ASSIGNMENT

Course Code : MS - 92

Course Title : Management of Public Enterprises

Assignment Code : MS-92/TMA/SEM - I/2017

Note : Attempt all the questions and submit this assignment on or before 30th April, 2017 to the
coordinator of your study center.

Q1.Briefly discuss the various organizational forms which a Public Sector Enterprise can
take?

Ans:

The participation of Government in economic and business sectors requires some kind of
organisational structure to operate. You have learnt about the types of business organisation in the
private sector namely, single ownership, joint ventures, Hindu joint family, cooperative and
company.

As the public sector grows, a vital question crops up as to how it is to be structured or what form of
organisation it should take. In the formation of the public sector the government has a major role to
play. But the government acts through its employees, its people, its offices who they take
conclusions and decisions on behalf of the government. In order for the government to participate

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in the economic activities of the country, public enterprises were formed by the government which
are expected to contribute to the economic development of our country in today's liberalised,
competitive world. These public enterprises are owned by the public and are answerable to the
public through the Parliament. They are characterised by public accountability, public funds being
used for its activities and public ownership. Depending on the relationship with the government
and the nature of its operation, a public enterprise may take any particular form of organisation.
The aptness of a specific form of establishment may depend upon its needs. Simultaneously, any
organisation in the public sector, in accordance with general principles, should ensure
organisational performance productivity and quality standards. The types of organisation which a
public sector house may take are as follows:

 Departmental enterprise
 Statutory body
 Government organisation

Governmental agencies, more often than any other, have clear and defined structure. In American
government, defined scopes and roles of individuals are not only the standard, but are typically
recorded with detailed job descriptions and organizational charts. By and large, there is not
tremendous variation in structure types, but if one looks carefully, there are a few.

Vertical Structures

Most government organizations are classic examples of vertical structure. Vertical organizational
structures are characterized by few people at the top and increasing numbers of people in middle
management and lower level positions. In other words, a few people make policy and decisions, and
many people carry them out. Governments often lean toward them because they create very
defined job scopes and powers--each person has a clear role to play. Vertical structure is the classic
bureaucracy and is epitomized and originated in one of the oldest government functions: military
command.

Horizontal Structures

Horizontal organization charts are characterized by a few positions at top and then many positions
on the next row down. In other words, there are very few supervisors and many peers or equals.
While this structure is most common in professional organizations such as law and architecture
firms or medical practices, a few types of government use this structure. For instance, in very small
programs--especially after budget cutbacks--certain city and county social services such as drug
prevention or domestic violence education programs may find themselves with only a few staff
members. In order to deliver services or because they do job sharing, staff may work together
cooperatively rather than in hierarchical order.

Divisional Structures

Divisional structures divide function and responsibility based on specialty or geography--such as a

market territory. In the case of the public sector, a few organizations such as courts use this system.
For example, federal courts are divided into regional circuits and even most counties have multiple

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courthouses which hear cases from their defined territories within the country. These courts run
parallel and are not affected by one another. Similarly, police and fire departments usually have
precincts and battalions with specific jurisdictions for better functionality.

Q2.Explain the ideal way in which the Government should interact with Public Enterprises to
facilitate their operations in public interest.

Ans:

The relationship between the Government and public enterprise managers is no different from that
which exists between any owner and his managers in the private sector. And public enterprise
managers are no different from their private sector counterparts, in that both of them ultimately try
to maximise self-interest. The real difference lies in the role of the owners in this relationship.

In the private sector, the owners specify their goals clearly, monitor the achievement of these goals
closely and determine rewards and punishments accordingly. In the public sector, goals are rarely
clear. There are multiple principals (the Finance Ministry, the Planning Commission. the
Department of Public Enterprises, the auditor general, etc), each of which specifies multiple and
often conflicting goals. So it is difficult to monitor and evaluate performance. Even when
performance can be measured objectively, there doesn't exist a fair and effective system of rewards
and punishments.

Does this imply that to make public enterprises "do things right", we should emulate the example of
the private sector? The answer is both yes and no. For instance, they should not be evaluated
primarily on the basis of financial performance. To do so would be like going to a cinema-hall to
sleep rather than to watch a movie. In other words, why bother to create public enterprises if all
you want them to do is to act like private ones?

Public enterprises are an instrument of public policy and their operation ought to enhance national
welfare. However, increases or decreases in the profitability of an enterprise may not necessarily
have any correspondence with increases or decreases in national welfare. In many cases, a market
monopoly guarantees enormous profits, with or without managerial efficiency.

While policy makers concede that profitability is an inappropriate criterion for measuring public
sector performance, they still end up using profitability as an implicit or explicit yardstick. In large
part, this is because policy makers have still not successfully answered the question: "If not for
profit, then for what? "This intellectual cop-out is the major source of the troubles that plague
public enterprises. If we do not even know what we want from our public enterprises, how can we
expect to get it? The challenge lies in devising performance indicators which rate performance on
commercial and non-commercial objectives.

Take the issue of autonomy versus accountability. There are two way's of controlling any
enterprise, public or private. One involves specifying final outcomes clearly and letting the manager
pursue them with minimal intervention. This is often called "management by objectives" or
"management by results".

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Alternatively, one can control the production processes to ensure the desired outcome. This
requires substantial intervention in the affairs of the enterprise. Since the Government finds it
difficult to specify goals, it opts for the latter course.

Reducing controls in order to increase the autonomy of public enterprises, however, is not enough.
This may turn out to be both undesirable and unstable. The important question here is: "Autonomy
for what?" If public enterprise goals remain fuzzy, more autonomy will simply lead to abuses, which
will most certainly invite a cut back on autonomy. This is the classic "autonomy pendulum"
observed all over the world.

Reforms, therefore, should focus not only on the "quantity of controls" but also on the "quality of
controls." If the former is reduced while the latter is increased, the Government can raise both
managerial autonomy and managerial accountability. This would make the debate that focuses on
the choice between autonomy and accountability redundant, because the trade-off between the two
is imaginary and not real.

Unfortunately, while a simple stroke of the pen can raise or lower the quantity of controls,
regulating the quality of controls requires superior attributes of policy making. The starting point
once again is goal specification. Recent moves towards designing large holding companies, to
insulate them from bureaucratic interference, again emphasises the reduction of the quantity of
controls. But this too is a cosmetic exercise which leaves the heart of the problem untouched.

If smaller companies are put under bigger ones, the Government will be freed of the responsibility
of financing them." Tewary is confusing cause with effect. The real problem is that smaller
companies do not generate surpluses. Consequently, the Government often has to subsidise their
losses.

Whether such financing comes from the government budget directly, or indirectly through the
profit of larger enterprises, is a secondary issue. In fact, putting unprofitable enterprises under
profitable ones will provide the latter an excuse to justify their future lapses in terms of this extra
burden.

The problem of monitoring will be further compounded by the fact that the new mega-
conglomerates will be headed by people who will, in all likelihood, have more political clout than
most members of the Cabinet. They will probably enjoy more autonomy than their counterparts in
the private sector. In the absence of any well-specified goals and a well-developed monitoring
system, the potential for disaster is mindboggling. as shown by Pertamina in Indonesia.

The only real solution to the problem of poor performance of public enterprises lies in getting the
Government back into the business of being a "principal" in the principal-agent relationship. This
requires action on several broad fronts. First, The Government has to decide on its criteria for
monitoring public enterprises. Experience suggests that it is futile to search for any universal
criterion, applicable to all public enterprises, which would be the counterpart of profits in the
private sector.

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Q3.What is the need for setting up of State Level Public Enterprises (SLPEs)? Discuss in detail
with reference to any SLPE of your choice.

Ans:

The need for setting up of State Level Public Enterprises

The State Level Public Enterprises (SLPEs) have played a very important role in providing
infrastructure services including, power supply, road transportation and irrigation in the different
States and Union Territories.  The contribution of these enterprises to the society, their ability to
generate revenue, maintain profitability have been brought out lucidly in the Second National
Survey of State Level Public Enterprises conducted by the Ministry of Heavy Industries & Public
Enterprises.
Features
There are a total of 849 operating SLPE’s in India employing over 18 lakh people. The National
Survey, based on information furnished online BY 579 companies, reveals that despite many
constrains these enterprises have made a significant contribution to the State exchequer.
                                                                                                                                         
Bulk of the investment in these enterprises has gone into infrastructure projects, which are mostly
classified as public utilities. Out of the 579 enterprises, 357 SLPEs earned profits, while as many as
190 SLPEs incurred losses. “Although these enterprises are often monopolies, they operate at a
price disadvantage asthey have to work under an administered price regime. Despite rise in inputs
costs, prices of goods and services of these enterprises have not been correspondingly raised for
years” says Heavy Industries Minister Mr. Praful Patel, explaining the reasons for their losses.
Composition
As high as 67% of the investment in SLPEs has been in the power and energy sector, followed by
investment in ‘Industry’ with a share of approximately 9%. Financial services claimed a share of
8%, comprising various promotional institutions catering to different sectors like handloom and
handicrafts development, fisheries and forestry development etc. This was followed by investment
in ‘transport services’ with a share of 5% of total (financial) investment. Sectors such as mining
(4.5%), trading and marketing / other services (3.5%) and agriculture (2%) had comparatively
much lower investments.
               
Investments
The total investment in the 579 SLPE’s stood at Rs 3,29,079 crores. this comprised Rs 1,15,588
crores as paid-up capital and Rs 1,83,256 crores as long term loan.  The debt-equity ratio
accordingly worked out to 1.6:1
 
State-wise, Maharashtra tops this list with a total investment of Rs. 63,129 crores followed by
Gujarat, Karnataka, Andhra Pradesh and West Bengal

Top 5 States in terms of Investment in SLPEs, 2012-13

Sr.No. State Investment

(Rs.crores)
1. Maharashtra 63,128.76

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 2. Gujarat 52,137.64
3. Karnataka 41,577.92
4. Andhra Pradesh 33,154.22
5. West Bengal 22,208.94

 
Sardar Sarovar Narmada Nigam Ltd. with an investment of Rs. 27,158 crores is the biggest SLPE.  
Maharasthra State Electricity Board Holding Co. (Rs. 12,287 crores), Vidarbha Irrigation
Development Corporation (Rs. 9,936 crores) and Maha Genco (Rs. 8,394 crores) are the three
companies from Maharashtra figuring in the list of top 10 SLPEs in terms of investments.
 

Top 5 SLPEs in terms of Investment, 2012-13

No. State Investment

(Rs.crores)
1. Sardar Sarovar Narmada Nigam Ltd., Gujarat 27,158.42
2. A.P. Power Genration Corportion, AP 13,297.21
3. Maharashtra State Electricity Board Holding Co 12,287.43
4. Vidarbha Irrigation Development, Maharashtra 9,936.89
5. Kaveri Neeravari Nigam Ltd, Karnataka 9,660.03

 
Turnover
The total turnover of the 579 SLPEs stood at Rs 2,39,453 crores. However, this figure does not give
the true picture of the financial performance, as most public utilities, like power supply and road
transport undertakings, are often required to operate under controlled / administered prices,
much below the remunerative prices, which reduce the value of turnover.
 
In terms of gross sales/turnover, Gujarat topped the list with a turnover of  Rs 42,038 in 2012-13. 
It was followed by Maharashtra (Rs. 35,725 crores), Andhra Pradesh, Tamil Nadu and Karnataka .

Top 5 States in terms of Turnover, 2012-13

Sr.No. State Investment

(Rs. crores
1. Gujarat 42,037.94
2. Maharashtra 35,725.48
3. Andha Pradesh 27,741.30
4. Tamil Nadu 22,556.32
5. Karnataka 19,905.15

 
Maharashtra State Electricity Distribution Company (Maha Vitaran) ranked first amongst all the
579 SLPEs with a turnover of Rs 20,159 crores. Maha Vitaran also accounted for 56% turnover of
all the reporting SLPEs from Maharashtra. This company is responsible for distribution of

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electricity in entire Maharashtra, except Mumbai City and Suburban districts, where the power is
distributed by BEST, Tata Power and Reliance Energy.

Top 5 SLPEs in terms of Turnover, 2012-13

Sr.No. State Investment

 
1. MahaVitaran 20,158.61
2. Gujarat Urja Vikas Nigam Ltd. 14,013.92
3. Tamilnadu State Marketing Corp Ltd 10,486.43
4. A.P. Beverages Corporation. Ltd. 8,429.85
5. MahaGenco 8,081.97

 
Profitability
In terms of  profit making SLPEs, Odisha led all the States with a net profit of Rs 2,232 crores. It was followed
by Maharashtra (Rs 1,070 crores), Andhra Pradesh ( Rs 1,053 crore), Gujarat (Rs 1,031 crores) and
Karnataka (Rs 831 crores)
 
The Orissa Mining Corporation was also the most profitable SLPE posting a net profit of Rs 1,052.86 crores. 
Maha Genco (Rs 300.03 crores) and Maha Transco (Rs 258.20 crores) were the two companies from
Maharashtra in the Top 10 profitable SLPEs list.
 
The survey also throws light on the most loss making SLPEs. Delhi Jal Board topped the list of loss making
SLPEs with a loss of Rs. 1,567 crores. It was followed by Delhi Transport Corporation (Rs. 1,216 crores),
Bihar State Electricity Board (Rs. 585 crores), Uttar Haryana Bijh Vitaran Nigam Ltd., (Rs. 495 crores ) and
Maharashtra State Road Development Corporation (Rs. 422 croes).
 
Employment  
In terms of employment, Maharashtra topped the list, with a workforce of 2,44,625 employees in its 55
SLPEs.  It was followed by Andhra Pradesh (2,27,889 employees), Tamil Nadu (1,97,206 employees), Gujarat
(1,06,503 employees) and UP (97,225)

Top 5 SLPEs in terms of Manpower, 2012-13

Sr.No State Employment (Nos)
.
1. AP State Road Transport Corpn. 1,13,340
2. Maharashtra State Road Transport Corpn. 1,00,774
3. Maha Vitaran 80,950
4. Siagereni Collieries Ltd. 75,579
5. Gujarat State Road Transport Corp. 44,891

 
One of the significant findings of the survey is that  SLPEs, though burdened with several constraints
contributed more to the exchequer by way of local taxes, value added tax and dividend pay-out, as compared
to the subsidies they received from the respective state governments.  Following table illustrates this fact.

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Sr.No. State Contribution Subsidy received
to exchequer
(Rs crores)
(Rs crores)
1. Andhra Pradesh 5944.97 4416.43
2. Tamilnadu 4833.67 2282.85
3. Kerala 4071.65 20.45
4. Gujarat 2836.92 1566.38
5. Delhi 2770.19 165.48
6. Maharashtra 1383.56 646.70
7. West Bengal 1378.04 303.97
8. Orissa 1337.56 3.93
9. Goa 1180.05 3.57
10. Rajasthan 825.80. 1291.12

 
It is clear from the survey that the industrially developed states of Western India and Southern India also
have robust state level PSEs. An evaluation of the revenue and profitability of the enterprises also shows that
wherever reforms have been implemented, the SLPEs have shown better results. In case of power utilities,
for instance, collection of revenues has gone up significantly in states that have adopted franchising model.
 
To maintain the economic growth momentum, it is important to ensure that there are no supply side
constraints. Towards this end, the state level public enterprises, especially those in infrastructure sector have
a very important role to play.  It is for the respective state governments to prepare conducive business
environment for them to flourish.

Q4.Describe the Composition of the Board for the Management of Administration of Public
Enterprises. Examine how does it enjoy wider responsibilities than the Boards of Private
Sector Enterprises?

Ans:

The Composition of the Board for the Management of Administration of Public Enterprises

The public enterprises came into existence as a result of the expanding scope of public
administration. The advent of the concept of welfare state after the Second World War and the
increasing developmental initiative undertaken by Government across the world, the system of
public enterprises was developed. The government sells goods and services to the common people
through the means of a state owned enterprise system which incorporates the characteristics of
both public and private enterprises. For e.g. the metro train facility for commuting in big cities,
developed, managed and run by the government.

The government operates in the areas which are of basic or strategic importance and also the areas
that require huge investments beyond the scope of private enterprises. The public enterprises in

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India have been on a steady rise since their big show in the Third Five Year Plan and have engaged
themselves in a number of economic activities like advancing loans, regulating trade and commerce,
heavy machine manufacturing, chemical drugs and fertilizers, oil drilling etc. The government of
India boasts of five Maharatnas and nine Navratnas (ratna meaning gems) public enterprises which
are engaged in myriad of economic and developmental activities in the country, e.g. The Steel
Authority of India, Hindustan Aeronautics Limited, National Thermal Power Corporation etc.

The state owned enterprises play an important political, economic and developmental role in their
respective countries. The public enterprises of the erstwhile Soviet Union comprised of 85% of the
workforce of the country.

The growth of public enterprises also has its roots in the colonial pasts of the countries of Asia and
Africa. The Government sector, the public administration and ultimately the public enterprises in
these countries have been greatly influenced by the colonial powers that ruled them. India is a good
example of this trend where even today the Railways are the biggest example of a successful public
enterprise. Even the countries with no colonial history like Iran and Turkey, the public enterprise
was used a tool to bring about economic, political and social changes, particularly in Turkey after
the demise of the Ottoman Empire and formation of the modern Turkey.

The history of public enterprises in the USA dates back in the nineteenth century and was
characterized by the state chartered banks in which the Federal Government has significant portion
of the stocks. The formation of the Panama Rail Road Company in 1904 was another victory of the
public enterprise system. The growth of public administration and enterprises reached its peak
under Franklin D Roosevelt and the Tennessee Valley Authority became the most emulated model
of public corporation.

There are several factors that have contributed the growth of public enterprises in the recent times.
The governments have used it to guide and command the economy; they own the strategic
industries, functions and agriculture and also try to fill the inadequacies of the private sector. Public
enterprises are also essential in bringing about national development. They are also used as
political instrument to maintain political stability, prevent unrest and provide employment. Public
enterprises have also helped the earlier colonized and now developing economies of the world to
decrease their dependency on other nations and become self sufficient. Monopoly, freedom to chose
profitable projects; no taxes etc are other factors that have led to their growth.

Wider responsibilities than the Boards of Private Sector Enterprises

The private sector plays a key role in accelerating economic growth in market capitalist economies.
The private sector is the foundation of the market capitalist economic system. Without the private
sector the capitalist market cannot exist, and vice versa. For example, the development of the
private sector in transition economies was vital, and the final goal of transition was associated with
the private sector being converted into the dominant sector in the economy. In all industrialized or
advanced capitalist economies, the absolute and relative size of the private sector is very high.
Hence, in a capitalist market economy the private sector is mostly responsible for most of the

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country’s investments, for the generation of new job opportunities, and for the improvement of
standards of living, and it is the source of most technological developments.

The government in market capitalist economies undertakes the following responsibilities to

promote and support the private sector:

a) creating proper legal environment for the private sector to function, through private
property rights and contract law;
b) introducing customs and tax laws that should encourage private investment;
c) often providing basic infrastructure produced by public enterprises such as water, power,
land, transport and communication services, and other necessities;
d) initiating macroeconomic policies and expenditure to increase the demand for the private
sector produced goods.

The private sector increases into two ways: through privatization of state-owned enterprises
(SOEs) and through the creation and establishment of new firms. In this way, the share of the
private sector in the economy grows. Privatization represents the transfer of state-owned assets to
private ownership, alongside the creation and fostering of private businesses. Privatization is an
alternative way of distributing and choosing the means of generating wealth (Marangos 2004).
Consequently, it also may be considered a distribution of political and economic power in the
economy. The increase of the private sector further implies the abandonment of government
control over economic activity, as well as the abandonment of state monopoly in certain sectors.
However, as the private sector increases, both income and wealth inequality increase, and
intergenerational mobility decreases.

Supporters of the private sector mistrust government-initiated economic activities because they
believe that the private sector is both efficient and enterprising. This further increases efficiency
because of the increase in macroeconomic productivity due to the adoption of new technology.
Critics of the private sector argue that the private sector does not produce public goods, that it
creates private monopolies, enhances income and wealth inequality, and discourages
intergenerational mobility. Public goods are commodities where the exclusion principle breaks
down, and they are nonrivalrous. Such goods include, for example, lighthouses, national defense,
police, fire brigades, and traffic lights. In nearly all industrialized or advanced market-capitalist
economies, public goods are provided by the government and funded through the collection of state
revenues.

Q5.What are the benefits from privatization? Explain how change of ownership improves
efficiency?

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Ans:

The benefits from privatization

Privatization has been a key component of structural reform programs in both developed and
developing economies. The aim of such programs is to achieve higher microeconomic efficiency and
foster economic growth, as well as reduce public sector borrowing requirements through the
elimination of unnecessary subsidies. Microeconomic theory tells us that incentive and contracting
problems create inefficiencies due to public ownership, given that managers of state-owned
enterprises pursue objectives that differ from those of private firms (political view) and face less
monitoring (management view). Not only are the managers' objectives distorted, but the budget
constraints they face are also softened. The soft-budget constraint emerges from the fact that
bankruptcy is not a credible threat to public managers, for it is in the central government's own
interest to bail them out in case of financial distress. Empirical evidence shows a robust
corroboration of theoretical implications: privatization increases profitability and efficiency in both
competitive and monopolistic sectors. Full privatization has a greater impact than partial
privatization and monopolistic sectors show an increase in profitability that is above the
component explained by increases in productivity, which reflects their market power. From the
macroeconomic perspective, no conclusive evidence can be drawn, but the trends are favorable.

The biggest advantage of privatization is that once a privatization is done completely there is no
interference from political leaders and also one does not need to do undue favor to them which in
itself is a big boost when it comes to doing business and increasing profitability.

It increases the overall efficiency and reduces the bureaucratic culture which is the main culprit
because typically in government organizations work happens at its own leisurely pace which
results in delay in decision making and therefore reduces the effectiveness and competence of
public sector enterprise.

As far government is concerned it has also benefits from doing privatization because majority of
governments all over the world has fiscal deficit and by doing privatization government can reduce
fiscal deficit to an extent, however full control is possible only when government control its
unnecessary expenditures.

Change of ownership improves efficiency

Based on firm performance, managers earn rewards and investors decide whether to invest in a
firm. Therefore one of the key questions in corporate finance is to identify factors that contribute to
firm performance. Since the early 1930s, when Berle and Means (1932) found a positive correlation
between ownership concentration and firm performance, ownership structure has been recognised
as an important factor.

A concentrated ownership structure can help reduce the risk that managers will abuse their power
at the expense of corporate shareholders, since greater monitoring efforts by large shareholders
can be expected. On the other hand, ownership concentration also has costs, not least that it may

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lead to the expropriation of minority shareholders , with possibly negative repercussions on firm
performance.

By and large, existing empirical work equates firm performance with accounting ratios such as
profitability and labour productivity. However, such ratios are unlikely to reflect the full value
created by a firm. For example, Japanese companies have historically been less profitable than their
American counterparts, but their remarkable productivity performance in sectors such as autos and
electronics led to rapid growth in their global market share in the 1970s and 1980s. Moreover,
profitability captures only the part of the value added that goes to shareholders, while labour
productivity can be an inadequate measure of overall performance, especially in capital intensive
industries. Finally, financial ratios can be easily manipulated for tax or other reasons, particularly in
countries where the rule of law is weak, and among small and medium sized private enterprises.

Q6.Write short notes on the following:-

Q(a)Navaratna Dispensation

Ans:

In pursuance of the policy objective to make the public sector more efficient and competitive,
Government have announced its decisions to grant autonomy and delegated powers from time to
time on various issues for application in the Central PSUs in general and also specific delegated
powers to the Navratna and Mini-Ratnas.

It is however, clarified that the delegated powers would not include the power to decide about
merger and acquisition. The Central Government public enterprises must therefore take prior
approval of the Government in regard to merger with and/or acquisition of any other business
entities or major business activities and should not take decision at their own. This would be
applicable to all the Central PSUs irrespective of their financial status or grant of
Navratna/Miniratna status etc. Decisions on merger and/or acquisitions should not be interpreted
as though such powers are within the autonomy given to the Navratnas/Miniratnas under the
guidelines issued by the Govt.

Similarly, it is also clarified that the Navratna and Miniratna enterprises must follow the procedures
detailed in the Government guidelines for investment of surplus funds as detailed in DPE OMs
Nos.DPE/4(6)/94-Fin. dated 14.12.94 and 1.11.95. There is no separate dispensation available to
any of the public enterprises in this regard (other than the PSEs in financial sector about which
separate guidelines were issued, vide OM No. DPE/4(6)/94-Fin. dated 2.7.96) and these guidelines
on investment of surplus funds are applicable to all the Central PSEs including the Navratna and
Miniratna CPSEs.

Q(b)Performance of Ports

Ans:

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Ports have traditionally made use of quantitative measures to assess their performance. While
contributing towards ranking a port in the worldwide context or even classifying ports according to
their size, these provide little information about the quality of the services being offered. The trends
in contemporary logistics and the emerging of the new economy mean that successful ports can no
longer sustain this approach. It is therefore suggested that ports become agile. Agile ports entail a
new approach to measuring port performance. Because its development requires the
implementation of a two-stage integration process, internal and external, it is therefore proposed
that a two-tier measurement of port performance indicators is also developed. The new port
measurement indicators, besides considering quantitative aspects, will also focus on qualitative
issues as they bring increasing visibility within the port environment and along the transport chain,
enhancing a better integration of all supply chain logistics elements. Qualitative performance
indicators are at the heart of lean ports and consequently of port networking. Additionally, they
support a total quality port management system implementation which encourages continuous
improvements. The objective of this paper is to suggest a set of new port performance indicators
that measure lean port performance and sustain the subsequent development of agile ports.

The reason for attempting this study on Indian Major Ports is that India in an effort to increase the
efficiency of ports India has been attempting to deregulate its port sector. At the same time Indian
ports are not considered noteworthy in terms of their efficiency as they are characterized by the
existence of obsolete and poorly maintained equipment, hierarchical and bureaucratic management
structures, weak coordination between the port trusts and users of the ports hence there is a need
to study the Indian ports and the factor influence their efficiency in depth. Secondly, considering the
country’s entry into the second stage reform, the analysis will help to assess potential benefits of
moving to a deregularized port sector under a liberal trading region when more than 75% of the
country’s foreign trade passes through seaports. For instance, the determinant factors if taken care
of can stimulates traffic, and then the benefits of performance augmenting factors might be
responsible not only redistribution of existing traffic but also for attracting new manufacturers.
Hence there is a stray justification for analyzing factors determining the efficiency of the Indian
ports sector.

Q(c)Labour Redundancy

Ans:

Redundancy occurs when an undertaking is closed down or there is amalgamation which causes
severance of the legal relationship of a labour and employer as it existed immediately before the
close down, arrangement or amalgamation, and as a result of and in addition to the severance that
worker becomes unemployed or suffers any diminution in the terms and conditions of employment.

There is no stated formula in the Labour Law. The redundancy pay is subject to negotiation
between the employer or representative of the employer on the one hand and the worker or the
trade union concerned on the other.

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A worker may refer any dispute concerning the redundancy pay and terms and conditions of
payment to the National Labour Commission for settlement and the decision of the Commission
shall be final.

Many employers cull undesirable employees by declaring jobs redundant and placing the
incumbent employees in a ‘redundancy pool’ or ‘redeployment pool’. The employer then requires
the pooled employees to apply for vacant posts but turns down the applications of the targeted
‘undesirables’. The practice of ‘pooling’ might succeed if the employer can prove that the pooling
and the redundancies are legally justified in the prevailing circumstances, that there are no hidden
agendas and that the employees concerned have agreed to the pooling option. However, this
approach bears so many pitfalls and is so open to misuse that I strongly advise employers to avoid
it.

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