages. The general principle is that a worker who suffers an
injury in the course of his employment, which results in a disablement, should be
entitled to compensation and in the case of a fatal injury, his dependant would be
compensated. Under the Workmen’s Compensation Act it is the employer who is
responsible to pay compensation (as opposed to the employees State insurance.
Establishments to which the Employees’ State Insurance Act applies to the
liability to pay compensation are on the ESI Corporation). The meaning of
compensation in this Act is limited to compensation granted under the Act for
employment injuries sustained during the course of work. It is also limited tospecifically monetary compensation other than a salary, travel allowance, and any
other form of remuneration that could be paid under normal circumstances of
employment
To get an overall understanding of the Act it is useful to look at the “Statement of
Objects and Reasons’ published with the Act when it was first passed in 1923. To
quote: “ …the growing complexity of industry in this country with the increasing
use of the machinery and consequent danger to workmen, along with the
comparative poverty to workmen themselves renders it advisable that they should
be protected, as far as possible from hardship arising out of accidents.
The Employees’ State Insurance Act, 1948
The Employees’ State Insurance Act, 1948 provides for health care and cash ents
in the case of sickness, maternity and employment injury. The Act is applicable to
non-seasonal factories using power and employing 10 or more employees and
non-power using factories and certain other establishments employing 20 or more
employees. The ESI Scheme is administered by a statutory body called the
Employees’ State Insurance Corporation (ESIC), which has members representing
Employers, Employees, Central and State Governments, Medical Profession and
the Parliament. The Union Minister for Labour & Employment is the Chairman. A
Standing Committee constituted from among the members of the Corporation, actsas the executive body for administration of the Scheme and is chaired by Secretary
to the Government of India, Ministry of Labour & Employment. There are 24
Regional Boards and 345 Local Committees in existence at present.
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The Employees’ Provident Fund and Miscellaneous Provision Scheme, 1952
The Employee’s Provident Funds and Miscellaneous Provisions Act, 1952 is a
welfare legislation enacted for the purpose of instituting a Provident Fund for
employees working in factories and other establishments. The Act aims at providing social security and timely monetary assistance to industrial employees
and their families when they are in distress and/or unable to meet family and social
obligations and to protect them in old age, disablement, early death of the bread
winner and in some other contingencies. Presently, the following four Schemes are
in operation under the Act through the EPFO:
Employees’ Provident Funds Scheme, 1952
Employees’ Deposit Linked Insurance Scheme, 1976
Employees' Pension Scheme, 1995
New Pension Scheme, 2009
The Maternity Benefit Act, 1961 (M.B. Act), which provides for 12 weeks
wages during maternity as well as paid leave in certain other related contingencies.
The Payment of Gratuity Act, 1972 (P.G. Act), which provides 15 days wages
for each year of service to employees who have worked for five years or more in
establishments having a minimum of 10 workers.
Evolution of Income Security for Elder, disabled and Survivor’s in India:
Government Employees
The concept of old-age Pension was brought to India by the British, because the
person who were brought by them from England to occupy the higher
bureaucracy, had to be given old age pension, as they were entitled to be given old
age pension, as they were entitled to it, if they had remain in their own country.
The benefit was also extended to all Government employees as they had to rule
through them. Moreover it would have looked discriminately if it was available to
only one section of employees, who were British citizen and not available to the
employees of Indian origin. The Central Government employees are also enjoying
the benefit of pension and the payment of pensions is regulated under the CCS
(Pension) Rule, 1972. Similarly the Armed Forces Personnel, Railway Employeesand members of All India Service are enjoying the pensionary benefits at par with
Central Government Civilian employees through separate notifications issued by
the respective Ministries/Department. The pension schemes for the Government
employees are financed from the General Revenue of the Government of India.
Thus, in a sense it is a Social Assistance Scheme.
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In 1965, the Gratuity Scheme was introduced for the Government employees. In
respect of Central Government employees who join the service on or after
1.10.2001, the Government is considering framing of a separate pension scheme
on recommendations of Pension Regulatory Authority set up by the Government
of India.
Industrial Employees
The Employees’ Provident Funds Scheme was framed under the EPF Act, 1952.
With a view to protect the family of the PF members, who die while in service, a
Scheme name Employees’ Family Pension Scheme was framed under the EPS and
Family Pension Fund Act, 1952 in the year, in the year 1971, as a Social Insurance
Scheme. In the year 1976, the Employees’ Deposit Linked Insurance Scheme was
framed under the EPF and MP Act, 1952, providing lump sum benefit, which was
linked to the PF deposits of the subscribers who dies while in service. On behalf ofthe employees, the employer is required to pay the contributions towards the EDLI
scheme, 1976. In the year 1995, the Employees’ Provident Pension Scheme, 1971
was re placed by Employees’ Pension Scheme, 1995 which provides pension on
Superannuation, Family Pension to the family of the member who die while in
service or away from service or while drawing pension. In addition, Disablement
Pension, Children Pension, Orphan Pension, Disabled Children Pension and
pension for nominee and dependent parents and other benefits viz. Return of
Capital and communication are also being provided. The working class in India
was demanding one more retrial benefit and accordingly the Government of India
introduced the payment of Gratuity Act in the year 1972.
Other Schemes in general
The Public Provident Fund Scheme, 1967 is a statutory Scheme of the Central
Government framed under the provisions of the PPF Act, 1968. The scheme came
into force w.e.f 1.07.1968 the PPF scheme can be availed by any individual in his
or spouse name and this is a boon to the self employed and entitled for income tax
benefits.
The Government of India included the National Social Assistance Programmes(NSAP) in the Central Budget for the year, 1995-96 and it came into effect from
15th
August, 1995. The NSAP for the time being included:
1. National Old Age Pension Scheme2. National Family Benefit Scheme (Survivor Benefit Scheme)3. National Maternity Benefit Scheme
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4. Social Security Group Insurance Scheme for weaker section
NALCO’s Role in Maintenance of Social Security
NALCO Employees’ Provident Fund Trust (NEPFT) looks after the maintenance of the
Laws of Social Security in NALCO. The board of Trustees for NEPFT, headed by theChairman-cum-Managing Director of the company, has been reconstituted, following a
meeting of the Board of Trustees on June 15, 2009. The meeting was presided by Shri
C.R Pradhan, CMD while Shri B.L. Bagra, Director (Finance), attended the meeting as
special invitee. The representative of NEPF Trust and officials were also presented on the
occasion. The new board of Trustees for the NEPF with the following members
(nominated by Employees’ Recognized Union and Management) has been constituted
(W.E.F 1st January, 2009).
Employees’ Representative
Shri B.P. Kar, Senior PS, Corporate Shri B.N. Soren, EA (Administration), Mines Shri L.D. Rout, EA (HRD), Alumina Refinery Shri Malaya Swain, Accountant, Smelter Shri P.K. Behera, Sr. EA, (HRD) Smelter
Employer’s Representative
Shri S.C. Das, Executive Director (Finance), Corporate Office
Shri S.K. Das, Dy. General Manager (Finance), Smelter & Plant Complex Shri K Ravindranath, Dy. General Manager (Electrical), Mines & RefineryComplex
Shri S.K. Mishra, Dy. General Manager (HRD), Corporate Office Shri A.K. Rout, Sr. Manager (Finance),NEPFT, Corporate Office Shri P.K. Dhirsamant, Dy. Manager (Finance), NEPFT, Corporate Office
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Employees’ PensionScheme – 1995
(w.e.f. 16th
November 1995)
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Early Pension:
With a minimum service of 10 years and any time before attaining the age
of superannuation but after 50 years of age provided the member retires orotherwise ceases to be in employment.
II. Disablement Pension
Paid to the member on permanent and total disablement during the service if at
least one month’s contribution has been paid.
III. Widow/Widower
The widow or widower pension shall be payable to the spouse of the member
when member dies
While in service
Away from Service
As a pensioner
This pension is payable upto the death of the spouse or upto date of remarriage
whichever is earlier.
IV.
Children Pension
The children pension to each child shall be 25% of the widow/widower pension
and is payable to two children at a time upto their age of 25 years and will run
from the oldest to the younger in that order. The pension shall be paid
concurrently along with the widow/widower pension. The legally adopted children
of the member are also eligible for children pension
V. Orphan Pension
The orphan pension to each child shall be 75% of the widow/widower pension and
is payable to two children at a time up to their age of 25 years and will run from
the oldest to the younger in that order, on the death or remarriage of the spouse of
the member.
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VI. Disabled Children/Orphan Pension
If the child or children of the member is/are permanently or totally disabled at thetime of death of the member, then a disabled children or orphan pension is payable
up to the entire lifetime of the child irrespective of the age and number of children
in the family in addition to the normal children/orphan pension payable to the
other normal children.
VII. Nominee Pension
If there is no spouse or an eligible child for the member on his death, then the
nominee executed through the Nomination proforma in Form 2 for the EPS-95would be eligible to get a nominee pension up to his/her life time with quantum of
pension same as the widow pension.
VIII.
Pension to the dependent father/mother
If there is no spouse, children or a valid nominee to a member, then a pension
equal to the widow pension shall be payable to the dependant father up to his
death and then to the dependant mother up to her entire life time.
Previously under the old Employees’ Family Pension Scheme, 1971, only
widow/widower pension was payable, in case of only death while in reckonable service
and prior to completion of 60 years of age. In absence of widow or on cessation of
Widow Pension, pension was payable to the eldest child up to the age of 25 years and
then it was to pass on to the younger children, one at a time, subject to the age limit of of
25 years. There was no provision for pension to member and capital return or
commutation or disablement pension. At the time of leaving the service, the employee
was entitled to withdrawal benefit only.
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METHOD OF CALCULATION OF PENSION AND THE MINIMUM AMOUNT
PRESCRIBED
Monthly Member Pension
The quantum of pension payable to a member on superannuation and/or exit from service
on attaining the age 58/50 years shall correspond to the period of pensionable service
rendered by the member and his pensionable salary i.e. the last twelve months’ average
pay drawn by him at the time of exit. The pension is calculated by the formula
(Pension Salary x Pensionable Service)
70
Those retiring after 16-11-1995, shall have also the benefit of past service pension for the
period of membership under the erstwhile Employees’ Family Pension Scheme, 1971 on
factor formula basis provided in Paragraph 12(3) in the EPS-1995 as below:
Years of Past Service Salary up to
Rs.2500/- per
month
Salary more than
Rs.2500/-
per month
Up to 11 years 80 85
More than 11 years but up to 15 years 95 105
More than 15 years but less than 20 years 120 135
Beyond 20 years 150 170
However, the amount shall be multiplied by the corresponding Table B factor for the
period that had elapsed between 16-11-1995 and the date of exit is date of attaining 58
years for superannuation/early pension, date of death for widow/widower pension and
date of disablement for disablement pension.
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Both the amounts would be aggregated to calculate the total monthly member pension
subject to the minimums prescribed as below:
Date ofCommencement of
Pension
Minimum formulaPension For Pension
For Pensionable
Service
MinimumAggregate
Pension
Minimum afterproportionate
reduction for
eligible service
less than 24 years
From 16.11.1995 to
15.11.2000
335 500 265
From 16.11.2000 to
15.11.2005
438 600 325
From 16.11.2005 635 800 450
However these minimums are prescribed only to the existing members. For new
entrants the pension would be as per the formula.
Disabled Member Pension:
The pension is calculated as above subject to a minimum of Rs.250/- per month
Widow/Widower Pension:
If Member dies in service then
Widow Pension = Member Pension treating the date of death of retirement (or) Table ‘C’
factor (or) Rs.450/- whichever is higher
If the members dies away from service before 58 with service of more than 10 years
then
Widow Pension = Member Pension treating the date of exit from employment as date of
retirement (or) Table ‘C’ factor (or) Rs 450/- whichever is higher
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New Pension Scheme –
2009
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GLOSSARY
PFRDA Pension Fund Regulatory and Development Authority
NPS New Pension System
GOI Government of India
CRA Central Recordkeeping AgencyCRA-FC CRA Facilitation Centre
KYC Know Your Customer
NSDL National Securities Depository Limited
T+1 Transaction Plus One Day
NPIN Internet Personal Identification Number
T-PIN Telephonic Personal Identification Number
PRA Permanent Retirement Account
PRAN Permanent Retirement Account Number
PF/PFM Pension Funds/Pension Fund Managers
RFP Request for Proposal
ASP Annuity Service Provider
TB Trustee Bank
PoP Point of Presence (NALCO)
PoP-SP Point of Presence - Service Provider (Authorised
branches of
POP for NPS)
UAT User Acceptance Test
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PENSION FUND REGULATORY AND DEVELOPMENT
AUTHORITY (PFRDA)
Pension Fund Regulatory and Development Authority (PFRDA) was established by the
Government of India on 10th
October 2003 to promote old age income security byestablishing, developing and regulating pension funds, to protect the interests of
subscribers to schemes of pension funds and for matters connected therewith or incidental
thereto.
1. The Central Government has introduced the New Pension System (NPS) with effect
from 01 January 2004. The new pension system covers, at present, new entrants to
Central Government services (excluding Armed Forces) some State Government
services and autonomous bodies at their discretion and all citizens of India on a
voluntary basis with effect from 1st May 2009.
2. The NPS is based on a unique individual Permanent Retirement Account Number
(PRAN) created for individual subscribers. In this system, a subscriber shall
periodically contribute savings into his/her Permanent Retirement Account (PRA)
while he/she is working and shall use the accumulations at retirement to procure a
pension for the rest of his/her life. Subscribers in this system shall enjoy a variety of
important facilities and rights including portability across jobs and locations, rightsand choices regarding selection of Pension Fund(s) and schemes, freedom to switch
between Pension Funds and service providers and nationwide access over a period
of time.
3. PFRDA has already put in place the institutional framework and infrastructure
required for administering the 'New Pension System' (NPS) for government
employees. Various institutional entities such as Central Record Keeping Agency
(CRA), Pension Fund Managers (PFM), Trustee Bank (TB), Custodian and NPS
Trust have been appointed and are now functional.
4. The recordkeeping and administration functions for all subscribers of the New
Pension System will be centralized and performed by a Central Recordkeeping
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Graphic Representation of NPS Architecture
The key stakeholders of the New Pension System are as follows:
Pension Fund Regulatory and Development Authority (PFRDA)
Funds Flow
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PFRDA is the regulator for the NPS. PFRDA is responsible for appointment of various
intermediaries in the system such as Central Record Keeping Agency (CRA), Pension
Funds, Custodians, NPS Trustee Bank, etc. PFRDA shall also monitor the performance of
the various intermediaries. PFRDA has a significant role to play in safeguarding the
interest of subscribers. It will regulate the manner in which subscriber contributions are
invested by PF(s) and will make all efforts to ensure fair play for subscribers. It shall also
ensure that all stakeholders comply with the guidelines/regulations issued by PFRDA
from time to time.
Central Recordkeeping Agency (CRA)
The recordkeeping, administration and customer service functions for all subscribers of
the New Pension System will be centralized and performed by the CRA. The CRA shall,
on the basis of instructions received from subscribers, transmit such instructions to the
appointed Pension Funds on a regular basis. The CRA will also provide periodic,
consolidated PRAN statements to each subscriber.
Pension Funds (PFs)/Pension Fund Managers
Appointed PFs would manage the retirement savings of subscribers under the NPS. PFs
would use their secure access codes to confirm receipt of netted assets and instructions
regarding fund allocation, confirm allocation of funds and communicate the NAV of each
scheme to CRA on a regular basis. The PFs will be required to invest strictly inaccordance with guidelines issued by the PFRDA.
Annuity Service Provider (ASP)
ASPs would be responsible for delivering a regular monthly pension to the subscriber for
the rest of his/her life. On receipt of personal and banking information details of
subscriber from CRA and of specified sum from the trustee bank the ASP would use its
access codes to confirm receipt. ASP would then begin payments of annuities to the
subscriber.
Trust & Trustee Bank (TB)
A Trust would be responsible for taking care of the funds under the NPS. The Trust
would hold an account with a bank and this bank would be designated as NPS Trustee
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Bank. NPS Trustee Bank will facilitate fund transfers across various entities of NPS
system viz. PFM, Annuity Service Providers, subscriber, etc. PFRDA has already
established NPS Trust under the provisions of the Indian Trusts Act w.e.f. 27th
February
2008 and Bank of India is functioning as NPS Trustee Bank. The NPS Trust is being
administered by the Board of Trustees, as constituted by the PFRDA.
Point of Presence (POP)
POP shall be the first point of interaction between the voluntary subscriber and the NPS
architecture. PoP shall perform the functions relating to registration of subscribers,
undertaking Know Your Customer (KYC) verification, receiving contributions and
instructions from subscribers and transmission of the same to designated NPS
intermediaries. Detailed functions to be performed by the PoP(s) are listed out in section
2 of this RFP., PoP(s) and their authorized branches (PoP-SPs) shall also be required to
comply with the provisions of the Prevention of Money Laundering (PML) Act , 2002
and the rules framed thereunder, as may be applicable, from time to time.
Voluntary Subscribers
Subscribers will have complete control on how their contributions and savings in PRAN
are managed. They will be able to select a professional Pension Fund ( PF) from a pool of
competing Pension Funds. Each PF in this system will offer a limited number of simple,
standard investment schemes with different risk and return profiles. They will also be
able to seamlessly switch savings between investment schemes subject to such conditions
as prescribed by PFRDA from time to time.
FUNCTION OF POPs
The following sets of functions are primarily expected from PoP/PoP-SP. However, these
are not exhaustive.
INITIAL CUSTOMER INTERACTION FOR NPS
a) Addressing queries of potential subscribers regarding NPS.
b) Providing and displaying PFRDA approved information/material on NPS and
application form/ offer document/other publicity material
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The application and other request forms as prescribed by PFRDA for various services
under NPS would be required to be printed, stored and made available to NPS subscribers
by the PoP. In addition, these forms shall also be made available in downloadable format
on the PFRDA, PoP and CRA websites.
SUBSCRIBER R EGISTRATION
a) Receive the duly filled application form along with the KYC documentation as
may be applicable from time to time.
b) Verification of KYC documents as may be required from time to time.
c) At the time of registration, PoP-SP shall collect and verify contributions that may
be received through cash/cheque/Demand Draft.
d) Collection/deduction of NPS application processing fees and issue of receipt to the
subscriber against the same.e) Duly accepted application form shall be submitted on a daily basis, to CRA/CRA-
Facilitation Centre (FC) for digitization by hand where the PoP-SP and the CRA-
FC are co-located. Where the PoP-SP and CRA-FC are not co-located, the former
shall have the option to transmit the documents (original application form along
with documents) to the nearest CRA-FC either by hand or through post. For the
purpose, PFRDA/CRA may map PoP-SP(s) to nearest CRA-FC location.
f) Currently CRA-FC(s) are existing in approx 50 cities.
g) CRA would, on successful digitization, dispatch the PRAN kit directly to thesubscriber. The CRA shall also inform the PoP-SP of the PRAN numbers allotted
to its subscribers.
h) On receipt of PRAN numbers, PoP-SP shall upload the subscriber contribution
files into
CRA system and simultaneously arrange to transfer the funds into the account of
the NPS trust maintained with the Trustee Bank. For this purpose, the PoP/PoP-SP
is expected to maintain a separate, earmarked account for the NPS contributions
received.
i) The initial contribution of subscriber shall be remitted to the trustee bank on the
day it receives information from CRA about the PRAN number allotment to the
subscriber
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j) On successful digitization, the CRA shall retain the original NPS application form
and the
KYC documents for storage.
MAINTENANCE OF
HARD COPIES AND
R ECORD OF
TRANSACTIONS
(i) PoPs and PoP-SPs shall ensure maintenance, reporting and retention of records
of all
transactions in accordance with the provisions of PML Act, 2002 and Rules
framed
thereunder, as may be applicable, from time to time.
(ii) CRA shall store hardcopy of the NPS application form and other supporting
documents
submitted by the subscriber at the time of registration towards fulfilling the
KYC norms. In addition, CRA shall also maintain documents submitted by thesubscribers for effecting any changes in demographic details.
Note: NSDL/CRA has agreed to store the hard copy documents on behalf of PoP/PoP-
SP. This arrangement would, accordingly, need to be formalised in writing between
the PoP/PoP-SP and NSDL. NSDL shall however not be charging PoP/PoP-SP for
storage of such KYC documentation. The responsibility for KYC verification shall,
however, be that of PoP/PoP-SP.
R EGULAR SUBSCRIBER CONTRIBUTION UPLOAD
a) Verify PRAN card details on the deposit slip, the format for which shall be
prescribed by PFRDA.
b) Collection and verification of contributions that may be received
through cash/cheque/Demand Draft/ Electronic Clearing System (ECS).
c) Collection/deduction of contribution processing fee and issue of receipt to the
subscriber against the same.
d) Uploading subscriber contribution details online into the CRA system, in respect
of subscribers for whom clear funds are available, on a daily basis.
e) Remit clear funds into the account of the NPS trust maintained with the Trustee
Bank on a T+1 basis.
f) Maintain hard copies of deposit slips
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E Withdrawal Request processing At the current PoP-SP to which the
subscriber is linked in the CRA system
F Receiving Grievances and their redressal Initially, only at the parent PoP-SP
G Subscriber shifting within the same PoP Initially the subscriber has the option to
shift from his/her Parent PoP-SP to anyother PoP-SP within the same PoP.
H Subscriber shifting from one PoP to any
other PoP
In due course of time (as stipulated by
PFRDA) the subscriber will have the
option to shift from one PoP to any
other PoP registered with PFRDA.
PFRDA will lay down the procedures as
and when inter-pop operability is
established.
SERVICE LEVEL STANDARDS/R EQUIREMENTS
Sl.No Functions of the PoP Service level/Standards
A Registration of Subscriber Submission of application forms to CRA-FC byend of the day (EoD)
B KYC Verfication, Retentionand maintenance of record oftransactions
As per the provisions of the PML Act, 2002 andthe rules framed thereunder, as may beapplicable, from time to time.
C Transmission of funds to NPStrust account maintained withTB
Clear funds have to be transferred to theTrustee Bank on a T+1 basis.
D Switch/Scheme preferencechange
Request to be uploaded into the CRA system asand when received from subscriber by PoP-SP/PoP.
E Grievances Grievances against the PoP-SP to be normallyresolved within 7 days from the date of receiptof grievance.
F Subscriber shifting Request to be uploaded into the CRA system asand when received from subscriber byPoP/PoP-SP.
G Subscriber shifting from onePoP to any other PoP
In due course of time (as stipulated by PFRDA)the subscriber will have the option to shift fromone PoP to any other PoP registered withPFRDA. Operational details to be prescribed byPFRDA in due course.
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TECHNICAL ELIGIBILITY CRITEREA FOR PoP
Any institution bidding for PoP Registration is required to fulfill following basictechnical eligibility condition to be registered as PoP under NPS.
a) Regulated by both Reserve Bank of India, Securities and Exchange Board of India
or Insurance Regulatory and Development Authority.
b) Having a minimum of 25 branches, covering at least 25 districts spreading over 3
or more States with each branch conforming to IT infrastructure and capacity to
electronically link to the CRA (detailed IT requirement as mentioned in section
3.2 of this document). Each of these branches should have demonstrated capability
to electronically transmit in an efficient and secured manner clear NPS subscriber
contribution and subscriber information on at least "T+1" basis.
c) Minimum net worth (paid-up capital+reserves+surplus) of INR 1.00 Cr as on 31 st
March 2009.
d) A three year track record of profitability (Profit after tax) as of 31st March 2009.
e) The institution should be in business
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