HR Initiatives for

CASE 3 : GLOOM TO GLORY: Turnaround of

Visakhapatnam
THE SUCCESSFUL TURNAROUND Steel Plant

OF THE SINGARENI COLLIERIES

COMPANY LIMITED

Prologue

‘Gloom to Glory” is the story of one of the most amazing and unbelievable
comebacks in the plan of government economics and the roles played by a visionary
political leadership, professional management and a newly awakened labour force.

It was in the year 1996 that Singareni Collieries Company Ltd (SCCL), the 107 year
old state public enterprise, was experiencing stormy weather. Its financial perform-
ance hit rock bottom with accumulated losses of over Rs.1200 crore. It maladies
included an excessive baggage of over 100 confrontational trade unions giving one
strike call a day, low quality of coal, no customer focus, old and obsolete technology.
To add to its woes were administered coal prices and adverse geo-mining conditions
which pushed the only coal-mining company in South India to the brink of sickness
and uncertainty. A period that had in store a gloomy and doubtful future for all its
stakeholders – the government, customers and about one lakh workforce.

Against this gloomy scenario, the Government of Andhra Pradesh, under the vision-
ary leadership, stood up to the challenge and took some bold decisions and firm
actions – the result of which was a miraculous and remarkable turnaround.
By 2002-03, the company wiped out all its losses and entered the year 2003-2004
with net profits. It was a glorious year – a year of complete satisfaction, happiness,
success and achievement. It’s a story to be shared and learnt from the experiences.
This case is a sincere attempt to highlight the ups and downs of Singareni Collieries
and the remedial actions in the form of reforms that contributed to the turnaround of
the company.

The case study on the spectacular turnaround of this company explains the various
forces that lead to sickness of public sector entities. It also explains how new
paradigms, the state and the SCCL management in reforming a sick public sector unit
have drawn.

Introduction

Coal: Mother Nature’s Dark Child: Man is blessed with abundance of natural
resources, including mineral wealth, that play vital role in the development of a
country and promote the economic growth when explored and made best use of
them.

Coal, which is one of the important minerals, is known to man since ages and this
natural wealth has been put to diverse use in the modern world. Regarded as the
fuel for growth, coal is an important input for power generation, a vital infrastructure
for economic development. The mineral provides around 23% of global primary
energy needs and accounts for a share of over 38% among various sources of total

Case prepared by Dr. B. Rathan Reddy, Faculty, Institute of Public Enterprise, Hyderabad.
Case material has been prepared to serve as a basis for class discussion. Cases are not designed to
present illustrations, of either correct or incorrect handling of managerial problems. 1
Case Studies power generation in the world. The world coal consumption is projected to go up
from 4.7 billion tonnes in 1999 to 6.4 billion tonnes by 2020 primarily in China and
India, which are expected to account for 75% of the increased consumption.

Energy Consumption: Commercial energy consumption in India has grown from

over 26% to 68% in the last four and half decades. Coal accounts for 63% of the
country’s energy needs. The current per capita primary energy consumption in India
is about 243 kgoe/year, which is well below that of developed countries. Driven by
the rising population, expanding economy and a quest for improved quality of life,
energy usage in India is expected to rise to around 450 kgoe/year in 2010. Consider-
ing the limited reserve potentiality of petroleum and natural gas, eco-conservation
restriction on hydel projects and geo-political perception of nuclear power, coal will
continue to occupy center-stage of India’s energy scenario.

Coal Mining in India commenced in 1774 and the production level increased from
6.19 million tonnes in 1900 to around 340 million tonnes in 2002-03. In India, coal
production is still significantly under the government control and ownership, with
Coal India Limited (CIL) along with its subsidiaries being the number one producer.
Coal India, which is a Central Public Sector Undertaking, contributes to 87% of the
country’s total coal production. Singareni Collieries Company Limited, owned jointly
by the Central Government and the Government of Andhra Pradesh, accounts for
10% of the national production with only 7% of national coal reserves.

Challenges: A majority of PSUs continued to operate in post-liberalisation era facing

the new dynamics of market and taking on the challenges of competition from local,
national and international private players.

The PSUs also had to work under the threat of privatisation, and move towards
newer paradigms of accountability, economic viability and transforming to be more
competitive. Several PSUs became sick and were either closed or privatised.

Policy Reform Changed Scenario Impact on PSUs Change Needed

Markets Protected markets turned Monopoly lost Become market-oriented

opened competitive

Funds inflow stopped, Resource crunch Turn profitable

Reduced fund allocations
losses

Labour reforms Immune labour made Employee insecurity Employee attitude

accountable

Privatisation New competition from Customers Reign,

private/foreign players quality-cost imperative More customer and quality
focused

Sickness PSUs losses no longer fully Loss-making PSUs Workout a complete

absorbed by government faced with sickness/ turnaround
closure

Liberalisation and economic reforms had also impacted the coal industry in a
significant way. The coal industry as subjected to greater regulatory changes,
competition, rapidly changing technology and consumer preference.

2
The structural adjustment and the liberalisation programme announced by the HR Initiatives for
Government of India offered both) opportunities and threats in the form of: Turnaround of
Visakhapatnam
Steel Plant
• Free pricing and distribution of coal;

• Pressure on demand from domestic coal companies and

imported coal due to lowering of import duties;

• De-Licensing of coal industry;

• Stoppage of budgetary support from the government .

Against this backdrop, Singareni Collieries, which was on the brink of sickness and
closure, is among the few Indian public sector units to have redefined, re-evolved and
re-engineered itself and made significant strides towards profitability and viability in a
liberalised market era.

History (1871-2003):

1871: Dr. William Kind confirmed coal deposits in Godavari Valley.

1886: Hyderabad Deccan Company Pvt. Ltd., was incorporated in England.

1889: First commercial operation commenced at Yellandu, Khammam Dist., AP

(then a part of Warangal Dist).

1920: Hyderabad Deccan Company Pvt. Ltd was re-christened us the Singareni
Collieries Company Limited (SCCL), and its script listed in the London Stock
Exchange.

1945: The Nizam of Hyderabad purchased the shares of the company

1948: Machine mining started at No.5 Incline in Kothagudem

1949: SCCL came under State control

1975: Opencast mining started at Godavarikhani (RG OC-1)

1983: Longwall mining started at Godavarikhani (GDK-7 Inc.)

1986: Introduction of Walking Dragline (RG OC-1) and commencement of

computerisation

1989: Introduction of Blasiting Gallery method at Godavarikhani (GDK-10 Inc.)

1994: Introduction of Input Crusher and Conveyor technology in an Opencast mine

for the first time in the country.

2001: KK-2 Incline (an underground hand section coal mine of Mandamarri Area)
crossed 1.0 OMS (Output per manshift).

2002: Introduction of Surface Miner Technology at Yellandu (Koyagudem OC).

2003: The company achieved a stunning turnaround. All accumulated losses wiped
out. Entered net profit regime.

3
Case Studies Promoting Industrial Development

The giant State enterprise, SCCL is an important engine of economic growth in

Andhra Pradesh. It contributes around Rs 400 crore as royalty and sales tax
to the State’s exchequer.

Sector-Wise Offtake 2002-03

Cement
13%
Others
9%

Power
78%

With a base of about 6,000 vendors, the company has spurred the growth of ancillary
industries in the State. The economic prosperity of the entire coal belt in Andhra
Pradesh is dependent on SCCL. In consonance with the national policy, SCCL
facilitates the development of small scale industries and local industries. Development
of roads, water supply and other social infrastructure in and around the colliery areas,
in partnership with a proactive state government, has helped in improving the quality
of life all around.

Singareni Collieries has several strategic advantages ranging from huge coal reserves
to client proximity being the only coal-producing company in South India. The
company harnesses its locational advantage to service a large market in and around
its areas of operations. About 3,500 major, medium and small-scale industries form its
customer list which includes diverse industries such as thermal power plants, cement,
steel, paper, textile, tobacco, ceramics, pharmaceuticals, distilleries etc.

Singareni supplies coal to several thermal power plants, including NTPC

(Ramagundam), APGENCO power stations and power stations in Karnataka,
Maharashtra and Gujarat. The power sector consumes 78% of SCCL’s coal
production. Thirty seven cement plants situated in the states of A.P, Karnataka and
Tamil Nadu consumes 13% of its coal production. The balance 9% is supplied to
about 3400 small and medium scale industries.

With spurt in industrial growth in the southern states and huge increase in demand for
electricity, Singareni will have to play a key role in empowering the economies down
south of the country. With the new Electricity Act providing opportunities for
independent power production and distribution, the demand for SCCL coal is poised to
increase further.

4
Role of Swot Analysis for Turnaround of SCCL HR Initiatives for
Turnaround of
Visakhapatnam
Introduction Steel Plant

The SCCL embarked on a variety of strategies to improve the performance. The

means adopted were use of:

1. Better communication system

2. Multi departmental teams
3. Structural changes in IR systems
4. Various I.E techniques etc.

Swot Analysis in SCCL

The SWOT analysis as to five years ago is described below, listing out only more
important parameters to portray the then situation.

Strengths
1. The organization is more than hundred years old.
2. It has a pool of well trained human resources.
3. The human resources have high and proven level of technology absorption
capabilities and are “second to none”.

Weaknesses

1. High accumulated loss.

2. Became potentially sick to be re-referred to BIFR.
3. Employees have been displaying low level of commitment/light attitude towards
improvement in performance, importance of productivity, work culture, changes
and reforms, job satisfaction, wage levels, work norms, concern for aspirations of
other sections of public, need for thrift etc.
4. Employees have been exhibiting minimum level of awareness on company
parameters, problems in nearby organizations, management processes, role of
coal sector on the economy of the down stream organizations, importance of
quality, importance of work norms, ownership particulars of the company,
reforms process of the company etc.

5. Difficult IR situations with multiple unions and frequent strikes.

6. Reduced production and wage earned due to IR situation.

7. Assumption of guaranteed employment, irrespective of change in number of

mines and firm views about the system of employment of dependents.

8. Drudgery in some of the jobs like manual filling of coal into tubs
and such other underground operations.

9. Communication process not upto the mark and needed overhaul.

10. The coal sector is deregulated.

11. Disturbed social fabric-role of extremism in organizational aspect.

5
Case Studies Opportunities

1. High scope for expansion

Threats

1. Closure of non-performing organizations in the vicinity and elsewhere.

2. Phasing out of subsidies from Government.

3. Insistence by Government on a minimum I.R.R. (16%)

for opening of new mines.

4. Erstwhile cost driven pricing structure and its tendency to build up inertia in the
organizations.

Swot Analysis and Further Course of Action

The management had critically analyzed the SWOT situation as described above.
The follow up action plan was multi pronged. In simple, this consisted of utilizing the
strengths, opportunities and evolving methods of counter threats. Detailed and higher
emphasis was laid on eliminating/minimizing the “weaknesses” the I.R. situation and
the resultant effects in terms of reduced production, increased losses hurting the
organization, wages lost by employees on account of unfavourable I.R situations etc.

The various methods followed by management are with emphasis on:

1. Communication to all employees about organizational status.

2. I.R. scenario
3. Motivational needs
4. Improvement of working conditions
5. Strengthening of welfare measures and social development
6. HRD methods
7. Frequent reviews
8. Education of family members
9. Other strategies

These are discussed as follows:

Communication

a) Communication system is thoroughly over hauled and well handled. Written

(letters, pamphlets) form, oral (public address systems, Audio, Radio, TV)
communication, group form (on the occasion of public functions), Establishment
of communication cell & interaction with media strengthened.

b) A mammoth exercise is done to communicate facts and figures to all the employ-
ees at mines and depths. (of over 1 lakh). A number of committees are consti-
tuted for this. The members are from Mining/IED/E&M/Finance/Personnel/Best
workers. The scope of communication is vast. This communication to the rank
and file is done 11 times. I.E.D. helped design of the informations template. This
has helped in creating awareness among the employees and their role in im-
provement of organization.

6
Motivation Plans HR Initiatives for
Turnaround of
Visakhapatnam
With the help of I.E.D the employees were explained work norms and the need to Steel Plant
improve work turnout. The concept of fair day work was explained. Improved
productivity linked wage incentive plans were made use of. A system of payment of
10% of the company’s profit to the employees was initiated. There was good im-
provement in productivity performance.

Reforms for Turnaround of SCCL

The closed business environment before the economic reforms of 1991 had left little
place for performance, provided little incentive for innovation and entrepreneurship.
When the windows of liberalisation were opened, much like the spencer mouse
wondering where the cheese went, the company was caught unawares.

The half-a-decade period from 1992 to 1997 was when the strife between the need
to change and the reluctance to it became apparent. Globally, the psychological strife
between change and inertia has always taken a huge toll on business, large and small.
Large organizations love their model of success, and they become possessive about
their model more than their success. Honeywell is an interesting parallel. The US
giant, after nearly a century of brilliant performance, starting with a small chance
discovery to control heat in coal furnaces, had run excuses by 1995. Ironically its rise
and slope was being able to adapt or resist change and position itself to the techno-
logical requirements of the 19th century.

But Singareni had more than surface resistance to change .It had a trade union
problem that was hell bent on walking down a suicidal path of confrontation with the
management. The turbulent phase in the company’s history saw the accumulation of
huge losses and inability to keep up its financial commitments. Poor Industrial Rela-
tions characterized by a number of illegal and catcall strikes, militant trade unions,
indiscipline and deterioration in work norms set the foundation for the downward
slide.

Several other factors also catalyzed the downward path, viz. administered coal
pricing by the government which did not allow increase in sales prices despite peri-
odic wage hikes and a groaning interest burden had all added to its losses. Bad
practices like huge stores inventory and power pilferage from its colonies burgeoned
power and other costs.

The prescription for Singareni was obvious: Rx Reforms

SCCL Pre-reform period

The Dark Days, Bad Dream

As Singareni Collieries Company Ltd is the largest coal producer in South India, the
Government of India initially provided sufficient budgetary support to the company to
augment its production capacity by opening new mines or introducing mechanisation
in the existing mines. In view of the growing energy requirements and in pursuance
of the socialistic policies of the government, the emphasis was more on enhancing
coal production rather than project viability.

Frequent strikes, law and order problems, low productivity, apart from un-
remunerative coal price vis-a-vis cost of production during the period 1989-90 to
1991-92 affected the financial health of the company.
7
Case Studies Referral to BIFR

Apart from Industrial Relations (IR) problems and regulated pricing, other adverse
factors like skewed debt-equity ratio and huge interest burden resulted in heavy
losses for the company during 1989-90 to 1992-93. SCCL became a sick industrial
company and was referred to the Board for Industrial & Financial Reconstruction
(BIFR) during May 1992. However, due to a liberal financial package extended by
the Government of India in consultation with the State Government of Andhra
Pradesh and sustained efforts by the management and unions, a modest financial
turnaround was achieved. The company earned profits of Rs 17.76 crore and
Rs 26.64 crore in 1993-94 and 1994-95 respectively. By March 1994, SCCL came
out of the BIFR purview.

Poor Industrial Relations

The IR scenario in SCCL has been characterised by a number of illegal and cat call
strikes. The number of strikes reached a peak of 475 nos. in 1991-92. There were
multiple trade unions. The management had no details of actual patronage of
workers.

There was also a spurt in activities of militant trade unions especially during the
period 1989 to 1993. The average number of strikes during these four years was 446
with a production loss of 1.83 million tonnes per year. This had contributed to gross
indiscipline and deterioration in work norms in the company in general and in
Bellampalli region in particular.

Low Equipment Utilisation & Man Productivity

The frequent IR problems in the pre-1997 period also adversely affected machine
utilisation. Singareni made substantial investment for procurement of Heavy Earth
Moving Machinery (HEMM) in opencast mines and mechanised longwall units in
underground mines

The availability and utilisation of HEMM in opencast mines and longwall units in
underground mines were lower than the norms on account of poor work culture
prevailing in the company at that time. The performance of conventional hand section
(manual mining) underground mines also suffered on account of poor IR scenario and
law & order problems. The productivity in terms of overall output per manshift
(OMS) in these underground mines was stagnant at around 0.60 tonnes from 1992-93
to 1996-97. The low productivity levels in the mines coupled with the periodic wage
increase of workmen through National Coal Wage Agreements resulted in steep
increase in the cost of production from underground mines as the wage component
accounts for almost 55-60% of the total cost of production in underground mines.

In spite of being uneconomical, the mining operations in the underground mines were
continued to accommodate the huge workforce of about 1.14lakhs. The huge losses
incurred in these mines on account of low productivity affected the financial health of
the company.

Non-adherence to Quality Commitments

About 85-90% of coal output of the company is supplied to thermal power and
cement plants. Marketing of coal with emphasis on coal quality did not gain the
importance in view of huge demand-supply gap.

Selective mining and segregation of shale/stone/clay bands present in coal seams

was not given due attention. This resulted in numerous complaints from dissatisfied
customers and prolonged disputes with them. Customers’ confidence in getting
8
assured coal supplies was also greatly undermined due to IR problems resulting in
loss of production.
Inefficiency in Operations HR Initiatives for
Turnaround of
All the operations in the mines and departments were undertaken with departmental Visakhapatnam
Steel Plant
equipment and manpower. The low operational efficiency of departmental manpower
affected the performance of mines and financial health of Singareni. Despite rising
costs, the management could not make the workforce or unions to accept the bringing
in of private players as partners to cut costs and increase efficiency. There was no
outsourcing of activities during the early 1990s.

Administered Pricing
Coal prices were fixed by the Government of India upto 1996 and in view of the
likely impact of such price increase on power, railways, cement and steel sectors, the
administered prices were invariably pegged down, leaving SCCL with little or no
margin. Hike in input costs like wages due to periodic wage revisions under National
Coal Wage Agreements (NCWA), interest costs, stores etc., were also not fully
compensated in the annual/bi-annual price revisions by the Central Government. The
Yearly average cost of production was Rs 731 /ton during 1996-97 but the average
sale price was fixed at Rs. 529/ton. This impacted the company’s bottom line.

Burgeoning Power Cost

During the period 1980 to 1990, there was an increase in the number of private
colonies in mining areas. Some of the residents of these private colonies began to tap
power illegally from SCCL powerlines. SCCL was incurring huge expenditure
towards the power bills due to such illegal drawal of power. The power consumption
reached an all time high of 630 million KWH in 1996-97.

Increase in Inventory
The company procured mining machinery from various countries/companies keeping
in view the specific requirements of the projects. Joint protocols were entered with
countries like U.K., France, China and Germany for introduction of modem technolo-
gies like Longwall, BG and In-pit crusher- conveyor technology. The stock of various
equipment components/spares in the stores increased from Rs 238 crore in 1993-94
to Rs 379 crore in 1996-97.

Adverse Capital Structure

The company took up several mining projects in the 1970s and 1980s with the help of
liberal infusion of equity and loans by the Government of India. This was made to
step up coal production for meeting the escalating energy requirements of the coun-
try. The increasing loan component and interest costs resulted in skewed debt-equity
ratio which increased from 1.87:1 in 1973-74 to reach a peak of 3.68:1 in 1991-92.
The company was unable to service its debt and defaulted on the payment of interest
and loan instalments during the eighth plan period.

SCCL’S IR Problems (pre-reform period)

• There were nearly 100 Trade Unions each vying for supremacy and Catcall/
Illegal strikes were a common feature.
• Competition and one-upmanship among multiple trade unions was the main
reason for the large number of strikes.
• There was a spurt in activities of militant trade unions like SIKASA (A banned
outfit of Peoples’ War Group) especially during the period from 1989-90 to 1992-
93. The average number of strikes during these four years was 446 Nos. with a
production loss of 1.83 million tonnes/year. The number of strikes reached a peak
of 475 in 1991-92.
• Frequent strikes, law and order problems and high cost of production during the
period from 1989-90 to 1991-92 affected the financial health of the Company. 9
Manpower reached a peak of 1,16,918 in 1990-91.
Case Studies • Low literacy levels, extreme hardships in working conditions, strong opposition to
innovation and change further worsened Workforce-Management relationship.

SCCL Reforms for Resurgence

Troubles for companies, much like for individuals and countries, come not as a spy or
two but in battalions. Successful and resilient companies, like great individuals and
nations of character, emerge stronger from testing times. Singareni Collieries
Company Ltd., emerged stronger and victorious. The reforms story of SCCL has
many marvellous facets, but most significantly reforms were humane, logical,
transparent, beyond ISMs, performance-oriented and incentive-based. The traditional
perceptions of the role of the Government, Management, Labour, Technology and
Market were redefined and made allies in the building and growth of the company.

SCCL Post-reform Period

Under effective management, with full political backing and dynamic leadership,
Singareni Collieries initiated a series of result-oriented reforms that were aimed at
revamping its operations in order to put the company back on the growth track.
The need for urgent remedial action was realised as the company’s accumulated
losses rose to Rs 1,219 crore and the performance by 1997 had hit rock-bottom-the
worst ever in its history of over 100 years. The management identified the areas for
introducing the reforms, articulated the needed change and brought about a
phenomenal turnaround. The company decided to take on the problems headon.
Introspection and open brain-storming made the problems clear and a lateral
approach to finding solutions strengthened the plan of comeback.

Problems Identified Historic Errors New Approach

Industrial unrest through Succumbing or reacting to Unifying trade unions through

multiplicity of trade unions wild catcalls/strikes path breaking elections

Low literacy and awareness Neglecting the issue A high pitch communication
among workforce drive harnessing media,
launching literacy programmes

Poor quality of life for Lip service or ignore issue Focussed multi-faceted
workers workers’ welfare programme

Inefficient and high cost of Persisting with status quo Establishing outsourcing of
overburden removal non-core and ancillary
operations activities through public-
private partnerships

Management inaccessible to Oblivious to issue, Innovative programmes

labour force at large maintaining distant launched like Dial-your-GM,
management style field visits, interactions,
follow-ups
Huge interest payments Accumulating losses, Used innovative financial
banked on Government’s instruments like debt swaps
write-offs or support

Little Customer Care or Oblivious to issue. Bank Fuel Supply Agreements.

Quality Consciousness on regulatory industry Technology infusion for
status. quality testing, workforce
visits to client sites
Lack of clear Corporate Blue Sporadic moves Focus on safety, environment
print for growth
protection, labour welfare.
10
Strategy for Turnaround HR Initiatives for
Turnaround of
Visakhapatnam
Some of the key elements of the reform strategy included: Steel Plant

Trade Union Elections

A 21-day strike in June 1998 by workmen was resolved under the guidance of the
State Chief Minister. Hon’ble Chief Minister directed the management to conduct
labour union elections. Trade union elections were held in September 1998 in
SCCL for the first time in the history of the coal industry in India. Elections were
held under Secret Ballot system to elect one recognized union at the company level
and one representative union at the area level. This put in place a mechanism that
enabled Mine Managers to concentrate more on production and productivity matters.
The company successfully conducted trade union elections in 1998, 2001 and 2003.

Election Benefits

• Wild catcall strikes ceased.

• Management IR focus time reduced with only one union at the company level
and representative union at each area to negotiate with.
• Trade union leaders became more responsible.
• The move provided foundation for the greater shift in thrust from a protected
environ to a fiercely competitive market condition and from employee-manage-
ment confrontation state to one of partnership.
• The management harnessed the first step towards consolidating industrial
relations through the trade union reforms with several positive measures includ-
ing building good communication strategies transparent management systems,
innovative and effective welfare measures to integrate the workforce into a
motivated and significant force to achieve its goals.

Financial Restructuring Package

The Government of India approved a financial restructuring package in 1999 for

SCCL, which included:

• Infusion of fresh equity of Rs. 268 crore by the Government of Andhra Pradesh
and Rs. 257 crore by the Government of India during the ninth plan period from
1997-98 to 2000-01.
• Ten year interest-free moratorium on Rs. 663 crore of overdue interest on the
Government of Indian loans.
• Waiver of penal interest on interest of Rs. 66 crore.
• Rescheduling of the Central loans of Rs. 157 crore by two years.

Financial Re-Engineering

• Liquidating receivables in the form of tradable bonds :

Rs. 1,164 crore in 3 year – interest @ 15 to 12.5 per annum.

• Higher interest bearing Central loans (17 & 16%) discharged by pledging 13%
bonds for 11.75% interest loans. Through such carefully planned debt-swaps, the
company saved Rs. 61 crore in a four-year period.

11
Case Studies Cost-Cutting Measures

• Rationalization / Right sizing of manpower was undertaken by the Singareni

through the introduction of voluntary retirement scheme for certain categories of
workmen. Over 6,265 employees opted and retired under this scheme.

• Reduction of play-day and overtime allowance

(savings of Rs. 33 crore per year).

• Stoppage of employment to land ousters.

• Regulation of dependent employment against vacancies.

• Dismissal of chronic absentees.

• Energy conservation in mines/townships and reducing power pilferage in

colonies.

• Inventory reduction by adopting rate contracts for spares & fast moving items.

Particulars Inventory Inventory Level in Number

(Rs. in crores) of Months Consumption

1997-98 243.36 8.13

1998-99 218.82 6.62

1999-00 206.90 6.58

2000-01 210.13 5.80

2001-02 185.44 4.74

2002-03 190.90 3.80

Public-Private Partnerships / Outsourcing

The company employed outsourcing of over burden removal (OB)
as a strategic initiative to:

• Improve business focus on core competency.

• Reduce total cost of operations.
• Overcome limited internal resources.
• At present 50% work of OB removal is outsourced and the balance is done
departmentally. The company saved about Rs. 1,610 crore by partly outsourcing
OB removal in opencast mines since 1997.

Outsourcing of Ancillary Activities

Learning lessons from the success in outsourcing of OB removal operations, the
company started off-loading of ancillary services. Some of the services outsourced
include:
• Catering & maintenance of guesthouses
12 • Ambulances and light motor vehicles like cars, jeeps, etc
•
HR Initiatives for
Sanitation in workmen colonies Turnaround of
• Loading, unloading and stacking of materials in the stores. Visakhapatnam
• Distribution of material from stores to various mines and departments.
Steel Plant

• Security services in Hyderabad Corporate office, Guest house etc.,

• Savings on account of these measures is about Rs. 4.36 crore per annum.
Off-loading of these activities not only improved the quality of service, but also
allowed the management to concentrate on core activities.

Communication Strategies
The management grasped the potential risk of lack of strong internal communication
and workforce reach-out programmes. There has also been a growing perception
among the workforce that the management is isolated, distant and insensitive to the
needs of workmen. The management therefore realized that an effective two-way
communication at all the levels is necessary.

Most of the difficulties in the communication process in SCCL were due to its labour
intensive nature of the industry with majority of the workforce being illiterate and
unaware of conventional rules and procedures and the direction in which the com-
pany should be moving.

Apart from these barriers, some of the conditions like geographical distance between
employees of the organization in terms of location of the mines spread over 350 Kms
in 4 districts was also an important barrier. The indulgence and interference of
extremist activists in coal belt areas was another major factor hindering the process
of communication.

With a view to bring out awareness among the workmen, maintain transparency in
administration and to bridge the communication gap, various communication methods
to interact with the groups, individuals and their families, etc, have been taken up by
the management. Some of the steps taken in this direction are:

Communication Cells

• The company opened communication cells for creating a stable platform for
continuous interaction with workmen and their families.
• The cell uses the television as a medium for bringing home the key issues facing
the company. Every week an exclusive programme titled “Singareni Tarangalu” is
telecast in local TV Channels.
• The company also disseminates information to its employees through in-house
magazine “Singareni Vaarthalu”.
• Pro-active press meets, posters & pamphlets on various issues are used to
educate workmen.

Visits by Multi Departmental Teams

Multi-departmental teams comprising of members drawn from various disciplines visit
mines and departments to highlight the performance of the company and the issues
concerning production safety, welfare etc.
• The teams use local language and dialect and visual aids to communicate effec-
tively.
• They also visit workmen colonies and townships in the evenings to maximize
coverage.
• Subjects of topical interests are also discussed with the workmen, suggestions
are invited and implemented wherever feasible. 13
Case Studies Results of Effective and Continuous Communication with Employees
Through Multi-Departmental Teams

• There is better appreciation by employees of the challenges faced by SCCL in

the liberalized environment.
• Workmen have realized the need to improve production, productivity, reduce
costs, extract good quality coal and satisfy the customer’s needs. They are
motivated to realize their responsibilities.
• Multi-Departmental Teams have cultivated the minds of workmen to listen to the
views of Management and appreciate the realities. Earlier they were only
listening to unions and responding to their wishes. Workmen were not aware of
the Management’s views and the company’s interests, the other side of the coin,
before forming their own ideas on various issues. Now management is in a
position to explain its views to workmen on issues like dependent employment,
re-deployment of surplus workmen, privatization etc.
• The press was also reporting the union’s views and views/actions of
Management were coloured as harmful to the interest of the workmen. But now
there is a significant change in the attitude of the press and their role is
supportive for harmonious industrial relations.
• There is good improvement in Industrial relations due to this effective communi-
cation channel with workmen, union leaders, press and officers. The previous
trend of workmen to go on strike on slight pretext is arrested and now they are
debating and seeking reason/facts in strike calls. Cat-call strikes are reduced
significantly.
• Thus Multi-Departmental Teams have proved to be effective for communication
with workmen, officers, trade unions and press. They are contribution to
improvement in industrial relations, productions, productivity, and profitability of
SCCL. They have become the main channel to take contentious issues to
workmen, explain to them in detail and elicit their views on all important matters.

The improved performance of SCCL from 1997-98 to 2000-01 compared to that in

1996-97 due to implementation of various corrective measures, cost reduction
programs, better communication with workmen leading to their effective participation
etc, is summarized below.

Customer-Centric Measures
• To improve coal quality, selective mining has been introduced for separation of
clay bands.
• Customer meets have been arranged for getting first hand details of their griev-
ances.
• Automatic samplers and electronic weighbridges installed to avoid quality and
quantity disputes.
• Fuel supply agreements entered into with major customers with penalties,
bonuses and commitments to keep up customer satisfaction and ensure assured
demand.
Use of IT
• In-house software development group (SDG) comprising of trained personnel
from various disciplines constituted to develop department-wise applications.
• INTRANET established between. Kothagudem, Ramagundam and Hyderabad
offices.
14
• Underground Mine Management System (UGMMS) introduced for the first time HR Initiatives for
in the Indian coal industry at No. 5B incline at Kothagudem. Turnaround of
Visakhapatnam
• Opencast Mine Management System (OCMMS) introduced at Manuguru Steel Plant
opencast-II mine.
• SCCL website www.sccl.mines.com launched.
• Video conferencing facilities are on the anvil.
• SCCL proposes to introduce satellite-based communication systems for Heavy
Earth Moving Machinery.
HR and Welfare Strategy

Human Resource development through training and continuous upgradation of skills is

an important thrust area of the Management. The company has a well-established
Human Resource (HR) department with 10 vocational training centers and a full
fledged Training Institute (Nargundkar Institute of Management) to impart in-house
training.

Leading HR Consultant, Dr. B. Ratan Reddy, Institute of Public Enterprise has

imparted training for the executives and Trade Union Leaders together for over
a period of two years from 2002-04. This intensive training helped the
employees to change the mind set of the employees and helped them to visualise
about the company's vision, mission, competitor analysis, competitive strategies,
global strategies and its impact on productivity, production, quality,
Interpersonal Relationship, Negotiation skills, Team Building and effective
communication skills.

SCCL recognises workmen as stakeholders in the company’s progress and

welfare of workmen continues to be an important corporate philosophy of the
company. The average expenditure per employee on welfare which was
Rs. 14,402/- for the year 1996-97 has increased to Rs. 30,195 in 2002-03
(increase of 110% over last 6 years). In 2002-03, the welfare expenditure on
workmen was Rs. 293 crores.

Welfare Measures
• Literacy Drive: To achieve total literacy among employees, a scheme called
‘Telugu in 7 Days’ was launched with the help of Professor Goteti Balakrishna
Murthy of USA. Many employees and their families are participating in this
campaign. The aim of the literacy missions is to enable the miner to read the
notices and newspapers and understand their pay particulars.

• Housing: Over 47,250 quarters were provided to employees and the housing
satisfaction is around 50%.

• Education: SCCL has established ‘The Singareni Collieries Educational Society’

(SCES) which manages two colleges and 22 schools in the four districts of AP.
These institutions provide education to 13,386 students. Apart from the schools
run by SCES the company has provided land / infrastructure to 17 private
schools on a nominal rent basis. Rs. 8.31 crore was spent on running the
educational institutions during the year 2002-03.

• Amenities: Thirty-three employee recreation clubs, 11 stadia and 10 community

halls have been provided in the mining areas. SCCL spends more than
Rs. 50 lakh per year for maintenance of these facilities.

15
Case Studies • Water Supply: The company spends around Rs. 30 crore per year for supplying
about 22 million gallons of drinking water per day to its colonies and surrounding
habitat.

As an important welfare measure, SCCL commissioned Godavari Water Supply

Schemes in the Bellampalli region (7.50 MGD), Ramagundam region (7 MGD)
and Manuguru area (4 MGD) benefiting around 4.37 lakh residents in company
quarters and 2.83 lakh residents in nearby private colonies and hutment areas.

• Swap: SCCL launched a unique scheme under the title Special Welfare
Amenities Programme (SWAP) in 1997-98. In SWAP, both colony
representatives (workmen) and management decide on the works to be carried
out in their respective areas. Separate budgetary provisions are made under
SWAP, which has cut down delays in execution of works. It has also enabled the
company to undertake improvements as per the felt needs of workmen.

• Drainage & Sanitation: SCCL spent Rs. 28.26 crore on Special Welfare
Amenities Programme (SWAP) from 1997-98 onwards for improving civic
amenities like drains, sanitary lines, etc in workmen colonies.

• Medical & Health: The company administers seven hospitals with 1006 beds
and 43 dispensaries in its mining areas. Around Rs. 50 crore was spent for
medical care in 2002-03, including Rs. 1.84 crore for referral of 3,465 employees
and their dependents to speciality hospitals. Construction of a 50-bed hospital at
Bhoopalpalli in Warangal district is under progress

• Community Development: ‘Singareni Seva Samithi” is a social service

organization formed within the company to undertake community development
activities for the benefit of unemployed children of employees and bring
household transformation in coalfield areas. The activities undertaken by the
samithi include providing vocational training on various trades like sewing, sari-
rolling, welding, etc., and assistance to eligible employee’s children for attending
recruitment camps of Indian Army, State Police, CISF, etc.

• To inculcate the habit of savings amongst the employees, SCCL took the
initiative of disbursing the wages through banks. All the employees have
opened bank accounts and the habit of savings is reflected by way of increased
bank deposits in the coal belt areas by above 50%. All workmen receive their
wages through banks and ATM counters.

• SCCL firmly believes in involving employees as ‘Partners in Progress’.

It is the only PSU in the entire country sharing its profits with its
employees from 1999-2000 onwards. Around 10% of the company’s profit
was paid to workmen as special incentive during the last three years
(Rs. 67.94 crore). SCCL has enhanced the special incentive to 11% of its profit
for the year 2002-03.

Landmark in SCCL History (2002-03)

The year 2002–03 was a watershed in the history of Singareni Collieries as has
notched up the highest ever production, profitability and productivity.
• Production of 33.24 million tones of coal during 2002-03 was the best ever
production in the history of SCCL.

• Coal dispatches of 33.37 MT are the best ever dispatches.

16
• The increase in coal dispatches has been 2.32 MT over the year 2001-02 and HR Initiatives for
was the highest increase ever in the history of SCCL in a single year. Turnaround of
Visakhapatnam
• Despite 22 days strike during 2002-03, 25.9 million tones of coal were dispatched
Steel Plant

to power sector the highest ever in the history of SCCL. Power sector dispatches
constituted 78% of total dispatches during 2002-03.

• Gross turnover of Rs. 3689 Crore achieved during 2002-03 is the highest ever
turnover in the history of the company.

• Due to series of innovative productivity improvement measures cost of production

reduced by a record 6.4% in 2002-03. As against Rs. 861 per tonne cost of
production during 2001-02, the cost of production during 2002-03 was Rs. 806 per
tonne.

• The company attained the highest ever profitability of Rs. 417 crore as profits
after tax.

• It entered the net profits regime for the first time after 27 years (since 1975-76).

• SCCL paid dividend to the shareholders for the first time after 37 years (since
1965-66).

Other Achievements
• In 32 years history of All India Resource Competitions, the SCCL team for the
first time bagged the overall first place for the year 2002-03 in the national level
competitions. The company also got following other prizes.

• Best Rescue Team

• Best Rescue Team Member

• Best Team In Rescue & Recovery

• The company bagged 3 of the 14 National Safety Awards (Mines) in 2002.

• SCCL participated for the first time in “International Trade Fair on Mines,
Minerals & Metallurgy” held at Pragati Maidan, New Delhi, in September 2002.
The company stall bagged the first prize for ‘Design and Concept’ out of about
74 exhibitors in the trade fair from India and abroad.

• SCCL bagged the coveted FAPCCI (Federation of Andhra Pradesh Chamber of

Commerce and Industry) Award for best “outstanding performance” among
industries of Andhra Pradesh for 2002-2003.

• SCCL has also bagged the prestigious Coal India Productivity Organizational
Award for the year 2002-2003, for outstanding improvement in productivity
through application of industrial engineering techniques.

• SCCL participated for the first time in 19th World Mining Congress and Expo –
2003 held at New Delhi from 1 – 5th November 2003. The company’s stall won
the first prize for “Design and Concept” in National Category.

• During 2002-2003, Coal production commenced from KTK-3A Incline in

Bhoopalpalli and Koyagudem opencast project in Yellandu area with a projected
coal production capacity of 1 million tonne per year.

17
Case Studies Outsourcing / Public Private Partnerships

It is a common practice across the globe and also in India that private corporates
carry out outsourcing of certain activities as a strategic business initiative.

Outsourcing is adopted for the following reasons:

• To improve business focus on core competency.

• To gain access to world-class capabilities and technology
• To reduce total cost of operations.
• To achieve performance guarantees.
• To overcome limited internal resources (capital and skilled manpower).
• To free up capital for core business.
• To transfer operating risk to the service provider.
• To off-load functions difficult to manage or control.

Originally outsourcing to private agencies in SCCL was done for surface coal
transport from mine to Coal Handling Plants and for driving of tunnels / Shaft sinking
from surface to reach underground coal seams.

Introduction of outsourcing for overburden (OB) removal in a new mine through

private contractual operations in SCCL was launched in a small way at
Gouthamkhani open-cast mine, Koyagudem, in September 1993.

Subsequently, contractual operations for OB removal was introduced in other new

mines – Medapalli OC in Ramagundam and IC – “D” Block in Yellandu area where
the company could not afford to invest in machinery.

Later, this concept was extended to other mines where a huge backlog in OB
removal had built up over the years and where the stripping ratio was very high.

Some of the reasons that compelled SCCL to undertake outsourcing of OB removal

were:

• Gradual Decline in Underground Hand-Section Production: Underground

hand section production reduced from 12.73 Mt in 1988-89 to 11.07 Mt in
1992-93 with corresponding fall in productivity levels from 0.72 tonnes per
manshift to 0.61 tonnes. Further, growth in machine-mining was not to the
expected levels. Hence, production from opencast mines had to be augmented to
meet the ever increasing demand.

Crisis Management

Consequent to the trade union elections, there has been a significant improvement in
the industrial relations scenario as the number of strikes have come down by 90%
during 1997-2002. However, the success of the turnaround was severely tested by
the strike notice of all recognized trade unions in January-February 2003. Following
the management’s decision to introduce Surface Miner technology at Koyagudem
open-cast mine, trade unions gave a call for strike. A deliberate disinformation
campaign was launched with the introduction of this technology being equated with
privatization and loss of jobs.

18
Corporate Communication Policy HR Initiatives for
Turnaround of
Visakhapatnam
In continuation of the various communication activities initiated in 1997, the company Steel Plant
in 2003 brought out a comprehensive corporate communication policy. The policy – a
unique experiment in public sector – aims at reaching out to about 1 lakh workforce
spread over 67 mines to develop the spirit of bondage among workmen and execu-
tives. Some of the objectives of the policy are:

• ‘Singareni Day’ will be celebrated on December 23 every year to promote the

spirit of Singarenism.

• Full-fledged corporate communication cells are established in each area and

separate budgetary allocations are made for communication and PR activities.

• ‘Mine Sadassu’ were started at each mine and departments. They are also
conducted in hospitals, workshops, powerhouses, etc. The Mine Manager and
the executives enlighten the workmen on the current issues concerning the coal
industry and educate them on various policies communicated by the corporate
office.

• Padayatra was a new initiative launched by the company as ‘Workers Vaddaku

Management’ (Management at the door steps of workmen). Under this pro-
gramme, a group of executives headed by the Area GM conducts Padayatra
team consist of executives from all major disciplines including medical & health
and members of Singareni Seva Samithi (SSS). The members hold placards and
banners containing appropriate the catchy slogans to raise awareness level on
issues like water conservation, anti – AIDS, etc. In the Padyatras the local
media are also involved and this is hailed as one of the best transparent initiatives
which has brought the administration to the doorsteps of the workforce.

Wages Through Banks

Among the various initiatives to promote the well-being of employees, payment of

wages through bank is perhaps the best innovation carried out. This has not only
brought the PSU and the banking community together for mutual benefit, but also led
to the empowerment of company’s employees. Before this practice was introduced,
wages were paid to workmen at mines in the form of cash. A World Bank study in
the coal belt regions concluded that payment of cash has contributed to increase in
conspicuous consumption and rise in alcoholism.

Speeding up of Settlements (Area Terminal Benefit cells)

In line with the policy of welfare-oriented management, the company launched a
novel activity for the benefit of the retired workmen. It has set up ‘Area Terminal
Benefit Cell’ at each area to speed up settlement of benefits due to workmen on
superannuation, death, etc.

Group Gratuity Scheme

In SCCL Gratuity paid out of working capital funds as and when the claim is
admitted. In other words the amount provided is not being invested specifically. In
tune with the changing times and to protect workers interest fully and plan for healthy
finances for the company in the long run, the company launched Group Gratuity
Scheme in Obtober 2003. State PSUs like APSRTC, APDDC and Central PSUs like
Western Coal Fields have been successfully operating such Group Gratuity Schemes.
19
Case Studies Under the Group Gratuity Scheme, the company would set up a trust fund in collabo-
ration with LIC and will earmark Rs. 200 crores initially. The job of investment and
actuarial valuation would be taken over by the LIC free of charge and interest will be
paid by LIC on the accumulated funds. The employer has to pay an initial contribution
at the inception of the scheme to secure past service gratuity.

Energy Conservation Measures

In SCCL, burgeoning power will was one of the major areas of concern. The govern-
ment audit, during the review of the company’s performance, has observed that
SCCKL incurred an avoidable expenditure of Rs. 218 crore during five years (ending
March 2001) on power consumption. Not only power wastage, but also illegal tap-
pings of power and power pilferages have become rampant.

Eco-Friendly Mining

• Easing pressure on natural resources.

• Reducing air pollution.
• Environment monitoring.
• Clean environment
• Green environment

Change in temperature pattern has been observed where good green coverage has
been developed. One such area is Ramagunam wherein temperature reduction was
noticed to the extent of 2o Celsuis. Literacy campus and workshops are organized
regularly to bring environmental awareness.

• Training young minds.

• Development of parks & green space.
• Training and exposure to frontline staff.
• Waste recycling and reuse.
• Water Harvesting.
• Vermicompost pits.

Safety Measures

The company has taken a pro-active role to improve the safety record in its mines.
The policy is “Safety First. Safety Always. Safety Forever.”

SHAPE

Involving communities and local bodies as stakeholders in the development process is

a key mission area in the state government’s resolve towards a “People-friendly
state”. In this direction, SCCL has launched an innovative programme called
‘Surrounding Habitat Assistance Programme (SHAPE)’. Some of the objectives of
the SHAPE include:

• Involving the local villagers where mining activities are planned as stakeholders.
The slogan of SHAPE is “PARTNERS IN PROGRESS”. Instead of SCCL
deciding on welfare measures for its workers and local villagers, the
SHAPE aims at fulfilling the felt-needs of the local community based on
their assessment.

20
• The basic emphasis will be on providing infrastructure in respect of housing, HR Initiatives for
drinking water, sanitation and drainage, medical facilities, roads and street lighting. Turnaround of
Visakhapatnam
Steel Plant
• All activities which will be undertaken by the company for providing basic
infrastructure, will be on the ‘USER PAYS PRINCIPLE”. The concerned local
body (gram panchayat / municipality) will compulsorily enter into a memorandum
of understanding (MOU) with the management. The MoU will specify the
respective responsibilities of the local body and the management. While the
company will partially meet the cost of capital expenditure, the respective local
body will be entirely responsible for maintenance of the asset including all recur-
ring expenditure.

• The company proposes to spend around Rs. 193 crore for welfare activities in
surrounding habitat in creation of drinking water facilities, road improvements,
sanitation, etc.

Customer Focussed Services

In the area of liberalization where customer is the king, coal companies have to be
sensitive to the quality and transparency in coal supplies.

Singareni has about 3,500 major, medium and small-scale industries on its customer
list, which include diverse industries such as thermal power plants, cement, paper,
textile, tobacco, ceramics, pharmaceuticals and brick kilns. About 94% of coal
supplies are to power houses, cement units and captive power plants under the core
sector linkage.

Challenges Ahead

Singareni Collieries completed the turnaround from a loss making PSU into a profit-
able one during the year 2002-2003. With the highest ever production and profits, the
company has transformed into an organization with sound fundamentals.

With huge coal deposits and growing demand from the energy sector in particular, the
company is gearing up for higher production challenges. With a transformed manage-
ment and motivated workforce, it is looking forward for more successful years
ahead.

The Challenges for the Company in the Near Future Include:

• Possible reduction in import duty of coal.

• Rationalization of railway freight rates.

• Tightening environmental stipulations regarding ash content, stricter implementa-

tion of Kyoto protocol to discourage use of coal to reduce emission of green-
house gases.

• Discovery of gas reserves in the Krishna-Godavari Basin in Andhra Pradesh,

and consequent impact on SCCL market share in South India.

• The imperative need to improve performance of underground mines as the

reserves in

• Open-cast mines are limited.

21
Case Studies Issues for Discussion

1. Discuss the effect of effective and continuous communication with employees. In

your opinion what other measures can be taken to communicate with employees?

2. What do you understand by customer focussed services? How does this concept
applies to the coal companies? Discuss.

3. The case discusses the strategy for turnaround. Discuss its advantages and
disadvantages.

References

Reddy, B Ratan. (1999), Turnaround Strategies , Reading Material, IPE.

Reddy, B Ratan. (2000), Turnaround Strategies, Printed Case Study, IPE.
SCCL. (2004). Glory to Bloom.
Website, SCCL.
National Seminar on Industrial Engineering in Mining in India of SCCL (2003).

22