Annexure-V- Cover Page for Academic Tasks

Course Code: HRM516 Course Title: Industrial Relation and Labour Law

Course Instructor: Dr. Shikha Goyal

Academic Task No.: 2 Academic Task Title: Case Based Assignment

Date of Allotment: 16/03/20 Date of submission: 26/03/2020

Student’s Roll no: 32, 33, 34, 36 ,37 Student’s Reg. no: 11907761, 11907762, 11907766, 11908130, 11908134

Evaluation Parameters:

Learning Outcomes:

We understood about the various concepts of Industrial Relations and Labour laws. Also we were able to
implement the concepts that are taught in the class in the real scenario of given case.

Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other students work
or from any other source except where due acknowledgement is made explicitly in the text, nor has any
part been written for me by any other person.

Student’s Signature: Prerna Kumari, Hardik Pandey, Ravina, R.S. Lucky, Chhaya Sharma.

Evaluator’s Comments (For Instructor’s use only)

General Observations Suggestions for Improvement Best part of assignment

Evaluator’s Signature and Date:

Marks Obtained: Max. Marks: __________

PEER RATING
NAME HARDIK PRERNA CHHAYA RAVINA LUCKY
(B-33) (B-32) (B-37) (B-34) (B-36)
HARDIK N/A 10 10 10 07
(11907762)
PRERNA 10 N/A 10 10 07
(11907761)
CHHAYA 10 10 N/A 10 07
(11908134)
RAVINA 10 10 10 N/A 07
(11907766)
LUCKY 10 10 10 10 N/A
(11908130)
 BHARAT PETROLEUM: LONG-TERM WAGE SETTLEMENT

Introduction

Bharat Petroleum Corporation Limited (BPCL) is an oil and gas company controlled by Indian
government with its headquarters in Mumbai. The company has two large refineries which are
located in Mumbai and Kochi. BPCL is India’s 2nd largest oil company and is placed at 275th in
the Fortune list of world’s biggest corporation of 2019 and 2018. Till 2002, government
controlled the prices of the oil products and fuel prices were kept low for customers with the help
of subsidies. But by 2010 the products were free from the subsidies. This step by government
increased competition and BPCL profit margin come under major pressure. In BPCL the pay
packages were reviewed every 10 years, but due to this the cuts in subsidies the government
could not provide financial support for increase in wage. Since the workers of the BPCL are part
of trade unions, their wages were set by long term settlement with collective bargaining. Hence
in 2009, the negotiation started over the labour wage and productivity, promotion polices,
working conditions and benefits. The negotiating team included trade union which had the
support of at least 25% of the workers, human resource managers and finance managers. The
traditional approach of BPCL was a 10-year long term agreement with 30% of increase in
salaries, but then the management thought it would save money if the changed the terms to 5
year and 15% raise. In the end, BPCL came to conclusion that they will go with 10 years plan.
The negotiating team had three key issues that they wanted to discuss during the settlement:

 Increase in the wage rate of the workers. BPCL’s workers were well protected under the
labour law of the country and they also enjoyed higher salaries then the competitive
companies.
 BPCL operating cost was high. So, in order to deal with it, it was important for the firm
to increase productivity and make sure they had prompt response to customer
requirements.
 The company also had to upgrade its refining capability so that it does not harm the
environment.
Even after 13 discussions the negotiating team could not come to a mutual decision. The trade
union was firm in their approach and could not appreciate the management team’s position. The
negotiation went off for 4 years and still the trade unions were not interested in quick closure.

Challenges faced by Bharat Petroleum

If we talk about the challenges faced by the Bharat petroleum there are various number of
problem but some of them are mention in the case study about which we will study here. Some
of the problems are as under:-

1. Rising wage bill

2. Low productivity
3. Lack of control over refinery efficiency
4. Lack of Communication
5. Need for labour flexibility
6. Wage revision process during settlements
7. Balancing employee demands with business imperatives

Problem 1:

Rising wage bill: One of the challenges faced by the company is rising wage bill.

Increasing Operational Cost: The workers work for the wages and Bharat petroleum is already
paying the high wage to the workers in comparison with the other companies in this field. But
the employees working for them is demanding for 30 percent increase in their wages but the
company was offering 15 percent of wages and additional allowances on the biases of their
salaries. The allowances includes dearness or cost of living allowances, house rent allowance,
and work related allowance, retirement benefits and incentives. But the BPCL is facing rise in
there Operational costs as compared to their competitors.

Promotional Policy leading to Wage Rise: The main reason behind this rise is the BPCL
promotion policy in which the worker get promoted after fix time that is 5 year and then there
will be promotional increase of 5 percent. Even if worker is not promoted, wage rise is there.
Due to this kind of policies there were no control on the worker’s salaries so company had
decided to make it open scale and fix some amount to save the company from loss.
As the wage bill was rising and promotions were covered under Promotion Policy, company
was not able to identify direct and indirect workforce. Company was also not able to recruit new
workers due to the promotions policy.

Solution 1:

Recreating HRM Model: Management must first recreate their HRM model to identify which
workers are providing them core services and which taskforce don’t serve the goal of the
company but are essential for functioning of company.

Close end scale: Company must introduce the close end scale for the workmen as according to
Department of Public Enterprises the Public Sector Undertaking Companies can decide the pay
scales on the basis of their paying capacity. This pay scale is determined after a Collective
Bargaining Process between Management and Unions.

Outsourcing: Company must outsource services and jobs that are not serving the core
operations. It will help them to bring down the Operations Cost.

Problem 2:

Low productivity Low productivity is also one of the challenges faced by the BPCL due to the
following reasons:

 Workings Hours were not rationalized: Working hours inside the same refinery varied
from 35 hours to 48 hours a week. Clerical Employees were leaving 30 minutes earlier as
compared to those of Officers. This disparity lead to interrupted operations during the
high market demands.
 High Premium: As the disparity was there in company working hours, to keep up with
the productivity and market demand BPCL use to pay premium that was double of their
regularly paid wages. Thus to increase productivity company paid $6.52 million for the
overtime wages.

Solution 2:

Fixed Working Hours: To come out with the problem management should decide the fix
working hours for the employees as 48 hours in a week for every worker. It means now every
individual has to work for at least 48 hours in a week. This will just not increase the productivity
of the company but also help the company to exceptionally decrease the Premium Bill.

Productivity based Incentives: To promote the goal of Productivity, BPCL must introduce
Productivity based incentives for the core workers.

Flexibility in Staff Adjustments: BPCL must introduce a system where they can shift workers
and redistribute work according to the need and demand of the business for the long-term
sustainability.

Problem 3:

Lack of control over refinery efficiency: The Company was facing a challenge in their refinery
efficiency due to the following reasons:

Controlled by non-engineers and non-officers: The main reason for this problem was that the
Mumbai Refinery Panel was managed by the non-officers and non-engineers who are not that
much capable to take all the required measures and decision. They were also not ready to give
their authorities to anyone but the company wanted to appoint someone who is well experienced,
have a better knowledge base and also fresh talents who can introduce innovation and
sustainability.

Panel Operators were Union Members: As panel operators were part of Unions, during
strikes, there was huge loss of value. Also they were not willing to take non panel jobs during the
shutdowns leading to complete shutdowns at Refinery. Company’s efficiency have reduced
drastically due to these reasons.

Delayed Decisions: As panel operators were not able to take decisions and have restricted their
role to following instructions and reporting, during the crisis in Panel Room, nobody is there to
take decisions leading to delayed decisions and decreased efficiency.

Solution 3:

Making Employees aware of present Financial Situation: As due to decreasing efficiency,

company is already generating $25 million less every year as compared to the capacity of
Mumbai Refinery. This has decreased the Net Present Value (NPV) of company. Thus company
must make their employees aware of the fact that if the NPV of the company will keep
decreasing like this our shareholders will not be satisfied leading to divestment and loss of Job.

Give control of Panel to Officer: To prevent the company from losses, company must consider
the long term goals of the company and let employees align their goals with that of company. An
officer can help the refinery to generate additional value of $25 million per annum. Also a new
officer can keep the work going on even during the strikes.

Problem 4:

Lack of Flexibility: Due to changing business environment and amendments in government

policies BPCL was lagging behind as compared to its competitors. Also BPCL was forced to
take tough decisions such as making jobs redundant leading to employees loosing jobs. This is
impacting the Industrial Relations of the company negatively as workers were going on strike.

Solution 4:

Introduce Trainings: Invest in employees training and development so that employee will learn
and adapt themselves during the technical advancements and thus can be offered with other
positions. This will help in promoting flexibility in employees

Counsel Employees: Help employees to understand the importance of adaptability and how it
will help employees to achieve their goals that are aligned with long term goals of organization.

Problem 5:

Balancing employee demands with business imperatives: The Company was already dealing
and fulfilling lots of demand of the workers that are aligned with the individual goals of workers.
But the company is already facing losses and now has to balance Employees demands with
business imperatives.

Mr. Gathoo knew it very well that they are not in that condition where they can offer fitment
benefit of 30 percent during the Wage Revision Process. If they do so the company will not meet
its budget requirements. But the union wants 30 percent increment which was not possible for
the company.
Solution 5:

Close Ended Pay Scales: Company must introduce close ended pay scale and do amendments to
their pay as fixed Cost To Company for the workers. Company may also compare their Pay
Structure with those of HPCL and IOCL and do amendments in accordance to that.

As company cannot make changes in Fitment Benefits, company must try to do changes in their
long term wage settlement process.

Make Employees Aware of Organizational Goal: Company must make their employees aware
of the company performance and introduce the performance based incentives. This way they can
achieve organizational goals too and keep the employees satisfied too.

Recommendations

Tripartite Negotiations: Even after management’s continued efforts to settle the long term
wage, unions were not settling for anything and had walked out from the discussions. In such
case local government should be involved in discussions and decision making. Bringing in the
regional labor commissioner would have helped the BPCL management to put forward that the
compensation is not decided by Government of India now and BPCL as a company now have to
decide the pay scales for workers based on their paying capacity as Government will not provide
any budgetary support

One Issue at a time: As Organization is facing multiple issues, it is not easy to communicate
and negotiate on all the issues at one time with the Union. Thus Company must identify the
major issue; I would suggest Efficiency of the Mumbai Refinery, as the company is losing a lot
from there. Company must work on efficiency and productivity parameters first as it will address
the Organization’s Goal and increase the inflow in the organization. Union would consider these
issues easily and also these are legally possible under Industrial Disputes Act, 1947 as
Conciliation officer can be involved to resolve the issues.

Concept Used in the Case

1. Stages of Collective Bargaining

  Collective bargaining is done to resolve the various disputes between the
employer and trade union. The different bargaining levels can be of unit level,
plant level, industry level, territorial / geographical level & national level
bargaining.
 Here in the case it can be observed that the disputes happening on the different
levels and the union are of various levels who don’t want to participate in the
negotiation with the management.
2. Wage Settlement
 Wage settlements are defined in an organization where particularly workmen and
the unions discuss and agree for a pay as per their work conditions. For the
Unions it is an occasion to show their leadership skills and extract their worth for
the work they do in the organization in a given condition.
 Here in the case it can be observed that management want to negotiate with the
Labour and workers however they are not ready for the wage settlement. We can
see that employee was not following the concept of collective bargaining.
3. Labour Law
 It deals with the aspects of relationship between trade unions, employers and
employees. The final goal of Labour laws is to reduce the differences between the
Employer and Employee which leads in the growth of Industry and Growth of a
Nation.
 Here in the case it can be seen that various Labour Law are playing the role to
maintain and keep the Labour happy and satisfied about the work in the industry.
The Labour law ensures the proper wage rate and a good working condition for
the workers working in the industry
4. Trade Unions
 A trade union is an organization which mainly consists of their members working
as a worker in the industry. Trade union aims is to protect and advance the
interests of its members in the workplace and works to protect the rights of the
worker. Most trade unions are independent of their employer.
 In the above case it can be seen that there are different level and various trade
unions that are acting for the protection of Labour and their law and rights. Also,
 the union which represent maximum Labour are choose by the employer to
discuss the matter bothering the employee.
5. Negotiation
 Negotiation in Industrial Relation deals with providing the best facility for the
employee in the union by discussing it with the employer. Negotiation is also a
process used by employer to convey their needs and demand to the workers.
 In the case of Bharat Petroleum Corporation Limited it can be seen that employer
want to discuss on various points like productivity and profits however, employee
where not ready to make an negotiation or even participate in the discussion with
the employer.
6. Communication Strategy
 Communication in the Negotiation is one of the most important part and should
be taken care of extensively. Communication strategy defines itself as a way of
communicating with the employee in the given condition and situation.
 In the given situation it can be seen that earlier management do not use to
communicate directly with the Labour which could lead to lot of misinformation
and rumors. However later they build an effective strategy of communicating their
need with the workers directly.
7. Promotion Policy
 Promotion policy for an employee is decided by the employer. Promoting policy
predefines the promotional strategy for the employee in the given time period
with respect to their current working position and their wage rate.
 In the case of BPCL it was observed that company predefined the promotional
strategy for the department of marketing in every 5 year and for the Mumbai
refinery in every 8 years. Also, they mentioned in the promotional strategy that
with each promotion workers uses to get the hike of 5% in their salary and to the
workers who were not promoted were assured with the salary rise of 4% in their
basic pay. Which lead their profit reduction and invited an issue like lower
productivity.
References
[1] Hyder, R. (1981). Critical Appraisal of Performance of Marketing System in a Heavy Engineering
Industry-A Case Study in Perspective of BPCL, Allahabad (Doctoral dissertation, Aligarh Muslim
University).

[2] Shastri, K. R., & Srivastava, S. (2011). Enhancing the Skills of Employee Towards Sustainability
and Growth of Business Enterprise: A Case study with special reference to bharat pump and
compressor limited (BPCL). Australian Journal of Business and Management Research (AJBMR),
(1).

[3] Rai, S. (2012). Human resource management and labour relations in the Indian industrial
sector (No. SP III 2012-301). WZB Discussion Paper.

[4] Murthy, P. L. N., & Agarwal, R. C. (2011). Refining demands from petroleum. World
Pumps, 2011(10), 36-41.

[5] Saravanan, S., & Janani, K. A study on measuring the financial soundness of Bharath Petroleum
Corporation Limited (BPCL).

Other links to References

[1] https://indiankanoon.org/doc/500379/

[2] https://indiankanoon.org/doc/1213182/

[3] https://www.thehindubusinessline.com/companies/kochi-refinery-wage-settlement-
signed/article23101297.ece

[4] https://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---
dialogue/documents/publication/wcms_187873.pdf

[5] https://www.bharatpetroleum.com/pdf/OurFinancial/F000000158_Annual_Report_2012_
13.pdf