Nurturing a white elephant

Public sector units (PSUs) are well known for their huge employee burden and it is an equally well known fact that major part of these PSU earnings goes towards employees. And the PSU in question today is SAIL.

In FY15, the company clocked a net profit of Rs.2117 crore and employee spend was at Rs.9747 crore. SAIL’s employee count stands somewhere close to 98,000.  And that’s massive when compared to the peers in the private sector – Tata Steel (standalone) has 36,200 employees and JSW Steel has some 12,000.

And we can see the telling effect of this on the cost of production – SAIL’s employee cost per tonne for FY15 stood at Rs.70.07 crore – the amount it spent on its employees to make one tonne of steel. On the other hand, employee cost per tonne of Tata Steel stood at Rs.50.73 crore and JSW Steel was the least at Rs.12.39 crore.

One can argue that given the huge workforce, naturally, SAIL’s spend would be higher. That’s true but it does not mean that the employees are gaining more in SAIL. In fact thanks to the huge work force, the average spend on each employee is around Rs.9.80 lakh compared to Tata Steel’s Rs.10.14 lakh and JSW’s Rs.11.60 lakh. It’s the same simple logic – chota parivaar, sukhi parivaar.