hr project

Major Project Report 2012

CHAPTER: 1
INTRODUCTION

MESCE Department of Management Science Page 1


1.1 Introduction to the study

The study was undertaken to know the employee’s perception regarding the effectiveness of
performance appraisal system at Malabar cements ltd. It consists of the systematic evaluation of
employees with respect to his/her performance on the job and potential for development.

Perception according to Kotler (1997) is the process through which people in choosing,
organizing and interpreting information in order to form a meaningful picture of the world.
According to Gibson (1996) is the process of person perception in understanding the
environment that involves organizing and interpretation as stimuli in a psychological experience.

The performance evaluation (performance appraisal) is a key factor in order to develop an
organization effectively and efficiently. Individual performance appraisal is very beneficial for
the growth dynamics of the organization as a whole. Performance appraisal is ―the process of
evaluating how well employees perform their jobs when compared to a set of standards, and then
communicating that information to those employees ―(Mathis and Jackson, 2000).

Cement Industry in India is on a roll at the moment. Driven by a booming real estate sector,
global demand and increased activity in infrastructure development such as state and national
highways, the cement industry has witnessed tremendous growth. Production capacity has gone
up and top cement companies of the world are to enter the Indian market, there by sparking off a
spate of mergers and acquisitions. Indian cement industry is currently ranked second in the world

Malabar Cements Ltd. Is a flagship company of the Government of Kerala. The company was
incorporated on August 11, 1978 and commenced production on April 24, 1984. This industrial
unit has a capital outlay of Rs.680 million. The factory is rated to produce 4.2 lakh tones cements
per annum. The company meets about 10 % of total cement consumption in Kerala. The
company moves with a work force of over 1000 dedicated and highly skilled personnel. Malabar
Cements have the state of the art, dry process technology for manufacture of super quality
cement, quality much above the national standard.



1.2 Need for the study

The study was conducted at Malabar cements Ltd, to understand the employee’s perception
regarding the effectiveness of performance appraisal system. The purpose of this study is to find
out how far the employees are perceived with the existing performance appraisal provided by the
Malabar cements and also tries to find out if the performance appraisal system provided is
sufficient enough to improve their performance level.

1.3 Objectives of the study

Primary objective

To study the employees perception regarding the effectiveness of performance appraisal
system.

Secondary objectives

To identify the employees expectation from the performance appraisal system
To evaluate the managerial attributes about their managers
To study employee’s perception regarding the present performance appraisal system

1.4 Problem statement

For any organization, employees are the main party to receive more concentration so that the
business organization has a successful future. Here the management of Malabar Cements
suspects that there lies some sort of defects in their performance appraisal methods followed by
the organization.



CHAPTER: 2
INDUSTRY PROFILE



1. INTRODUCTION
The cement industry is one of the main beneficiaries of the infrastructure boom. With robust
demand and adequate supply, the industry has bright future. The Indian Cement Industry with
total capacity of 165 million tones is the second largest after China. Cement industry is
dominated by 20 companies who account for over 70% of the market. Individually no company
accounts for over 12% of the market. The major players like L&T and ACC have been quiet
successful in narrowing the gap between demand and supply. Private housing sector is the major
consumer of cement (53%) followed by the government infrastructure sector. Similarly northern
and southern region consume around 20%-30% cement while the central and western region are
consuming only 18%-16%.India is the 2nd largest cement producer in world after china .Right
from laying concrete bricks of economy to waving fly over’s cement industry has shown and
shows a great future. The overall outlook for the industry shows significant growth on the back
of robust demand from housing construction, Phase-II of NHDP (National Highway
Development Project) and other infrastructure development projects. Domestic demand for
cement has been increasing at a fast pace in India. Cement consumption in India is forecasted to
grow by over 22% by 2009-10 from 2007- 08.Among the states, Maharashtra has the highest
share in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh
is leading with 14.72% of total production followed by Rajasthan. Cement production grew at
the rate of 9.1 per cent during 2006-07 over the previous fiscal's total production of 147.8 mt
(million tons). Due to rising demand of cement the sales volume of cement companies are also
increasing & companies reporting higher production, higher sales and higher profits. The net
profit growth rate of cement firms was 85%.
Cement industry has contributed around 8% to the economic
development of India. Outsiders (foreign players) eyeing India as a major market to invest in the
form of either merger or FDI (Foreign Direct Investment). Cement industry has a long way to go
as Indian economy is poised to grow because of being on verge of development. The company
continues to emphasize on reduction of costs through enhanced productivity, reduction in energy
costs and logistics expenses. The cement sector is expected to witness growth in line with the
economic growth because of the strong co-relation with GDP. Future drivers of cement demand
growth in India would be the road and housing projects. As per the Working Group report on
Cement Industry for the formulation of the 11th Plan, the cement demand is likely to grow at



11.5 per cent per annum during the 11th Plan and cement production and capacity by the end of
the 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, with
capacity utilization of 90 per cent. Despite the growth of Indian cement industry India lags
behind the per capita production. Supply for cement is expected to remain tight which, in turn,
will push up prices of cement by more than 50%. The most important factor for better prices is
consolidation of the industry. It has just begun and we will see more consolidation in the coming
years. Other budget measures such as cut in import duty from 12.5 per cent to nil etc. are all
intended to cut costs and boost availability of cement. Sadly the adverse effects of global
slowdown have not speared this industry too. Demand is sluggish, the government is keeping an
eagle eye on prizes, domestic coal and pet coke, prizes have increased sharply and utilizations
rates are down. The numbers coming out are a reflection of grim times.
ACC the country’s largest cement company that’s controlled by
Swiss giant HOLCIM, registered 2% fall in august sales. It is the biggest fall since Feb 2007.
Production fell by 5%. To stand against the problematic situation, government as well as cement
industry has taken some steps. Companies are focusing on cost of transportation. One of the
strategy is to decrease dependence on road & opt for sea logistics as that can cut transportation
cost by 30- 50 %. Some plants are adopting futuristic plan such as setting up captive power plant,
moving closer to the customers by creating clicker, crushing, and capacity in key markets, to be
more customer centric to generate better revenue. India should push for stricter regulations of
market place as to control the prices of big companies and prevent them from forming cartels and
exchanging information. To fight with the high inflation, government wants to import more
cement from Pakistan .However cement prizes are not very much high as other items but still
they are increasing. And the reason of high prize is surging cost of raw material and
transportation cost.
Apart from this government also discussed with cement industry not
to have increase in prizes and keep consumer interest in mind. Now the question arise in front of
the government is whether the demand by the government is possible to increase through
expenditure on infrastructure or not according to the current state of economy when so many
crises are going on or how the government allocation of US$ 3.23 billion for the National
Highway Development, Project will keep the demand for cement alive? And to what extent the
prizes of cement should be increase so that consumer can’t affect. Cement industry in India has



also made tremendous strides in technological up gradation and assimilation of latest technology.
Presently, 93 per cent of the total capacity in the industry is based on modern and environment-
friendly dry process technology. The induction of advanced technology has helped the industry
immensely to conserve energy and fuel and to save materials substantially. Indian cement
industry has also acquired technical capability to produce different types of cement like Ordinary
Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement
(PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland
Cement, White Cement etc. Some of the major clusters of cement industry in India are: Satna
(Madhya Pradesh), Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra
Pradesh), Nalgonda (Andhra Pradesh), Bilaspur (Chattisgarh), and Chandoria (Rajasthan).

2. CURRENT SCENARIO

The Indian cement industry is the second largest producer of quality cement, which meets global
standards. The cement industry comprises 130 large cement plants and more than 300 mini
cement plants. The industry's capacity at the end of the year reached 188.97 million tons which
was 166.73 million tons at the end of the year 2006-07. Cement production during April to
March 2007-08 was 168.31 million tons as compared to 155.66 million tons during the same
period for the year 2006- 07.Despatches were 167.67 million tons during April to March 2007-
08 whereas 155.26 during the same period. During April-March 2007-08, cement export was
3.65 million tons as compared to 5.89 during the same period. Cement industry in India is
currently going through a consolidation phase. Some examples of consolidation in the Indian
cement industry are: Gujarat Ambuja taking a stake of 14 per cent in ACC, and taking over DLF
Cements and Modi Cement; ACC taking over IDCOL; India Cement taking over Raasi Cement
and Sri Vishnu Cement; and Grasim's acquisition of the cement business of L&T, Indian Rayon's
cement division, and Sri Digvijay Cements. Foreign cement companies are also picking up
stakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 per
cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to
the emergence of two major groups in the Indian cement industry, the Holcim-ACC-Gujarat
Ambuja Cements combine and the Aditya Birla group through Grasim Industries and Ultratech
Cement. Lafarge, the French cement major has acquired the cement plants of Raymond and



Tisco. Italy based Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries'
cement plant in Andhra Pradesh, and German cement company Heidelberg Cement has entered
into an equal joint-venture agreement with S P Lohia Group controlled Indo- Rama Cement.

3. PROCESS TECHNOLOGY

While adding fresh capacities, the cement manufacturers are very conscious of the technology
used. In cement production, raw materials preparation involves primary and secondary crushing
of the quarried material, drying the material (for use in the dry process) or undertaking a further
raw grinding through either wet or dry processes, and blending the materials. Clinker production
is the most energy intensive step, accounting for about 80% of the energy used in cement
Production. Produced by burning a mixture of materials, mainly limestone, silicon oxides,
aluminum, and iron oxides, clinker is made by one of two production processes: wet or dry; these
terms refer to the grinding processes although other configurations and mixed forms (semi-wet,
semi-dry) exist for both types. In the dry process, the raw materials are ground, mixed, and fed
into the kiln in their dry state. In the wet process, the crushed and proportioned materials are
ground with water, mixed, and fed into the kiln in the form of slurry. Different types of cement
that are produced in India are:
• Ordinary Portland cement (OPC):
OPC, popularly known as grey cement, has 95 per cent clinker and 5 per cent gypsum and other
materials. It accounts for 70 per cent of the total consumption.
• Portland Pozzolana Cement (PPC):
PPC has 80 per cent clinker, 15 per cent pozzolana and 5 per cent gypsum and accounts for 18
per cent of the total cement consumption. It is manufactured because it uses fly ash/burnt
clay/coal waste as the main ingredient.
• White Cement:
White cement is basically OPC - clinker using fuel oil (instead of coal) with iron oxide content
below 0.4 per cent to ensure whiteness. A special cooling technique is used in its production. It is
used to enhance aesthetic value in tiles and flooring. White cement is much more expensive than
grey cement.
• Portland Blast Furnace Slag Cement (PBFSC):



PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag and 5 per cent gypsum and
accounts for 10 per cent of the total cement consumed. It has a heat of hydration even lower than
PPC and is generally used in the construction of dams and similar massive constructions.
• Specialized Cement:
Oil Well Cement is made from clinker with special additives to prevent any porosity.
• Rapid Hardening Portland cement:
Rapid Hardening Portland Cement is similar to OPC, except that it is ground much finer, so that
on casting, the compressible strength increases rapidly.
• Water Proof Cement:
Water Proof Cement is similar to OPC, with a small portion of calcium stearate or non-
saponifibale oil to impart waterproofing properties.

4. PROCEDURE

The main raw materials used in the cement manufacturing process are limestone, sand, shale,
clay, and iron ore. The main material, limestone, is usually mined on site while the other minor
materials may be mined either on site or in nearby quarries. Another source of raw materials is
industrial by-products. The use of byproduct materials to replace natural raw materials is a key
element in achieving sustainable development.

Raw Material Preparation

Mining of limestone requires the use of drilling and blasting techniques. The blasting techniques
use the latest technology to insure vibration, dust, and noise emissions are kept at a minimum.
Blasting produces materials in a wide range of sizes from approximately 1.5 meters in diameter
to small particles less than a few millimeters in diameter. Material is loaded at the blasting face
into trucks for transportation to the crushing plant. Through a series of crushers and screens, the
limestone is reduced to a size less than 100 mm and stored until required. Depending on size, the
minor materials (sand, shale, clay, and iron ore) may or may not be crushed before being stored
in separate areas until required.
Raw Grinding



In the wet process, each raw material is proportioned to meet a desired chemical composition and
fed to a rotating ball mill with water. The raw materials are ground to a size where the majority
of the materials are less than 75 microns. Materials exiting the mill are called "slurry" and have
flow ability characteristics. This slurry is pumped to blending tanks and homogenized to insure
the chemical composition of the slurry is correct. Following the homogenization process, the
slurry is stored in tanks until required. In the dry process, each raw material is proportioned to
meet a desired chemical composition and fed to either a rotating ball mill or vertical roller mill.
The raw materials are dried with waste process gases and ground to a size where the majority of
the materials are less than 75 microns. The dry materials exiting either type of mill are called
"kiln feed". The kiln feed is pneumatically blended to insure the chemical composition of the
kiln feed is well homogenized and then stored in silos until required.

Preprocessing

Whether the process is wet or dry, the same chemical reactions take place. Basic chemical
reactions are: evaporating all moisture, claiming the limestone to produce free calcium oxide,
and reacting the calcium oxide with the minor materials (sand, shale, clay, and iron). This results
in a final black, nodular product known as "clinker" which has the desired hydraulic properties.
In the wet process, the slurry is fed to a rotary kiln, which can be from 3.0 m to 5.0 m in diameter
and from 120.0 m to 165.0 m in length. The rotary kiln is made of steel and lined with special
refractory materials to protect it from the high process temperatures. Process temperatures can
reach as high as 1450oC during the clinker making process. In the dry process, kiln feed is fed to
a preheated tower, which can be as high as 150.0 meters. Material from the preheated tower is
discharged to a rotary kiln with can have the same diameter as a wet process kiln but the length
is much shorter at approximately 45.0 m. The preheated tower and rotary kiln are made of steel
and lined with special refractory materials to protect it from the high process temperatures.
Regardless of the process, the rotary kiln is fired with an intense flame, produced by burning
coal, coke, oil, gas or waste fuels. Preheated towers can be equipped with firing as well. The
rotary kiln discharges the red-hot clinker under the intense flame into a clinker cooler. The
clinker cooler recovers heat from the clinker and returns the heat to the preprocessing system



thus reducing fuel consumption and improving energy efficiency. Clinker leaving the clinker
cooler is at a temperature conducive to being handled on standard conveying equipment.

Finish Grinding and Distribution

The black, nodular clinker is stored on site in silos or clinker domes until needed for cement
production. Clinker, gypsum, and other process additions are ground together in ball mills to
form the final cement products. Fineness of the final products, amount of gypsum added, and the
amount of process additions added are all varied to develop a desired performance in each of the
final cement products. Each cement product is stored in an individual bulk silo until needed by
the customer. Bulk cement can be distributed in bulk by truck, rail, or water depending on the
customer's needs. Cement can also be packaged with or without color addition and distributed by
truck or rail.

5. DEMAND & SUPPLY

The demand drivers for the cement sector continue to be housing, infrastructure and commercial
construction, etc. We expect the proportion of infrastructure in total demand to improve further
in future, as the thrust on infrastructure development is on the rise. During April-November
2007, cement demand grew by 10 per cent year on- year (y-o-y) propelled by the growth
witnessed in end user segments such as housing, infrastructure etc. CRISIL Research expects
demand to remain strong and grow by over 12 per cent in the next 2 years. Cement demand is
expected to outstrip supply for the next year and a half as no major capacities are coming on
stream, thus providing enough flexibility to cement manufacturers to further hike the prices.
Today, cement from Andhra is going all over India, including Assam, Meghalaya, Jharkhand,
Orissa, West Bengal, Chattisgarh, Gujarat and Maharashtra. More cement is likely to flow into
Tamil Nadu from the state in view of cut in sales tax. Any further increase in demand in the
South India will benefit the cement industry here. Cement movement from Gujarat to Mumbai is
also coming down due to exports while cement movement from Orissa into Andhra has stopped
and, in fact, cement is flowing into Orissa as well. Earlier in 2006-07, the housing sector alone
consumed 65 per cent of the total domestic consumption. With the launch of several



infrastructure projects, the housing consumption may come down to 55 per cent as the
infrastructure and other sectors are expected to move up to 45 per cent from the present 35 per
cent. Still, the main sector of consumption continues to be housing, including commercial space,
occupying more than 60 per cent. The current demand in the state for 2005- 06 is expected to
cross 15 million tons (11.5 million tons). We expect the demand here to go past the 17.5-million
mark in 2006-07 in view of irrigation and infrastructure projects being taken up in the state.
Weaker sections’ housing, construction of public toilets, schools in rural areas apart from several
private and public infrastructure projects will also give tremendous boost to the cement
consumption in the state. Most importantly, irrigation projects, worth nearly Rs 1 lakh crore, will
trigger unprecedented demand for the next 5-7 years. Cement consumptions are as follows:

6. DEMAND DRIVERS

Indian cement demand skewed towards housing
The demand from the housing sector is ~53% of the total Indian cement demand. There are fears
of a slowdown in the demand from the housing sector due to a drop in real estate prices in the
country. The worry is that builders may postpone construction of new buildings if the property
prices were to correct.
Infrastructure to give demand a big boost
Our analysis shows that Infrastructure should be the biggest growth driver for cement demand in
the country. If we were to look only at order books of the top eight construction and
manufacturing equipment companies in India, we find that their combined order book has
virtually doubled over the last two years from INR1,000bn (USD25bn) to INR1,950bn
(USD48.75bn) for completion over the next 24-30 months.

7. COST

Over the past five years, cost of cement production has grown at a CAGR of 8.4%. Also, the
producers have been able to pass on the hike in cost to consumers on the back of increased
demand. Average realizations have increased from Rs. 1,880 per ton in FY 03 to Rs. 3,133 per
tons in FY 07, at a CAGR of 13.6%, which has been reflected in higher profit margins of the



industry. To reduce the cost of production, the industry has focused on captive power generation.
Proportion of cement production through captive power route has increased over the years. Also,
cement movement by rail has increased over the years. Freight and energy costs are also
increasing; however, in the current market scenario, manufacturers have the flexibility to pass on
the increase in costs to end consumers. Let us have a look at the cost factors affecting the cement
industry

Capacity Utilization:
Since the industry operates on fixed cost, higher the capacity sold, the wider the cost distributed
on the same base. But one should also keep in mind, that there have been instances wherein
despite a healthy capacity utilization, margins have fallen due to lower realizations.
Power:
The cement industry is energy intensive in nature and thus power costs form the most critical
cost component in cement manufacturing (about 30% to total expenses). Most of the companies
resort to captive power plants in order to reduce power costs, as this source is cheaper and results
in uninterrupted supply of power. Therefore, higher the captive power consumption of the
company, the better it is for the company.
Freight:
Since cement is a bulk commodity, transporting is a costly affair (over 15%). Companies, which
have plants located closer to the markets as well as to the source of raw materials have an
advantage over their peers, as this leads to lower freight costs. Also, plants located in coastal
belts find it much cheaper to transport cement by the sea route in order to cater to the coastal
markets such as Mumbai and the states of Gujarat and Tamil Nadu. On account of sufficient
reserves of raw materials such as limestone and gypsum, the raw material costs are generally
lower than freight and power costs in the cement industry. Excise duties imposed by the
government and labor wages are among the other important cost components involved in the
manufacturing of cement.
Operating margins:
The company should have a consistent record of outperforming its peers on the operational
performance front i.e. it should have higher operating margins than its competitors in the
industry. Factors such as captive power plants, effective capacity utilization results in higher



operating margins and therefore these factors should be looked into. Since cement is a regional
play on account of its high freight costs, the company should not have all its plants concentrated
in one region. It should have a geographical spread so that adverse market conditions in one
region can be mitigated by high growth in the other region

8. Government Policies

Government policies have affected the growth of cement plants in India in various stages. The
control on cement for a long time and then partial decontrol and then total decontrol has
contributed to the gradual opening up of the market for cement producers. The stages of growth
of the cement industry can be best described in the following stages:
Price and Distribution Controls (1940-1981)
During the Second World War, cement was declared as an essential commodity under the
Defense of India Rules and was brought under price and distribution controls which resulted in
sluggish growth. The installed capacity reached only 27.9 MT by the year 1980-81.
Partial Decontrol (1982-1988)
In February 1982, partial decontrol was announced. Under this scheme, levy cement quota was
fixed for the units and the balance could be sold in the open market. This resulted in extensive
modernization and expansion drive, which can be seen from the increase in the installed capacity
to 59MT in 1988-89 in comparison with the figure of a mere 27.9MT in 1980-81, an increase of
almost 111%.
Total Decontrol (1989)
In the year 1989, total decontrol of the cement industry was announced. By decontrolling the
cement industry, the government relaxed the forces of demand and supply. In the next two years,
the industry enjoyed a boom in sales and profits. By 1992, the pace of overall economic
liberalization had peaked; ironically, however, the economy slipped into recession taking the
cement industry down with it. For 1992-93, the industry remained stagnant with no addition to
existing capacity.
Government Controls
The prices that primarily control the price of cement are coal, power tariffs, railway, freight and
royalty on limestone. Interestingly, all of these prices are controlled by government



9. REQUIREMENTS

Coal
The consumption of coal in a typically dry process system ranges from 20-25% of clinker
production. This means for per ton clinker produced 0.20-0.25 ton of coal is consumed. This
contributes 35-40% of the production cost. The cement industry consumes about 10mn tons of
coal annually. Since coalfields like BCCL supply a poor quality of coal, NCL and CCL the
industry has to blend high-grade coal with it. The Indian coal has a low calorific value (3,500-
4,000 kcal/kg) with ash content as high as 25-30% compared to imported coal of high calorific
value (7,000-8,000 kcal/kg) with low ash content 6-7%. Lignite is also used as a fuel by blending
it with coal. However this process is not very common.
Electricity
Cement industry consumes about 5.5bn units of electricity annually while one ton of cement
approximately requires 120-130 units of electricity. Power tariffs vary according to the location
of the plant and on the production process. The state governments supply this input and hence
plants in different states shall have different power tariffs. Another major hindrance to the
industry is severe power cuts. Most of the cement producing states like AP, MP experience
power cuts to the tune of 25-30% every year causing substantial production loss.
Infrastructure
To reduce uncertainty relating to power, most of the leading companies like ACC, Indian Rayon,
and Grasim rely on captive power plants. A few companies are also considering power-
generating windmills.
Limestone
This constitutes the largest bulk in terms of input to cement. For producing one ton of cement,
approximately 1.6 ton of limestone is required. Therefore, the cement plant location is
determined by the location of limestone mines. The major cash outflow takes place in way of
royalty payment to the central government and cess on royalties levied by the state government.
The total limestone deposit in the country is estimated to be 90 billion tons. AP has the largest
share -- 34%, Karnataka 13%, Gujarat 13%, M.P 8%, and Rajasthan 6.5%. The plants near the
limestone deposit pay less transportation cost than others.



Transportation
Cement is mostly packed in paper bags now. It is then transported either by rail or road. Road
transportation beyond 200 kms is not economical therefore about 55% cement is being moved by
the railways. There is also the problem of inadequate availability of wagons especially on
western railways and southeastern railways. Under this scenario, manufacturers are looking for
sea routes, this being not only cheap but also reducing the losses in transit. Today, 70% of the
cement movement worldwide is by sea compared to 1% in India. However, the scenario is
changing with most of the big players like L&T, ACC and Grasim having set up their bulk
terminals.
Infrastructure for Future
The consumption of cement is determined by factors influencing the level of housing and
industrial construction, irrigation projects, and roads and laying of water supply and drainage
pipes etc. The level and growth of GDP and its sectoral composition, capital formation,
development expenditure, growth in population, level of urbanization, etc, in turn, determine
these factors. But the domestic demand for cement is mainly from the housing activities and
infrastructure development. The government paved the way for the entry of the private sector in
road projects. It has amended the National Highway Act to allow private toll collection and
identified projects, bridges, expressways and big passes for private construction. The budget
gave substantial incentives to private sector construction companies. Ongoing liberalization will
lead to an increase in industrial activities and infrastructure development. So it is hoped that
Indian cement industry shall boom again in near future.
Incentives in States
Most state governments, in order to attract investments in their respective states, offer fiscal
incentives in the form of sales tax exemptions/deferrals. In some states, this applies only to
intrastate sales, like Madhya Pradesh and Rajasthan. States like Haryana offer a freeze on power
tariff for 5 years, while Gujarat offers exemption from electric duty.
Installed Capacity
India is the world’s second largest cement producing country after China. The industry is
characterized by a high degree of fragmentation that has created intense competitive pressure on



price realizations. Spread across the length and breadth of the country, there are 120 large plants
belonging to 56 companies with an installed capacity of around 135mn tons as on March 2002.

10. OPPORTUNITIES, THREATS, RISKS AND CONCERNS

The cement industry is going through its boom period with full capacity utilization. Powered by
the GDP growth of 8-9%, the annual demand for cement in the country continues to grow at 8-
10%. As per NCAER study, under high growth scenario, the demand for cement (including
exports) is expected to increase to 244.82 million tons by 2010-11. As per the study, the demand
is expected to be much higher at 311.37 million tons, if the optimistic projections of the road and
the housing sectors are met. The industry has responded to this with substantial new capacity
announcements. The materialization of these capacities, however, is likely to be delayed due to a
number of factors including timely delivery of equipment and construction of the plant due to the
heavy order book position of the suppliers. It is expected that demand growth will outstrip supply
till the materialization of such new capacities. However, the current high level of international
crude prices and its impact on the domestic prices of petroleum products is likely to make a dent
in the profitability but its impact will have to be seen depending upon the ability of the economy
to pass on such cost increase to the consumer. While the freight cost could be optimized on the
imported coal through usage of company’s own ships for part of the quantity, the international
prices of imported coal and its volatility together with the strengthening of the dollar against
rupee could derail this. This could impact the delivery prices of imported coal and also the cost
of production. The Government has taken steps to increase the availability of indigenous coal for
its expanded capacity across various plants which can mitigate the impact of such high cost of
imported coal for the plants located near the coal fields in India. The Government’s continuing
efforts to rein in cement prices by freeing imports and banning exports could artificially disable
the normal market price mechanisms for determining the price. The rise in the price of cement is
because of the gap of demand & supply in the market. The demand for cement is much higher
than its actual supply. But with the production maximization, which can be encountered in next
few year, this gap may narrow down, that may ensure the market to be in equilibrium.
Decreasing per capita consumption doesn’t affect the total consumption for the cement. It means
the infrastructure; contacted housing is using the bulk of the production. In spite of High price of



the product, the hick of demand because of the increasing rate of infrastructural development.
Domestic price of cement is rising as well as the imported cement price is lowering. So
altogether the supply of the cement, which is affordable, will increase. This may in decrease the
gap between supply and demand. Major Demand was from the housing sector, which may shift
to infrastructure as lots of infrastructural development processes has already being taken up &
due to the increased price, housing segment started showing a slowdown.

11. Main Companies in India

Associated Cement Companies Ltd (ACCL)
Associated Cement Companies Ltd manufactures ordinary Portland cement, composite cement
and special cement and has begun offering its marketing expertise and distribution facilities to
other producers in cement and related areas. It has twelve manufacturing plants located
throughout the country with exports to SAARC nations. The company plans capital expenditure
through expansion of existing units and/or through acquisitions. Non-core assets are to be
divested to release locked up capital. It is also expected to actively pursue overseas project
engineering and consultancy services.
Birla Corporation Ltd.
Birla Corp's product portfolio includes acetylene gas, auto trim parts, casting, cement, jute
goods, yarn, calcium carbide etc. The cement division has an installed capacity of 4.78 million
metric tons and produced 4.77 million metric tons of cement in 2003- 04. The company has two
plants in Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar Pradesh and
holds a market share of 4.1 per cent. It manufactures Ordinary Portland cement (OPC), Portland
pozzolana cement; fly ashbased PPC, Low-alkali Portland cement, Portland slag cement, low
heat cement and sulphate resistant cement. Large quantities of its cement are exported to Nepal
and Bangladesh. Going forward, the company is setting up its captive power plant to remain
Cost competitive.
Century Textiles and Industries Ltd (CTIL)
The product portfolio of CTIL includes textiles, rayon, cement, pulp & paper, shipping, property
& land development, builders and floriculture. Cement is the largest division of CTIL and
contributes to over 40 per cent of the company's revenues. The company has an installed capacity



of 4.7 million tons with a total cement production of 5.43 million tons in 2003-04. CTIL has four
plants that manufacture cement, one in Chhattisgarh, two in Madhya Pradesh and one in
Maharashtra. Going forward, the company has scripted a three-pronged strategy closing down its
shipping business, continuing with its chemicals and adhesive division, and focusing on cement,
rayon and paper as its long term business plan.
Grasim-UltraTech Cemco
Grasim's product profile includes viscose staple fibre (VSF), grey cement, white cement, sponge
iron, chemicals and textiles. With the acquisition of Ultra Tech, L&T's cement division in early
2004, Grasim has now become the world's seventh largest cement producer with a combined
capacity of 31 million tons. Grasim (with Ultra Tech) held a market share of around 21 per cent
in 2003-04. It has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu and
Gujarat among others. The company plans to invest over US$ 9 million in the next two years to
augment capacity of its cement and fibre business. It’s also plans to focus on its international
ventures, ramping up the capacity of Alexandra Carbon Black in Egypt to 1,70,000 tons per
annum (from 1, 20,000 tpa) and raising the capacity of the carbon black plant in China from
12,000 tpa to 60,000 tpa.
Gujarat Ambuja Cements Ltd (GACL)
Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of commercial
production at its 2 million tons plant in Chandrapur, Maharashtra. The group has clinker
manufacturing facilities at Himachal Pradesh, Gujarat, Maharashtra, Chhattisgarh, Punjab and
Rajasthan. The company has a market share of around 10 per cent, with a strong foothold in the
northern and western markets. Its total sales aggregated US$ 526 million with a capacity of 12.6
million tons in 2003-04. Gujarat Ambuja is India's largest cement exporter and one of the most
cost efficient firms. GACL has a 14.45 per cent stake in ACC, making it the second largest
cement group in the country, after Grasim-UltraTech Cemco. The company has free cash flows
that it is likely to use to grow inorganically. The company is scouting for a capacity of around
two million tons in the northern and western markets. It has also earmarked around US$ 195-220
million for acquisitions
India Cements
India Cements is the largest cement producer in southern India with a total capacity of 8.81
million tons and plants in Andhra Pradesh and Tamil Nadu. The company has a market share of



5.4 per cent with a total cement production of 6.36 million tons in 2003-04. Its product portfolio
includes ordinary Portland cement and blended cement. The company has limited its business
activity to cement, though it has a marginal exposure to the shipping business. The company
plans to reduce its manpower significantly and exit non-core businesses to turnaround its fortune.
It also expects the export market to open up, with the Gulf emerging as a major importer.
Jaiprakash Associates Limited
Jaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is part of the Jaypee
group with businesses in civil engineering, hospitality, cement, hydropower, design consultancy
and IT. It has an annual capacity of 4.6 million tons with plants located in Rewa & Bela (Madhya
Pradesh) and Sadva Khurd (Uttar Pradesh). The company has a market share of 3.8 per cent with
the cement division contributing US$ 172 million to revenue in 2003-04. The company is
upgrading its capacity to 6.5 million tons through the modernizing of the existing units and the
commissioning of a new grinding unit at Tanda (Uttar Pradesh) with an investment of US$ 163
million. Jaiprakash Associates has decided to concentrate on its core business of construction and
engineering and leave its cement plant to its subsidiary Jaypee Rewa Cement Ltd. The company
manufactures a wide range of world class cement of OPC grades 33, 43, 53, IRST-40 and special
blends of pozzolana cement.
JK Synthetics
JK Synthetics, a Singhania Group company, started manufacturing nylon at Kota in 1962.
Subsequently, it diversified into PSY/PFY, nylon tyre-cord, cement (in 1975), acrylic and white
cement (in 1984). The company has a market share of 2.7 per cent. JK Synthetics Limited is
restructuring its business divisions into two separate entities- JK Cements and JK Synthetics.
After the restructuring, it will be left with a cement plant at Nimbahera in Rajasthan, with a
capacity of 3.26 million metric tons and manufacturing white cement.
Madras Cements
Madras Cements Ltd is one of the oldest cement companies in the southern region and is a part
of the Ramco group. The company is engaged in cement, clinker, dolomite, dry mortar mix,
limestone; ready mix cements (RMC) and units generated from windmills. The company has
three plants in Tamil Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. It has a
total capacity of 5.47 million tons annually and holds a market share of 3.1 per cent. Madras
Cements plans to expand by putting up RMC plants. As Karnataka is a promising market, the



company is further expanding its capacity from the present 1.5 million tons to 3.4 million tons
through an investment of US$ 9 million.
Holcim
Holcim, earlier known as Holderbank, has a cement production capacity of 141.9 million tons. It
is a key player in aggregates, concrete and construction related services. It has a strong market
presence in over 70 countries and is a market leader in South America and in a number of
European and overseas markets. Holcim entered India by means of a long-term strategic alliance
with Gujarat Ambuja Cements Ltd (GACL). The alliance aims to strengthen their clinker and
cement trading activities in South Asia, the Middle East and the region adjoining the Indian
Ocean. Holcim also intends to use India as an additional base for its IT operations, R&D projects
as well as a procurement sourcing hub to generate additional synergies and value for the group.
Italcementi Group
The Italecementi group is one of the largest producers and distributors of cement with 60 cement
plants, 547 concrete batching units and 155 quarries spread across 19 countries in Europe, Asia,
Africa and North America. Italcementi is present in the Indian markets through a 50:50 joint
venture company with Zuari Cements. All initiatives in southern India are routed through the
joint venture company, while Italcementi is free to buy deals in its individual capacity in
northern India. The joint venture company has a capacity of 3.4 million tons and a market share
of 2.1 per cent.
Lafarge India
Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5 million
tons and a clinker capacity of 3 million tons in the country. Lafarge commenced operations in
1999 and currently has a market share of 3.4 per cent. It exports clinker and cement to
Bangladesh and Nepal. It produces Portland slag cement, ordinary Portland cement and Portland
pozzolana cement. The Indian cement plants are located in Chhattisgarh and Rajasthan. Lafarge
Cement has become the largest cement selling firm in the Indian markets of West Bengal, Bihar,
Jharkhand and Chhattisgarh.



SWOT ANALYSIS OF CEMENT INDUSTRY
Strengths

The cement industry has much strength to be considered. Cement is, literally, the building block
of the construction industry. Almost every building constructed relies on cement for its
foundation. The cement business is a $10 billion industry, measured by annual cement
shipments. There is also a strong reputation behind the cement industry. Cement is a solid
material and consumers rarely have complaints about the product. Regional distribution plants
have also made cement widely available to any type of buyer.

Weaknesses

The cement industry is not without its drawbacks. The cement industry relies on construction
jobs to create a profit. But the cement industry heavily relies on weather. About two-thirds of
cement production takes place between May and October. Cement producers often use the winter
months to produce and stockpile cement, to meet demand. Another weakness is the cost of
transport; the cost of transporting cement is high and this keeps cement from being profitable
over long distances. In other words, shipping cement costs more than the profit from selling it.

Opportunities

The cement industries have opportunities as well. One such opportunity is the cement industry's
efficiency. The cement industry has recently streamlined its production efforts, using dry
manufacturing instead of wet, which is heavier and more time-consuming. The cement industry
has also invested about $6 billion in expansion efforts to meet unmet cement needs. Projections
show that by 2012, the cement industry will have 25 percent more production capabilities.

Threats

The nature of the economy has uncovered a number of threats to the cement industry. The
cement industry greatly relies on construction. The current economy has lessened the number of
construction jobs, which in turn hurts the cement industry. The cement industry controls the
majority of the United States market, but not all of it. About 11.5 metric tons of cement are



imported annually to support the unmet need. If other countries can produce and ship cement for
a reduced price, the U.S. cement industry is in danger. The U.S. government is also attempting to
regulate the cement industry's waste. The Environmental Protection Agency has introduced
regulations for the cement industry to cut down emissions.



CHAPTER: 3
COMPANY PROFILE



Company profile
Malabar Cements Limited is a high tech manufacturing company in the public sector, situated in
Walayar, palakkad district. Incorporated in the year 1978, the company commenced production
in 1984. The company, through its eighteen years of operation, could survive and prosper even
during the present era of liberalization and globalization.

Since 1996, company started consolidation, modernization and technical up gradation
phase to improve upon profitability, cutting production cost, improving the efficiency to face the
competitive environment. MCL achieved ISO-9002 certification in November 1996 being the
first cement factory in the public sector in the country. The major efforts of the modernization
and up gradation fronts are realigning and computerized operation of the kiln system, installation
of 2.5MW multi fuel diesel generator, belt bucket elevator etc. company could reduce production
cost and inefficiency due to these efforts.

The company achieved all time record performance during the year 1999-2000. MCL is
the first public sector company to receive the converted national award for energy conservation
from NCBM, New Delhi. Malabar cements contribute to the developmental activities of the state
by supplying a basic construction material. The presence of ―Malabar‖ in the market helps to
control the cement price to some extent. MCL has the largest dealer network in Kerala for
cement sales. Only Malabar cements can reach its cement factory.

Fresh without any deterioration in the original strength either due to moisture or
humidity, within 12 hrs anywhere in Kerala. Company has systems to educate the consumer’s
usage of cement and provide after sales services.

Malabar Cements Limited, a fully owned Government of Kerala undertaking, is the only
th
major integrated cement manufacturing unit in the state. The company was incorporated in 11
April 1984 at its walayar plant. The company has a paid up equity of Rs 26 crores and capital
outlay of Rs 68 crors. It is rated to produce 4.2 lakh tons of cement per annum at its walayar
plant. As part of expansion program, it has commissioned a 2.0 lakh tons clinker gridding unit at
cherthala of MCL is 6.2 lakh tones. This ISO 9001:2000 company meets about 10 % of total
cement consumption in Kerala.



The customers

Malabar Cements Ltd marketing has always the customer centered, consumer satisfaction
wowed in product quality and after sales services. Not only that super quality is build in to the
produce through very sophisticated computerized process control system the dedicated and
dynamic quality control system the this superior product features are consistently maintained.

Objectives of MCL

1. To manufacture and supply quality cement at reasonable prices by making an optimum
profit
2. To ensure fair dealings with customers
3. To provide employment opportunity for the public

Quality policy

The employee of MCL commits to comply with all requirements to continually improve
the effectiveness of the quality management system and arrives.

1. To identify various groups of customer served by him
2. To understand their respective needs and desires either stated or implied
3. To ensure best possible quality in products and services
4. To meet and exceed their expectations

Credentials

Company could win several awards in the field of energy conservation, pollution control
and safety. The company has received the following awards

1. State award for the best performance in energy conservation 1995 from the state
electricity inspectors
2. Second place among large scale industries in making substantial and sustained effort in
pollution control in 1996 from Kerala pollution control board

Competitors



The main competitor of Malabar cements are sankar, corometal, L&T, ACC, RAASI,
Chettinad and others

MCL ORGANISATIONAL STRUCTURE

chairman

MD

GM

GM(E) GM(M) GM(TS)
CE(M)

CC

FM MM OM HR PDN PRCSE



MD-Managing Director

GM-General Manager

GM (E)-General Manager (ENG)

CE (M)-Chief engineer (MECH)

GM (M)-General Manager (Mins)

CC-Chief chemist

GM (TS)-General Manager (tech service)

FM-finance

MM-marketing

OM-operations

HR-human resource

PDN-production

PURCSE-purchase

Product profile

Malabar Cements is simony for super quality, claim thousands of their customers spread
throughout the state. In Malabar cements, product improvement is not a onetime strategy for
boosting sales on the product life cycle theory. It is quest of excellence. Perfecting the product
quality is everybody’s concern here. Our distinction begins with scientifically selecting the best
raw material for clinker. Stringent quality control is exercised in relending raw materials,
clinkerisation. Clinker gridding, and finally into cement packaging.



Malabar super

Malabar super is fabulous in every sense: super in strength, wonderful in work ability,
incredible in aging, implausible in durability, and fantastic in strength gain. An AMAZING
performer!

Tests carried out by bureau of Indian standards have established unshakeable credentials
of Malabar super. Super strength accelerated setting time and fine finish. Malabar super is
superior in strength to ordinary ―43‖ grade cement. It attains the 28 days strength required as per
IS just in 7 days time. Not only that, the strength attained in 28 days time is about 50% more than
the IS specification. The amazing strength of Malabar super arises out of its unequalled particle
fineness, 33% more than the IS specification and consistency in composition, more possible by
computerized process control system

Product characteristics

Malabar super offers better setting characteristics prolonged initial set and short final set
timings; providing more time for concrete mixing and placing, and less time for keeping the
concrete undistributed, free from movement and vibration, the property engineers and mansions
relish to have, in the cement they work with. Malabar super is finer when compared to normal
OPC, meaning rate of hydrogen and rate of strength gain is best

Benefits

Malabar super superiors setting properties, quick early strength gain, and higher finished
strength, gives at least 10% cement reduction in volume batching. By designing the mix,
reduction in cement requirement can go beyond 30% under good production and placement
practices. Malabar super is therefore economical

Malabar classic

Malabar classic offers better setting properties delayed initial set and early final set offering
better working time and reduced observation time, it is a superior class of its own among
cements



The structures achieve excellent dimensional stability with the heat resistant properties of
Malabar classic. It also reduces heat generation during hydration, making it a better workable
finished product absolutely reliable. The extra fineness welded into it allows Malabar classic
better coverage and finish in wall and roof plastering. This in turn, reduces paint consumption.

Product characteristics

The cement most suited to the south Indian climate proudly invented by us, through in house
studies and continues researchers in product improvement a way of life in MCL. An outcome of
this is Malabar classic. With scientifically proportioned sand and coarse aggregates, the most
cohesive mix possible with Malabar classic, will avoid the otherwise in the rent drawbacks of
concrete segregation and bleeding. The fly ash interweaved with Malabar classic makes it
sulphate resistant; a basic property, that cement should posses, for constructions and structures in
sea co and in alkaline waters. Malabar classic is best suited to resist alkali aggregate reaction, a
defect eventually resulting in excessive cracks and subsequent unserviceability of structures.

Benefits

The extra fineness welded in to it allows Malabar classic better coverage and finish in wall and
roof plastering. This in turn reduces the paint consumption, with its superior strength properties,
it is economical to use Malabar classic. 10% cement is normally guaranteed. Using a design mix
gain can go up to 30%

Malabar aiswarya

Malabar aiswarya brings prosperity in many ways. It increases the life of your structures by
safeguarding against sulphate attack. Aiswarya offers high quality at reduced price.

Aiswarya generates less heat of hydration, reduces the formation of getting cracks. This product
is best studied for constructions in soil and water with excess alkali metals, sulphates, alumina,
iron and acidic waters. To obtain the best quality cement, only glassy granulated slag is used for
product manufacturing. With very low magnesium oxide content this provides shape stability for
concrete structures.

Major players


The major players in the current sector are:

Ultratech cement
Century cement
Madras cement
ACC
Gujarat Abuja cement limited
Grasim industries
India cements limited
Jaiprakash associates
JK cements
Lafarge
Heidelberg cement

Vision

MCL industrial units have a capital outlay of Rs. 69 cores. The factory is rated to produce Rs 4.2
lakh tones cement per annum (24000 bags per day). The company meets about 10% of the total
cement consumption of Kerala and the company will reach near 13% of total consumption by
2010 and the company will achieve self sufficient its own power supply.

Mission

“Achieving prosperity through quality”

In a society where there is steep erosion of value and at time when relationship are
getting strain day by day. MCL a well run public sector company of the state, committed to the
society nurtures a corporate theme ―of building values strengthening relationship‖ which also
relevant to its products.

Ownership pattern

MCL is fully owned by the government of Kerala. Initially there were some loans taken
by the company, which is fully repaid now. Government share capital currently is 2500 87 lakhs.



At the end of 2005-06 the company has working capital of Rs 107 lakhs from different banks of
the company.

Human resource department

According to jucins ―human resource refers to a whole consisting of interrelated,
interdependent and interacting, psychological, sociological, and ethical components‖. Thus
human resource represents the quantitative and qualitative measurement of workforce required in
an organization.

(Department structure)

Managers (P&A)

1) Supervision and guidance to the officers in P&A department on respective matters
2) Formulation of policies and strategies in connection with all matters related to P&A

All matters related to personnel, industrial relations, labor welfare, and advertisement, health,
legal, security, and statutory regulations related to P&A department of the including plant,
mines, CGU and other officers

Malabar cements ltd has a large but dedicated and skilled workforce. The personnel/human
resource department is the big at the same time important department of the company. The
department is headed by MPA (manager personnel & administration).

The department performs the following functions

Recruitment
Training & development
Wage & salary administration
Promotion
Performance appraisal
Canteen administration
Welfare activities
Safety activities



In MCL human resource are classified into two main categories. They are

1) Management staff
Executives
Officers
2) Management staff
3) Staff workers

The company has an efficient and enthusiastic human resource team. This is the only public
sector company in Kerala where there have been no strikes or lockouts since its inception.
The fact remains a testimonial to the brilliance of the human resource department.

Procurement of human resource

Recruitment

Recruitment is the process of searching for employees and stimulating and encouraging
them to apply for jobs in an organization. In MCL non management staff and management
staffs are recruited through advertisements, internet and employee exchanges.

Selection

Selection is a process of choosing the most suitable person out of all applicants. The purpose
of selection is to pick up the right person for right job. No organization can achieve its goals
without selecting the right people.

Selection process

Test

Interview

Physical examination



Employment

Final approval

In MCL tests are conducted only when the number of applicants is proportionately more.
Medical examination is compulsory before induction

Interview

The interview board consists of

Government nominee
Subject expert
Personnel & administrative manager
Managing director
Only after the acknowledgement of all the interview board members the applicant gets
selected

Placement

Once the candidate is employed there is probation period of 1 year during which his/her
performance is assessed quarterly. Based on the performance employee is made permanent.

Training and development

According to ISO it is mandatory that every employee should be trained for a stipulated
man hours. Training is two types

Internal training
It is a house training which is given by MCL to its employees and it
broadly covers safety aspects, operations, emergency institutions etc.
External training



In external training the employee is trained by an outside institution
regarding new technology which is to be introduced in the plant. It is
given when it is found necessary.

Performance appraisal and promotion

Both management and non management staffs are appraised for their performance and
promotions are given on the basis of their appraisal reports.

Working hours

Workers must work 8hrs/day. There are three shifts for the factory workers.

First shift -6am to 2 pm
Second shift -2 pm to 10 pm
Third shift -10 pm to 6 pm

The working time will be rotated for each worker, so that every worker should work for all the
three shifts. There are 25 working days in a month. Working time for office staff is 8.30 am to 5
pm.

Compensation

MCL pays compensation to the employees in exchange for their valuable contribution to
the organization. All permanent employees of MCL should be included in group personnel
accidental insurance. An employee will get compensation either due to

Death inside the company
Death during his journey to the company

A welfare fund board is functioning in MCL in which every employee should be a member. The
fund provides a certain amount to the diseased person’s family Rs 2500 for the funeral expense
of the employee and a lump sum amount to his family and also job to his dependents.

Wage payment

Employees of MCL are categorized into two namely



Managerial
Non managerial

For non managers employee wages are decided by the central wage board. During every 5 years
it will be revised. For managerial employees the pay scale relates to the Kerala government scale
of payments.

Incentives

Incentives are decided by the recognized union and company. MCL follows production
cum profit linked incentives to regular employees.

Leave

For every 20 days of work the employee will get 1 day leave
12 sick leave
12 casual leave
Every 4 th Saturday of the month will be holiday for to the office staffs

Bonus

Every person is eligible for minimum bonus as per the payment of bonus act. Bonus
percentage will be demand at government level.

Employee grievances

MCL employees have every freedom approach the welfare officer to redress their
grievances. On close talk with the employees there it was found that the employees had opinion
about the management and they even said that the management never hesitate in giving away
their duties and rights, and even looked into fulfilling better welfare schemes.

Personal records

A personal record of all the employees is kept in MCL from their joining date up to their
date of retirement. Separate files of each employee are kept in MCL.



Fringe benefits

Workers enjoy ESI hospital facility. The company has a dispensary in the employee
township.
Workers are given 2 pairs of shoes and uniforms every year. Rain coats are provided

Recreation facility

MCL also providers recreational facilities to its employees such a club facilities, sports
and cultural activities.

Trade union

There are three registered trade unions in MCLINTUC (Indian national trade union), CITU
(central Indian trade union) and STU. The representatives of these trade unions will have the
membership in committee, safety committee, canteen committee etc

Labor welfare activities

Statutory welfare measures

Welfare activities taken by MCL for its laborers are

Facilities for storing and drying cloth
Facilities for sitting rest room
First aid appliances
Canteen to its workers at subsidized rate

Voluntary welfare measures

Purified drinking water
Health centre
Safety measures
Medical centre
Rest rooms are provided to the labors



Library
Recreation club
Cooperative society
Ambulance
Accommodation facilities
Annual gifts

Existence of welfare committees

Various welfare committees exist in the MCL of which the representatives of the recognized
unions will be a member. The various welfare committees are

Works committee
Canteen committee
Safety committee
Labor welfare committee

Welfare facilities for the mine employees

Educational facility to the children of employees
Financial help for the construction of house
Financial advisers are given to the employees regarding obtaining of loan
Canteen facility to the mine employees

Allowances

The various allowances are

Dust allowances
Union allowances
Medical allowances



Industrial relations

A good employee employer relation is important to the smooth functioning of an
organization. Industrial relations mean not only the complex relation between the trade union and
the management but also refer to the general way of relationships normally obtaining between
employees and employers.



CHAPTER: 4
LITERATURE REVIEW



A study on ―Employees perspectives regarding performance appraisal and reward philosophy in
insurance sector in Haryana‖ was conducted by ―Neeraja & Aman‖ (2005). This paper talks
about the employee’s perspectives regarding performance appraisal and reward philosophy and
the effect of demographic variables on it. The sample is selected on the basis of convenient
sampling method. This study based on the hypothesis that demographic variables and
employee’s opinion are independent of each other. This paper analysis the data by using factor
analysis, reliability test and chi-square test. The basic premise of the paper is concentrated on the
fact that performance pay jobs that reward productive characteristics of workers have a more
competitive pay structure than other factors. They analyzed that compensation in performance
pay jobs is more closely tied to both measured and unmeasured productive characteristics of
workers.

The study on ―merit based performance appraisal & productivity: do employees perceive the
connection‖ was conducted by ―Gerald T Gabris & Kenneth Mitchell‖ (1985). The article reports
the findings of a study of the Biloxi, Mississippi, merit bonus pay plan. It compares employees at
different levels in the organizational hierarchy with regard to their perceptions of whether the
new system has increased their individual or group productivity. Findings indicate that employee
reaction to the system varies. Proximity to the system and how its fairness and effectiveness.
Top-level managers, who relate to the system primarily from a policy standpoint, were the
biggest supporters of the merit pay plan. Middle managers, who bore the brunt of
implementation, were the system's most severe critics. First-line rank and file employees, the
recipients of the bonuses, were mixed in their reactions. Thus it appears that whether employees
perceive merit pay as a direct stimulus to their productivity is not a black and white issue. Many
apparently do not perceive a connection between merit pay and productivity.

The study on ―Perceived Fairness of Performance Appraisals in the Federal Government‖ was
conducted by ―Seok Eun Kim & Dian Rubianty‖ (2000). Studies suggest that the success of the
performance appraisal system may depend on how to manage employees’ perceptions of its
fairness, not the system per se. using the 2005 Merit Principles Survey, this study tests the
efficacy of perceived fairness of performance appraisals as a key determinant of intrinsic
motivation. The purpose of this article is twofold: (a) to identify factors of perceived fairness of
performance appraisal and (b) to assess the differential impact of each factor of perceived



fairness of performance appraisal on intrinsic motivation. An exploratory factor analysis
generated three separate but interrelated notions of perceived fairness variables: distributive,
procedural, and interactional fairness. Using these three perceived fairness variables, a
hierarchical regression analysis was performed. The results showed that although all three
perceived fairness variables positively associated with intrinsic motivation, they accounted for
only 5% of variance in prediction. When control variables were added, only perceived
procedural fairness appeared to positively affect intrinsic motivation. The results raise the
question of the role of performance appraisals as a motivational tool for performance
improvement. Nonetheless, managing perceived procedural fairness may still be a useful lever
for enhancing intrinsic motivation.

The study on ―Employee perceptions of performance appraisals: a comparative study on Indian
banks‖ was conducted by ―Shrivastava a & Purang P‖ (2011). Performance appraisal is the most
critical human resource practice and an indispensable part of every organization; however, the
practice continues to generate dissatisfaction among employees and is often viewed as unfair and
ineffective. Indian banking sector is one of the biggest and fastest growing financial service
sectors. The post-liberalization era has witnessed significant changes in the structure and
operations of banks operating in India. Arrival of new private and foreign banks has given a
cause to public sector banks to be more competitive, effective and innovative in their approach.
Past researches have compared public and private sector banks and have indicated that new
private sector banks are outscoring public sector banks in terms of technical and economic
efficiency parameters. However, no study could be found that compared public and private banks
in India on fairness perceptions of performance appraisal system. Therefore, this research studied
the differences between public and private sector banks with respect to perception of fairness of
the performance appraisal system and performance appraisal satisfaction. Perception of fairness
of the performance appraisal system has been studied through nine factors. The study used
independent samples t-test and qualitative analysis to study the mean differences between the
two banks. Results indicated that private sector bank employees perceive greater fairness and
satisfaction with their performance appraisal system as compared to public sector bank
employees



The study on ―Employees’ Perceptions about the Effectiveness of Performance Appraisals: The
Case of Pakistan‖ was conducted by ―Muhammad Kashif Saeed and Nosheen Shahbaz‖ (2011).
The current research investigates employees’ perceptions about the outcomes of performance
appraisal and aims to identify the factors which can harm the successful implementation of
performance appraisal. The sample of 120 employees at managerial level was selected on the
basis of simple random sampling technique from the plastic furniture manufacturing
organizations located in the province of Punjab in Pakistan. The findings suggest that the
employees are aware of the useful outcomes of the performance appraisal but they lack
knowledge in implementing an effective performance appraisal system. A significant difference
in perceptions regarding the outcomes of performance appraisal was found among the
respondents. The study will help policy makers in designing effective performance management
systems for their organizations by minimizing the perceived risks and detriments to effective
implementation of performance management systems.

The study on ―Multi-Source Performance Appraisals: Employee Perceptions of Fairness‖ was
conducted by ―Linda deLeon and Ann J. Ewen‖ (1997). Performance appraisal is crucial to
effective human resource management, but there is evidence that current processes are not very
effective This study reports on experience with a relatively new appraisal system in the
operations office of a large federal agency The method, multi-source assessment (MSA, or "360°
Feedback") utilizes ratings from peers, direct-reports, the supervisor, and the employee
Comparison of survey results from before and after implementation of MSA found significant
improvement in employee perceptions of the fairness and effectiveness of appraisals, particularly
among protected classes The implications of these findings and suggestions for future research
are discussed.

The study on ―An ―expert witness‖ perspective on performance appraisal in universities and
colleges‖ was conducted by ―John Simmons‖ (2002). Effective performance management of
professionals in knowledge based organizations has particular significance, but is an under
researched area in the literature. Universities and colleges are knowledge based organizations
especially dependent on the expertise, commitment and innovation of their staff. The paper
analyses performance appraisal systems in universities and colleges with particular emphasis on
staff perspectives and expectations. A brief history of performance appraisal in HE and FE is
provided and related to issues of power, accountability and control. Academic staff from two



business schools, together with a national sample of those teaching performance appraisals
within CIPD professional programmers’, was constituted as an ―expert witness‖ group and their
views sought on performance appraisal in their institutions. These data are used to develop a
philosophy of performance appraisal for academic institutions, to assess the acceptability of
particular performance criteria to academic staff, and to highlight the importance of staff
involvement in appraisal system design.

The study on ―Performance appraisal fairness perceptions in supervisory and non- supervisory
employees: a case of civil servants in district dera Ismail khan, Pakistan‖ was conducted by
―Malik Ikramullah‖ (2000). Research suggests that employees’ role and level in organization
influence reactions towards performance appraisal system (PAS). The present study investigates
fairness perceptions of PAS among supervisory (appraisers/appraises) and non-supervisory
employees (appraises) in the civil service of Pakistan. Data was collected from civil servants
working in the two departments in far flung district Dera Ismail Khan, Khyber Pakhtunkhwa. T-
test of significance was performed to test the hypothesis in of the study. The results revealed that
there was significant difference of fairness perceptions among supervisory and non supervisory
employees working in the two public sector departments. And supervisory employees perceive
the system fairer as compared to non-supervisory employees. In the article we discuss literature
of organizational justice and fairness of PASs. Subsequently, we discuss methods, limitations
and directions for future research in the PAS of the civil service.
The study on ―employee perceptions of performance appraisal fairness in two organizations‖ was
conducted by ―Evans, Elaine M.; McShane, Steven L‖ (1988). Studied the characteristics
comprising the appraisal process from the employees' perspective and how those characteristics
related to employee perceptions of performance appraisal fairness. Based upon factor analysis of
survey data from a total of 397 management and professional employees in 2 large Canadian
organizations, 6 characteristics were found to comprise the appraisal process: appraiser's
knowledge of the employee's job and performance, opportunity for employee participation,
establishment of specific and relevant job goals, discussion of employee development goals,
discussion of company and department goals, and feedback on results. The relative importance
of these characteristics to overall appraisal fairness ratings was different in the 2 companies. The
favorableness of the most recent appraisal was associated with the employee's belief in the



overall fairness of the appraisal process in both companies. (French abstract) (PsycINFO
Database Record (c) 2010 APA, all rights reserved).

The study on ―Relationship between Perceived Fairness in Performance Appraisal and Ocb;
Mediating Role of Organizational Commitment ―was conducted by ―Ishfaq Ahmed1,
Muhammad Ramzan2, Saher Khushi Mohammad3, Talat Islam3‖ (2011). Performance appraisal
is a key element of management practices. Performance appraisal plays an important role for
continuous improvement. Lot of researchers has worked on performance appraisal from both
employee and organizations point of view. This study is aimed to find out the relationship
between perceived fairness in performance appraisal and organizational citizenship behavior
considering the mediation effect of organizational commitment. For the study 318 employees of
banking sector were randomly selected. Questionnaire was used for data collection. Findings of
the study indicate that there is significant and positive relationship between perceived fairness in
performance appraisal and OCB while organizational commitment mediates this relationship.

The study on ―perceived fairness of and satisfaction with employee performance appraisal‖ was
conducted by ―marie burns walsh‖ (2003). Employee performance appraisal is one of the most
commonly used management tools in the United States. Over 90 percent of large organizations
including 75 percent of state employment systems require some type of annual performance
appraisal (seldon, ingraham & jacobson, 2001). Performance appraisal is one of the most widely
researched areas in industrial/organizational psychology (murphy & Cleveland, 1993). However,
the traditional research agenda has done little to improve the usefulness of performance appraisal
as a managerial tool. Recent research has moved away from studies of rater accuracy and
psychometric measures to themes of employee reactions towards performance appraisal as
indicators of system satisfaction and efficacy. Employee perception of fairness of performance
appraisal has been studied as a significant factor in employee acceptance and satisfaction of
performance appraisal. This study investigated employee reactions to fairness of and satisfaction
with an existing performance appraisal system utilizing a hypothesized four-factor model
(Greenberg, 1993) of organizational justice as the theoretical basis. The underlying hypothesis
was that the conceptualized four-factor model, which differentiated between the constructs of
interactional and procedural justice, would best represent the underlying factor structure of the



data. Data were obtained via a survey questionnaire from 440 participants from two
organizations that were part of a large public employment system. Ten multi-item scales x
representing four factors of organizational justice and performance appraisal fairness and three
scales indicating satisfaction were included. The findings of the study indicated that respondents
perceived the performance appraisal system was to be fair as indicated by their agreement with 9
of the 10 scales used to measure reactions to fairness. The respondents also indicated their
relative satisfaction with their most recent performance appraisal rating and with their
supervisor. Less satisfaction (although not dissatisfaction) was indicated with the performance
appraisal system overall. The conceptualized four-factor model was not found to represent the
underlying factor structure substantially better than alternative plausible three-factor models. the
best fit three–factor model, however, provided some support for the differentiation between
procedural and interactional organizational justice factors, which is a distinction that has been
debated in the organizational justice literature.
The study on ―employees’ perception of the problems and practices of employee performance
evaluation: a case study of awash international bank (aib)‖ was conducted by ―zelalem bayisa‖
(2000). This project is designed to assess the perception of employees towards the practices and
problems of performance evaluation in awash international bank to this end; the study has the
objective to assess the perception of employees towards the problems and practices of
performance evaluation. on the basis of data collected through questionnaires and interview
which are founded on the theoretical assessment of related literatures; i have tried to unearth
some of the real problems of appraisals based on the opinion of the rates in that particular
organization. The questionnaire was distributed to 80 employees of the bank working in four
branches: bole, head office, stadium and art kilo branches in which only 65 were fully completed
and returned. The questionnaire was distributed to the employees on the basis of convenience
sampling based on the willingness and cooperation of the respondents. The data collected were
analyzed using spss software. On the basis of the data obtained from the respondents, the study
identified the lack of transparency both during the evaluation and after evaluation as its major
findings. Almost all the participants vented out that they are not allowed to see the result of their
ratings. As a result, they do not have a confidence on the appropriateness of the evaluation to
make crucial human resource decisions. The lack of clarity of performance evaluation criteria
and the subjectivity involved in the evaluation which resulted in role ambiguity and frustration



viii among the employees were identified to be the other problem of performance appraisal in
awash international bank (aib). On the other hand, the subjective nature of the standards against
which the performance of employees are judged lead raters to manipulate the evaluation for their
own personal agendas. The universal purpose of performance evolutions across the board were
also common problems in the system. The performance evaluation forms do not reflect the
performance of the employees as they can be irrelevant for some jobs. In this regard, it was
identified that raters evaluate the performance of employees on the basis of recent behaviors.
Based on the findings of the study.

The study on ―The Perception of the Employees toward the Outcomes and Detriments of
Performance Appraisal System‖ was conducted by ―Mert, Ibrahim Sani‖ (2011). Although
performance appraisal is one of the most important functions of human resources management, it
cannot be said that the organizations have obtained the full benefit from performance appraisal
system as they expected. Lack of enough investigation about employees’ perception toward the
effectiveness of the performance appraisal system can be mentioned as one of the reasons. The
perception of employees toward the effectiveness of performance appraisal system helps human
resources employees and researchers to obtain the benefit expected from performance appraisal
system. Therefore, the employees’ perception of the outcomes and detriments of an effective
performance appraisal system were investigated in this research. According to the findings of the
study, the perceptions of employees toward the performance appraisal system have an effect on
their thoughts of their own appraisals. Besides, it was determined that women perceive the
performance appraisal system as more effective than men and the employees who work as a
manager have a more sensitive perception toward the detriments of performance appraisal
systems than who do not. It is thought that, the findings of this research may be beneficial to both
the researchers who study performance appraisal and human resources employees to evaluate the
effectiveness of performance appraisal systems.

The study on ―Boswell, Wendy R. and Boudreau, John W. , "Employee Attitudinal Effects of
Perceived Performance Appraisal Use‖" was conducted by Boswell, Wendy R. and Boudreau,
John W. (1997). This research investigates how employee perceptions of performance appraisal
use relate to employee satisfaction with the performance appraisal and with the appraiser—the
employees’ immediate supervisor. Employee perceptions that appraisals were used for



development positively associated with both attitudinal variables, after controlling for justice
perceptions, performance, and demographics. Perceptions of PA use for evaluation did not show
a significant relationship with either employee attitude. Implications of these findings are
discussed.

The study on ―Managers' theories of subordinates: A cross-cultural examination of manager
perceptions of motivation and appraisal of performance‖ was conducted by ―Iyengar, Sheena S.,
De Voe, Sanford E.‖ (2004). A cross-cultural study involving managers and employees of a
global organization in North America, Asia and Latin America researched on managers
perception of their employee's motivation and which kind of motivation according to them
related better with performance appraisal of the employee. While North American managers
perceived their employees to be extrinsically motivated and considered intrinsic motivation to be
better related with performance appraisal, Latin American managers perceived their employees
to be intrinsically motivated and considered extrinsic motivation to be better related with
performance appraisal. Asian managers perceived their employees to be both extrinsically and
intrinsically motivated and both kinds of motivations related with performance appraisal. In
contrast, the employees reported to be more intrinsically motivation.

The study on ―Linking strategic HRM, performance management and organizational
effectiveness: perceptions of managers in Singapore‖ was conducted by ―Pauline &alan
Nankervis‖ (2011). Strategic human resource management (SHRM) theory is predicated on the
assumption that effective human resource management (HRM) processes have the capacity to
contribute significantly to organizational effectiveness, expressed in terms of productivity,
flexibility, effectiveness, efficiency, return on investment, competitiveness, and ultimately,
profitability. Earlier research studies have explored the overall value-adding potential of HRM
processes as a whole. Few have focused on the links between strategic HRM, performance
management systems and organizational effectiveness, and even fewer have examined these
relationships in Southeast Asia. This paper addresses this gap in the literature by examining the
perceptions of a split sample of senior managers in Singapore. It reveals an interesting gap
between their rhetoric and the realities of their performance management systems, and suggests
future research directions.



Theoretical background

Performance appraisal system is one of the oldest and most universal practices of management. It
is widely used technique to evaluate the people. Formal appraisal of an individual’s performance
began in china in 221-265 AD. Later on in 1883, the New York City civil service in USA
introduced formal appraisal program shortly before the World War 1. US Army adopted the man
to man rating system evaluating military personal. In India the formal appraisal system started
after World War 2 nd. In the early fifties performance appraisal technique was called merit rating
and to use for technical, managerial, and professional personal.

Meaning

It is the process of evaluating the performance and qualification of employee in terms of the
requirements of the job for which he is employed, for the purpose of administration, including
placement, selection for promotion providing financial rewards and other actions. Performance
appraisal is the process of evaluating personnel job performance and his potential for
development. Appraisal is the valuation of work, quality or merit. In the organization context,
performance appraisal is an evaluation of personnel by superiors or other who are familiar.

Definitions

According to Scot, clothier and spreigal.‖Performance appraisal is a process of evaluating an
employee’s performance of a job in terms of its requirements.‖

Edwin B Flippo defines, performance appraisal system is the systematic, periodic and so far as
humanly possible, an impartial training of an employee’s excellence in matters pretaing to his
potentialities for a job.

Features of performance appraisal

1. Performance appraisal is a continuous process which consist of a series of steps
2. It is the systematic examination of an employee’s strength and weakness in terms of the
job
3. It is arranged periodically according to a definite plan



4. The main purpose of performance appraisal is to secure information necessary for making
objective and correct decision on employees, it is an impartial rating of an employee’s
excellence

Objectives of performance appraisal system

1. Salary increases

Normally salary increases of an employee depend on how he is performing his work. There is a
direct contact between the employee and the one who makes decision about salary increase. This
may disclose how well an employee is performing and how much he should be compensated.

2. Promotion

Most of the organizations often use a combination of merit and seniority for promotion.
Performance appraisal discloses how an employee is working in his present job and what his
strong and weak points are. In the light of these it can be decided whether he can be promoted to
the next year

3. Training and development

Performance appraisal systems try to identify the strength and weakness of employees on his
present job. This information can be used for devising training and development programs
appropriate for overcoming weakness of employees.

4. Feedback

Performance appraisal provides feedback to employees about their performance. It tells them
where they stand. A person can work better when he knows how he is working, how his efforts
are contributing to the achievement of the organizational objectives.

5. Pressure on employees

Performance appraisal puts a sort of pressure on employees for better performance. If the
employees are conscious that they are being appraised in respect of certain factors and their
future largely depends on such appraisal, they tend to have positive and acceptable behavior in
this respect. Thus, appraisal can work automatically are control device.


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