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  1. 1. Major Project Report 2012CHAPTER: 1INTRODUCTIONMESCE Department of Management Science Page 1
  2. 2. Major Project Report 20121.1 Introduction to the studyThe study was undertaken to know the employee’s perception regarding the effectiveness ofperformance appraisal system at Malabar cements ltd. It consists of the systematic evaluation ofemployees 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 theenvironment that involves organizing and interpretation as stimuli in a psychological experience.The performance evaluation (performance appraisal) is a key factor in order to develop anorganization effectively and efficiently. Individual performance appraisal is very beneficial forthe growth dynamics of the organization as a whole. Performance appraisal is ―the process ofevaluating how well employees perform their jobs when compared to a set of standards, and thencommunicating 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 nationalhighways, the cement industry has witnessed tremendous growth. Production capacity has goneup and top cement companies of the world are to enter the Indian market, there by sparking off aspate of mergers and acquisitions. Indian cement industry is currently ranked second in the worldMalabar Cements Ltd. Is a flagship company of the Government of Kerala. The company wasincorporated on August 11, 1978 and commenced production on April 24, 1984. This industrialunit has a capital outlay of Rs.680 million. The factory is rated to produce 4.2 lakh tones cementsper annum. The company meets about 10 % of total cement consumption in Kerala. Thecompany moves with a work force of over 1000 dedicated and highly skilled personnel. MalabarCements have the state of the art, dry process technology for manufacture of super qualitycement, quality much above the national standard.MESCE Department of Management Science Page 2
  3. 3. Major Project Report 20121.2 Need for the studyThe study was conducted at Malabar cements Ltd, to understand the employee’s perceptionregarding the effectiveness of performance appraisal system. The purpose of this study is to findout how far the employees are perceived with the existing performance appraisal provided by theMalabar cements and also tries to find out if the performance appraisal system provided issufficient enough to improve their performance level.1.3 Objectives of the studyPrimary 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 system1.4 Problem statementFor any organization, employees are the main party to receive more concentration so that thebusiness organization has a successful future. Here the management of Malabar Cementssuspects that there lies some sort of defects in their performance appraisal methods followed bythe organization.MESCE Department of Management Science Page 3
  4. 4. Major Project Report 2012CHAPTER: 2INDUSTRY PROFILEMESCE Department of Management Science Page 4
  5. 5. Major Project Report 20121. INTRODUCTIONThe cement industry is one of the main beneficiaries of the infrastructure boom. With robustdemand and adequate supply, the industry has bright future. The Indian Cement Industry withtotal capacity of 165 million tones is the second largest after China. Cement industry isdominated by 20 companies who account for over 70% of the market. Individually no companyaccounts for over 12% of the market. The major players like L&T and ACC have been quietsuccessful in narrowing the gap between demand and supply. Private housing sector is the majorconsumer of cement (53%) followed by the government infrastructure sector. Similarly northernand southern region consume around 20%-30% cement while the central and western region areconsuming only 18%-16%.India is the 2nd largest cement producer in world after china .Rightfrom laying concrete bricks of economy to waving fly over’s cement industry has shown andshows a great future. The overall outlook for the industry shows significant growth on the backof robust demand from housing construction, Phase-II of NHDP (National HighwayDevelopment Project) and other infrastructure development projects. Domestic demand forcement has been increasing at a fast pace in India. Cement consumption in India is forecasted togrow by over 22% by 2009-10 from 2007- 08.Among the states, Maharashtra has the highestshare in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradeshis leading with 14.72% of total production followed by Rajasthan. Cement production grew atthe rate of 9.1 per cent during 2006-07 over the previous fiscals total production of 147.8 mt(million tons). Due to rising demand of cement the sales volume of cement companies are alsoincreasing & companies reporting higher production, higher sales and higher profits. The netprofit growth rate of cement firms was 85%. Cement industry has contributed around 8% to the economicdevelopment of India. Outsiders (foreign players) eyeing India as a major market to invest in theform of either merger or FDI (Foreign Direct Investment). Cement industry has a long way to goas Indian economy is poised to grow because of being on verge of development. The companycontinues to emphasize on reduction of costs through enhanced productivity, reduction in energycosts and logistics expenses. The cement sector is expected to witness growth in line with theeconomic growth because of the strong co-relation with GDP. Future drivers of cement demandgrowth in India would be the road and housing projects. As per the Working Group report onCement Industry for the formulation of the 11th Plan, the cement demand is likely to grow atMESCE Department of Management Science Page 5
  6. 6. Major Project Report 201211.5 per cent per annum during the 11th Plan and cement production and capacity by the end ofthe 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, withcapacity utilization of 90 per cent. Despite the growth of Indian cement industry India lagsbehind 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 isconsolidation of the industry. It has just begun and we will see more consolidation in the comingyears. Other budget measures such as cut in import duty from 12.5 per cent to nil etc. are allintended to cut costs and boost availability of cement. Sadly the adverse effects of globalslowdown have not speared this industry too. Demand is sluggish, the government is keeping aneagle eye on prizes, domestic coal and pet coke, prizes have increased sharply and utilizationsrates are down. The numbers coming out are a reflection of grim times. ACC the country’s largest cement company that’s controlled bySwiss 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 cementindustry has taken some steps. Companies are focusing on cost of transportation. One of thestrategy is to decrease dependence on road & opt for sea logistics as that can cut transportationcost 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 bemore customer centric to generate better revenue. India should push for stricter regulations ofmarket place as to control the prices of big companies and prevent them from forming cartels andexchanging information. To fight with the high inflation, government wants to import morecement from Pakistan .However cement prizes are not very much high as other items but stillthey are increasing. And the reason of high prize is surging cost of raw material andtransportation cost. Apart from this government also discussed with cement industry notto have increase in prizes and keep consumer interest in mind. Now the question arise in front ofthe government is whether the demand by the government is possible to increase throughexpenditure on infrastructure or not according to the current state of economy when so manycrises are going on or how the government allocation of US$ 3.23 billion for the NationalHighway Development, Project will keep the demand for cement alive? And to what extent theprizes of cement should be increase so that consumer can’t affect. Cement industry in India hasMESCE Department of Management Science Page 6
  7. 7. Major Project Report 2012also 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 industryimmensely to conserve energy and fuel and to save materials substantially. Indian cementindustry has also acquired technical capability to produce different types of cement like OrdinaryPortland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement(PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting PortlandCement, White Cement etc. Some of the major clusters of cement industry in India are: Satna(Madhya Pradesh), Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (AndhraPradesh), Nalgonda (Andhra Pradesh), Bilaspur (Chattisgarh), and Chandoria (Rajasthan).2. CURRENT SCENARIOThe Indian cement industry is the second largest producer of quality cement, which meets globalstandards. The cement industry comprises 130 large cement plants and more than 300 minicement plants. The industrys capacity at the end of the year reached 188.97 million tons whichwas 166.73 million tons at the end of the year 2006-07. Cement production during April toMarch 2007-08 was 168.31 million tons as compared to 155.66 million tons during the sameperiod 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 was3.65 million tons as compared to 5.89 during the same period. Cement industry in India iscurrently going through a consolidation phase. Some examples of consolidation in the Indiancement industry are: Gujarat Ambuja taking a stake of 14 per cent in ACC, and taking over DLFCements and Modi Cement; ACC taking over IDCOL; India Cement taking over Raasi Cementand Sri Vishnu Cement; and Grasims acquisition of the cement business of L&T, Indian Rayonscement division, and Sri Digvijay Cements. Foreign cement companies are also picking upstakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 percent of the promoters stake in Gujarat Ambuja Cements (GACL). Holcims acquisition has led tothe emergence of two major groups in the Indian cement industry, the Holcim-ACC-GujaratAmbuja Cements combine and the Aditya Birla group through Grasim Industries and UltratechCement. Lafarge, the French cement major has acquired the cement plants of Raymond andMESCE Department of Management Science Page 7
  8. 8. Major Project Report 2012Tisco. Italy based Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industriescement plant in Andhra Pradesh, and German cement company Heidelberg Cement has enteredinto an equal joint-venture agreement with S P Lohia Group controlled Indo- Rama Cement.3. PROCESS TECHNOLOGYWhile adding fresh capacities, the cement manufacturers are very conscious of the technologyused. In cement production, raw materials preparation involves primary and secondary crushingof the quarried material, drying the material (for use in the dry process) or undertaking a furtherraw grinding through either wet or dry processes, and blending the materials. Clinker productionis the most energy intensive step, accounting for about 80% of the energy used in cementProduction. 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; theseterms 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 fedinto the kiln in their dry state. In the wet process, the crushed and proportioned materials areground with water, mixed, and fed into the kiln in the form of slurry. Different types of cementthat 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 othermaterials. 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 18per cent of the total cement consumption. It is manufactured because it uses fly ash/burntclay/coal waste as the main ingredient.• White Cement:White cement is basically OPC - clinker using fuel oil (instead of coal) with iron oxide contentbelow 0.4 per cent to ensure whiteness. A special cooling technique is used in its production. It isused to enhance aesthetic value in tiles and flooring. White cement is much more expensive thangrey cement.• Portland Blast Furnace Slag Cement (PBFSC):MESCE Department of Management Science Page 8
  9. 9. Major Project Report 2012PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag and 5 per cent gypsum andaccounts for 10 per cent of the total cement consumed. It has a heat of hydration even lower thanPPC 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 thaton 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. PROCEDUREThe 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 minormaterials may be mined either on site or in nearby quarries. Another source of raw materials isindustrial by-products. The use of byproduct materials to replace natural raw materials is a keyelement in achieving sustainable development.Raw Material PreparationMining of limestone requires the use of drilling and blasting techniques. The blasting techniquesuse 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 diameterto small particles less than a few millimeters in diameter. Material is loaded at the blasting faceinto trucks for transportation to the crushing plant. Through a series of crushers and screens, thelimestone is reduced to a size less than 100 mm and stored until required. Depending on size, theminor materials (sand, shale, clay, and iron ore) may or may not be crushed before being storedin separate areas until required.Raw GrindingMESCE Department of Management Science Page 9
  10. 10. Major Project Report 2012In the wet process, each raw material is proportioned to meet a desired chemical composition andfed to a rotating ball mill with water. The raw materials are ground to a size where the majorityof the materials are less than 75 microns. Materials exiting the mill are called "slurry" and haveflow ability characteristics. This slurry is pumped to blending tanks and homogenized to insurethe chemical composition of the slurry is correct. Following the homogenization process, theslurry is stored in tanks until required. In the dry process, each raw material is proportioned tomeet 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 ofthe 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 thekiln feed is well homogenized and then stored in silos until required.PreprocessingWhether the process is wet or dry, the same chemical reactions take place. Basic chemicalreactions 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 resultsin 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 diameterand from 120.0 m to 165.0 m in length. The rotary kiln is made of steel and lined with specialrefractory materials to protect it from the high process temperatures. Process temperatures canreach as high as 1450oC during the clinker making process. In the dry process, kiln feed is fed toa preheated tower, which can be as high as 150.0 meters. Material from the preheated tower isdischarged to a rotary kiln with can have the same diameter as a wet process kiln but the lengthis much shorter at approximately 45.0 m. The preheated tower and rotary kiln are made of steeland 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 burningcoal, coke, oil, gas or waste fuels. Preheated towers can be equipped with firing as well. Therotary kiln discharges the red-hot clinker under the intense flame into a clinker cooler. Theclinker cooler recovers heat from the clinker and returns the heat to the preprocessing systemMESCE Department of Management Science Page 10
  11. 11. Major Project Report 2012thus reducing fuel consumption and improving energy efficiency. Clinker leaving the clinkercooler is at a temperature conducive to being handled on standard conveying equipment.Finish Grinding and DistributionThe black, nodular clinker is stored on site in silos or clinker domes until needed for cementproduction. Clinker, gypsum, and other process additions are ground together in ball mills toform the final cement products. Fineness of the final products, amount of gypsum added, and theamount of process additions added are all varied to develop a desired performance in each of thefinal cement products. Each cement product is stored in an individual bulk silo until needed bythe customer. Bulk cement can be distributed in bulk by truck, rail, or water depending on thecustomers needs. Cement can also be packaged with or without color addition and distributed bytruck or rail.5. DEMAND & SUPPLYThe demand drivers for the cement sector continue to be housing, infrastructure and commercialconstruction, etc. We expect the proportion of infrastructure in total demand to improve furtherin future, as the thrust on infrastructure development is on the rise. During April-November2007, cement demand grew by 10 per cent year on- year (y-o-y) propelled by the growthwitnessed in end user segments such as housing, infrastructure etc. CRISIL Research expectsdemand to remain strong and grow by over 12 per cent in the next 2 years. Cement demand isexpected to outstrip supply for the next year and a half as no major capacities are coming onstream, 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 intoTamil Nadu from the state in view of cut in sales tax. Any further increase in demand in theSouth India will benefit the cement industry here. Cement movement from Gujarat to Mumbai isalso coming down due to exports while cement movement from Orissa into Andhra has stoppedand, in fact, cement is flowing into Orissa as well. Earlier in 2006-07, the housing sector aloneconsumed 65 per cent of the total domestic consumption. With the launch of severalMESCE Department of Management Science Page 11
  12. 12. Major Project Report 2012infrastructure projects, the housing consumption may come down to 55 per cent as theinfrastructure and other sectors are expected to move up to 45 per cent from the present 35 percent. 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 tocross 15 million tons (11.5 million tons). We expect the demand here to go past the 17.5-millionmark 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 severalprivate and public infrastructure projects will also give tremendous boost to the cementconsumption in the state. Most importantly, irrigation projects, worth nearly Rs 1 lakh crore, willtrigger unprecedented demand for the next 5-7 years. Cement consumptions are as follows:6. DEMAND DRIVERSIndian cement demand skewed towards housingThe demand from the housing sector is ~53% of the total Indian cement demand. There are fearsof a slowdown in the demand from the housing sector due to a drop in real estate prices in thecountry. The worry is that builders may postpone construction of new buildings if the propertyprices were to correct.Infrastructure to give demand a big boostOur analysis shows that Infrastructure should be the biggest growth driver for cement demand inthe country. If we were to look only at order books of the top eight construction andmanufacturing equipment companies in India, we find that their combined order book hasvirtually doubled over the last two years from INR1,000bn (USD25bn) to INR1,950bn(USD48.75bn) for completion over the next 24-30 months.7. COSTOver the past five years, cost of cement production has grown at a CAGR of 8.4%. Also, theproducers have been able to pass on the hike in cost to consumers on the back of increaseddemand. Average realizations have increased from Rs. 1,880 per ton in FY 03 to Rs. 3,133 pertons in FY 07, at a CAGR of 13.6%, which has been reflected in higher profit margins of theMESCE Department of Management Science Page 12
  13. 13. Major Project Report 2012industry. 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 alsoincreasing; however, in the current market scenario, manufacturers have the flexibility to pass onthe increase in costs to end consumers. Let us have a look at the cost factors affecting the cementindustryCapacity Utilization:Since the industry operates on fixed cost, higher the capacity sold, the wider the cost distributedon the same base. But one should also keep in mind, that there have been instances whereindespite 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 criticalcost component in cement manufacturing (about 30% to total expenses). Most of the companiesresort to captive power plants in order to reduce power costs, as this source is cheaper and resultsin uninterrupted supply of power. Therefore, higher the captive power consumption of thecompany, the better it is for the company.Freight:Since cement is a bulk commodity, transporting is a costly affair (over 15%). Companies, whichhave plants located closer to the markets as well as to the source of raw materials have anadvantage over their peers, as this leads to lower freight costs. Also, plants located in coastalbelts find it much cheaper to transport cement by the sea route in order to cater to the coastalmarkets such as Mumbai and the states of Gujarat and Tamil Nadu. On account of sufficientreserves of raw materials such as limestone and gypsum, the raw material costs are generallylower than freight and power costs in the cement industry. Excise duties imposed by thegovernment and labor wages are among the other important cost components involved in themanufacturing of cement.Operating margins:The company should have a consistent record of outperforming its peers on the operationalperformance front i.e. it should have higher operating margins than its competitors in theindustry. Factors such as captive power plants, effective capacity utilization results in higherMESCE Department of Management Science Page 13
  14. 14. Major Project Report 2012operating margins and therefore these factors should be looked into. Since cement is a regionalplay on account of its high freight costs, the company should not have all its plants concentratedin one region. It should have a geographical spread so that adverse market conditions in oneregion can be mitigated by high growth in the other region8. Government PoliciesGovernment policies have affected the growth of cement plants in India in various stages. Thecontrol on cement for a long time and then partial decontrol and then total decontrol hascontributed to the gradual opening up of the market for cement producers. The stages of growthof 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 theDefense of India Rules and was brought under price and distribution controls which resulted insluggish 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 wasfixed for the units and the balance could be sold in the open market. This resulted in extensivemodernization and expansion drive, which can be seen from the increase in the installed capacityto 59MT in 1988-89 in comparison with the figure of a mere 27.9MT in 1980-81, an increase ofalmost 111%.Total Decontrol (1989)In the year 1989, total decontrol of the cement industry was announced. By decontrolling thecement 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 economicliberalization had peaked; ironically, however, the economy slipped into recession taking thecement industry down with it. For 1992-93, the industry remained stagnant with no addition toexisting capacity.Government ControlsThe prices that primarily control the price of cement are coal, power tariffs, railway, freight androyalty on limestone. Interestingly, all of these prices are controlled by governmentMESCE Department of Management Science Page 14
  15. 15. Major Project Report 20129. REQUIREMENTSCoalThe consumption of coal in a typically dry process system ranges from 20-25% of clinkerproduction. This means for per ton clinker produced 0.20-0.25 ton of coal is consumed. Thiscontributes 35-40% of the production cost. The cement industry consumes about 10mn tons ofcoal annually. Since coalfields like BCCL supply a poor quality of coal, NCL and CCL theindustry 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 calorificvalue (7,000-8,000 kcal/kg) with low ash content 6-7%. Lignite is also used as a fuel by blendingit with coal. However this process is not very common.ElectricityCement industry consumes about 5.5bn units of electricity annually while one ton of cementapproximately requires 120-130 units of electricity. Power tariffs vary according to the locationof the plant and on the production process. The state governments supply this input and henceplants in different states shall have different power tariffs. Another major hindrance to theindustry is severe power cuts. Most of the cement producing states like AP, MP experiencepower cuts to the tune of 25-30% every year causing substantial production loss.InfrastructureTo 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.LimestoneThis 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 isdetermined by the location of limestone mines. The major cash outflow takes place in way ofroyalty 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 largestshare -- 34%, Karnataka 13%, Gujarat 13%, M.P 8%, and Rajasthan 6.5%. The plants near thelimestone deposit pay less transportation cost than others.MESCE Department of Management Science Page 15
  16. 16. Major Project Report 2012TransportationCement is mostly packed in paper bags now. It is then transported either by rail or road. Roadtransportation beyond 200 kms is not economical therefore about 55% cement is being moved bythe railways. There is also the problem of inadequate availability of wagons especially onwestern railways and southeastern railways. Under this scenario, manufacturers are looking forsea routes, this being not only cheap but also reducing the losses in transit. Today, 70% of thecement movement worldwide is by sea compared to 1% in India. However, the scenario ischanging with most of the big players like L&T, ACC and Grasim having set up their bulkterminals.Infrastructure for FutureThe consumption of cement is determined by factors influencing the level of housing andindustrial construction, irrigation projects, and roads and laying of water supply and drainagepipes etc. The level and growth of GDP and its sectoral composition, capital formation,development expenditure, growth in population, level of urbanization, etc, in turn, determinethese factors. But the domestic demand for cement is mainly from the housing activities andinfrastructure development. The government paved the way for the entry of the private sector inroad projects. It has amended the National Highway Act to allow private toll collection andidentified projects, bridges, expressways and big passes for private construction. The budgetgave substantial incentives to private sector construction companies. Ongoing liberalization willlead to an increase in industrial activities and infrastructure development. So it is hoped thatIndian cement industry shall boom again in near future.Incentives in StatesMost state governments, in order to attract investments in their respective states, offer fiscalincentives in the form of sales tax exemptions/deferrals. In some states, this applies only tointrastate sales, like Madhya Pradesh and Rajasthan. States like Haryana offer a freeze on powertariff for 5 years, while Gujarat offers exemption from electric duty.Installed CapacityIndia is the world’s second largest cement producing country after China. The industry ischaracterized by a high degree of fragmentation that has created intense competitive pressure onMESCE Department of Management Science Page 16
  17. 17. Major Project Report 2012price realizations. Spread across the length and breadth of the country, there are 120 large plantsbelonging to 56 companies with an installed capacity of around 135mn tons as on March 2002.10. OPPORTUNITIES, THREATS, RISKS AND CONCERNSThe cement industry is going through its boom period with full capacity utilization. Powered bythe 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 (includingexports) is expected to increase to 244.82 million tons by 2010-11. As per the study, the demandis expected to be much higher at 311.37 million tons, if the optimistic projections of the road andthe housing sectors are met. The industry has responded to this with substantial new capacityannouncements. The materialization of these capacities, however, is likely to be delayed due to anumber of factors including timely delivery of equipment and construction of the plant due to theheavy order book position of the suppliers. It is expected that demand growth will outstrip supplytill the materialization of such new capacities. However, the current high level of internationalcrude prices and its impact on the domestic prices of petroleum products is likely to make a dentin the profitability but its impact will have to be seen depending upon the ability of the economyto pass on such cost increase to the consumer. While the freight cost could be optimized on theimported coal through usage of company’s own ships for part of the quantity, the internationalprices of imported coal and its volatility together with the strengthening of the dollar againstrupee could derail this. This could impact the delivery prices of imported coal and also the costof production. The Government has taken steps to increase the availability of indigenous coal forits expanded capacity across various plants which can mitigate the impact of such high cost ofimported coal for the plants located near the coal fields in India. The Government’s continuingefforts to rein in cement prices by freeing imports and banning exports could artificially disablethe normal market price mechanisms for determining the price. The rise in the price of cement isbecause of the gap of demand & supply in the market. The demand for cement is much higherthan its actual supply. But with the production maximization, which can be encountered in nextfew 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 meansthe infrastructure; contacted housing is using the bulk of the production. In spite of High price ofMESCE Department of Management Science Page 17
  18. 18. Major Project Report 2012the 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. Soaltogether the supply of the cement, which is affordable, will increase. This may in decrease thegap between supply and demand. Major Demand was from the housing sector, which may shiftto 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 IndiaAssociated Cement Companies Ltd (ACCL)Associated Cement Companies Ltd manufactures ordinary Portland cement, composite cementand special cement and has begun offering its marketing expertise and distribution facilities toother producers in cement and related areas. It has twelve manufacturing plants locatedthroughout the country with exports to SAARC nations. The company plans capital expenditurethrough expansion of existing units and/or through acquisitions. Non-core assets are to bedivested to release locked up capital. It is also expected to actively pursue overseas projectengineering and consultancy services.Birla Corporation Ltd.Birla Corps product portfolio includes acetylene gas, auto trim parts, casting, cement, jutegoods, yarn, calcium carbide etc. The cement division has an installed capacity of 4.78 millionmetric tons and produced 4.77 million metric tons of cement in 2003- 04. The company has twoplants in Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar Pradesh andholds a market share of 4.1 per cent. It manufactures Ordinary Portland cement (OPC), Portlandpozzolana cement; fly ashbased PPC, Low-alkali Portland cement, Portland slag cement, lowheat cement and sulphate resistant cement. Large quantities of its cement are exported to Nepaland Bangladesh. Going forward, the company is setting up its captive power plant to remainCost 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 andcontributes to over 40 per cent of the companys revenues. The company has an installed capacityMESCE Department of Management Science Page 18
  19. 19. Major Project Report 2012of 4.7 million tons with a total cement production of 5.43 million tons in 2003-04. CTIL has fourplants that manufacture cement, one in Chhattisgarh, two in Madhya Pradesh and one inMaharashtra. Going forward, the company has scripted a three-pronged strategy closing down itsshipping business, continuing with its chemicals and adhesive division, and focusing on cement,rayon and paper as its long term business plan.Grasim-UltraTech CemcoGrasims product profile includes viscose staple fibre (VSF), grey cement, white cement, spongeiron, chemicals and textiles. With the acquisition of Ultra Tech, L&Ts cement division in early2004, Grasim has now become the worlds seventh largest cement producer with a combinedcapacity of 31 million tons. Grasim (with Ultra Tech) held a market share of around 21 per centin 2003-04. It has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu andGujarat among others. The company plans to invest over US$ 9 million in the next two years toaugment capacity of its cement and fibre business. It’s also plans to focus on its internationalventures, ramping up the capacity of Alexandra Carbon Black in Egypt to 1,70,000 tons perannum (from 1, 20,000 tpa) and raising the capacity of the carbon black plant in China from12,000 tpa to 60,000 tpa.Gujarat Ambuja Cements Ltd (GACL)Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of commercialproduction at its 2 million tons plant in Chandrapur, Maharashtra. The group has clinkermanufacturing facilities at Himachal Pradesh, Gujarat, Maharashtra, Chhattisgarh, Punjab andRajasthan. The company has a market share of around 10 per cent, with a strong foothold in thenorthern and western markets. Its total sales aggregated US$ 526 million with a capacity of 12.6million tons in 2003-04. Gujarat Ambuja is Indias largest cement exporter and one of the mostcost efficient firms. GACL has a 14.45 per cent stake in ACC, making it the second largestcement group in the country, after Grasim-UltraTech Cemco. The company has free cash flowsthat it is likely to use to grow inorganically. The company is scouting for a capacity of aroundtwo million tons in the northern and western markets. It has also earmarked around US$ 195-220million for acquisitionsIndia CementsIndia Cements is the largest cement producer in southern India with a total capacity of 8.81million tons and plants in Andhra Pradesh and Tamil Nadu. The company has a market share ofMESCE Department of Management Science Page 19
  20. 20. Major Project Report 20125.4 per cent with a total cement production of 6.36 million tons in 2003-04. Its product portfolioincludes ordinary Portland cement and blended cement. The company has limited its businessactivity to cement, though it has a marginal exposure to the shipping business. The companyplans 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 LimitedJaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is part of the Jaypeegroup with businesses in civil engineering, hospitality, cement, hydropower, design consultancyand IT. It has an annual capacity of 4.6 million tons with plants located in Rewa & Bela (MadhyaPradesh) and Sadva Khurd (Uttar Pradesh). The company has a market share of 3.8 per cent withthe cement division contributing US$ 172 million to revenue in 2003-04. The company isupgrading its capacity to 6.5 million tons through the modernizing of the existing units and thecommissioning of a new grinding unit at Tanda (Uttar Pradesh) with an investment of US$ 163million. Jaiprakash Associates has decided to concentrate on its core business of construction andengineering and leave its cement plant to its subsidiary Jaypee Rewa Cement Ltd. The companymanufactures a wide range of world class cement of OPC grades 33, 43, 53, IRST-40 and specialblends of pozzolana cement.JK SyntheticsJK 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 whitecement (in 1984). The company has a market share of 2.7 per cent. JK Synthetics Limited isrestructuring 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 acapacity of 3.26 million metric tons and manufacturing white cement.Madras CementsMadras Cements Ltd is one of the oldest cement companies in the southern region and is a partof 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 hasthree plants in Tamil Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. It has atotal capacity of 5.47 million tons annually and holds a market share of 3.1 per cent. MadrasCements plans to expand by putting up RMC plants. As Karnataka is a promising market, theMESCE Department of Management Science Page 20
  21. 21. Major Project Report 2012company is further expanding its capacity from the present 1.5 million tons to 3.4 million tonsthrough an investment of US$ 9 million.HolcimHolcim, earlier known as Holderbank, has a cement production capacity of 141.9 million tons. Itis a key player in aggregates, concrete and construction related services. It has a strong marketpresence in over 70 countries and is a market leader in South America and in a number ofEuropean and overseas markets. Holcim entered India by means of a long-term strategic alliancewith Gujarat Ambuja Cements Ltd (GACL). The alliance aims to strengthen their clinker andcement trading activities in South Asia, the Middle East and the region adjoining the IndianOcean. Holcim also intends to use India as an additional base for its IT operations, R&D projectsas well as a procurement sourcing hub to generate additional synergies and value for the group.Italcementi GroupThe Italecementi group is one of the largest producers and distributors of cement with 60 cementplants, 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 jointventure company with Zuari Cements. All initiatives in southern India are routed through thejoint venture company, while Italcementi is free to buy deals in its individual capacity innorthern India. The joint venture company has a capacity of 3.4 million tons and a market shareof 2.1 per cent.Lafarge IndiaLafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5 milliontons and a clinker capacity of 3 million tons in the country. Lafarge commenced operations in1999 and currently has a market share of 3.4 per cent. It exports clinker and cement toBangladesh and Nepal. It produces Portland slag cement, ordinary Portland cement and Portlandpozzolana cement. The Indian cement plants are located in Chhattisgarh and Rajasthan. LafargeCement has become the largest cement selling firm in the Indian markets of West Bengal, Bihar,Jharkhand and Chhattisgarh.MESCE Department of Management Science Page 21
  22. 22. Major Project Report 2012SWOT ANALYSIS OF CEMENT INDUSTRYStrengthsThe cement industry has much strength to be considered. Cement is, literally, the building blockof the construction industry. Almost every building constructed relies on cement for itsfoundation. The cement business is a $10 billion industry, measured by annual cementshipments. There is also a strong reputation behind the cement industry. Cement is a solidmaterial and consumers rarely have complaints about the product. Regional distribution plantshave also made cement widely available to any type of buyer.WeaknessesThe cement industry is not without its drawbacks. The cement industry relies on constructionjobs to create a profit. But the cement industry heavily relies on weather. About two-thirds ofcement production takes place between May and October. Cement producers often use the wintermonths to produce and stockpile cement, to meet demand. Another weakness is the cost oftransport; the cost of transporting cement is high and this keeps cement from being profitableover long distances. In other words, shipping cement costs more than the profit from selling it.OpportunitiesThe cement industries have opportunities as well. One such opportunity is the cement industrysefficiency. The cement industry has recently streamlined its production efforts, using drymanufacturing instead of wet, which is heavier and more time-consuming. The cement industryhas also invested about $6 billion in expansion efforts to meet unmet cement needs. Projectionsshow that by 2012, the cement industry will have 25 percent more production capabilities.ThreatsThe nature of the economy has uncovered a number of threats to the cement industry. Thecement industry greatly relies on construction. The current economy has lessened the number ofconstruction jobs, which in turn hurts the cement industry. The cement industry controls themajority of the United States market, but not all of it. About 11.5 metric tons of cement areMESCE Department of Management Science Page 22
  23. 23. Major Project Report 2012imported annually to support the unmet need. If other countries can produce and ship cement fora reduced price, the U.S. cement industry is in danger. The U.S. government is also attempting toregulate the cement industrys waste. The Environmental Protection Agency has introducedregulations for the cement industry to cut down emissions.MESCE Department of Management Science Page 23
  24. 24. Major Project Report 2012CHAPTER: 3COMPANY PROFILEMESCE Department of Management Science Page 24
  25. 25. Major Project Report 2012Company profileMalabar Cements Limited is a high tech manufacturing company in the public sector, situated inWalayar, palakkad district. Incorporated in the year 1978, the company commenced productionin 1984. The company, through its eighteen years of operation, could survive and prosper evenduring the present era of liberalization and globalization. Since 1996, company started consolidation, modernization and technical up gradationphase to improve upon profitability, cutting production cost, improving the efficiency to face thecompetitive environment. MCL achieved ISO-9002 certification in November 1996 being thefirst cement factory in the public sector in the country. The major efforts of the modernizationand up gradation fronts are realigning and computerized operation of the kiln system, installationof 2.5MW multi fuel diesel generator, belt bucket elevator etc. company could reduce productioncost and inefficiency due to these efforts. The company achieved all time record performance during the year 1999-2000. MCL isthe first public sector company to receive the converted national award for energy conservationfrom NCBM, New Delhi. Malabar cements contribute to the developmental activities of the stateby supplying a basic construction material. The presence of ―Malabar‖ in the market helps tocontrol the cement price to some extent. MCL has the largest dealer network in Kerala forcement sales. Only Malabar cements can reach its cement factory. Fresh without any deterioration in the original strength either due to moisture orhumidity, within 12 hrs anywhere in Kerala. Company has systems to educate the consumer’susage of cement and provide after sales services. Malabar Cements Limited, a fully owned Government of Kerala undertaking, is the only thmajor integrated cement manufacturing unit in the state. The company was incorporated in 11April 1984 at its walayar plant. The company has a paid up equity of Rs 26 crores and capitaloutlay of Rs 68 crors. It is rated to produce 4.2 lakh tons of cement per annum at its walayarplant. As part of expansion program, it has commissioned a 2.0 lakh tons clinker gridding unit atcherthala of MCL is 6.2 lakh tones. This ISO 9001:2000 company meets about 10 % of totalcement consumption in Kerala.MESCE Department of Management Science Page 25
  26. 26. Major Project Report 2012The customers Malabar Cements Ltd marketing has always the customer centered, consumer satisfactionwowed in product quality and after sales services. Not only that super quality is build in to theproduce through very sophisticated computerized process control system the dedicated anddynamic 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 publicQuality policy The employee of MCL commits to comply with all requirements to continually improvethe 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 expectationsCredentials Company could win several awards in the field of energy conservation, pollution controland 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 boardCompetitorsMESCE Department of Management Science Page 26
  27. 27. Major Project Report 2012 The main competitor of Malabar cements are sankar, corometal, L&T, ACC, RAASI, Chettinad and others MCL ORGANISATIONAL STRUCTURE chairman MD GMGM(E) GM(M) GM(TS) CE(M) CC FM MM OM HR PDN PRCSE MESCE Department of Management Science Page 27
  28. 28. Major Project Report 2012MD-Managing DirectorGM-General ManagerGM (E)-General Manager (ENG)CE (M)-Chief engineer (MECH)GM (M)-General Manager (Mins)CC-Chief chemistGM (TS)-General Manager (tech service)FM-financeMM-marketingOM-operationsHR-human resourcePDN-productionPURCSE-purchaseProduct profile Malabar Cements is simony for super quality, claim thousands of their customers spreadthroughout the state. In Malabar cements, product improvement is not a onetime strategy forboosting sales on the product life cycle theory. It is quest of excellence. Perfecting the productquality is everybody’s concern here. Our distinction begins with scientifically selecting the bestraw material for clinker. Stringent quality control is exercised in relending raw materials,clinkerisation. Clinker gridding, and finally into cement packaging.MESCE Department of Management Science Page 28
  29. 29. Major Project Report 2012Malabar 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 AMAZINGperformer! Tests carried out by bureau of Indian standards have established unshakeable credentialsof Malabar super. Super strength accelerated setting time and fine finish. Malabar super issuperior in strength to ordinary ―43‖ grade cement. It attains the 28 days strength required as perIS just in 7 days time. Not only that, the strength attained in 28 days time is about 50% more thanthe IS specification. The amazing strength of Malabar super arises out of its unequalled particlefineness, 33% more than the IS specification and consistency in composition, more possible bycomputerized process control systemProduct characteristics Malabar super offers better setting characteristics prolonged initial set and short final settimings; providing more time for concrete mixing and placing, and less time for keeping theconcrete undistributed, free from movement and vibration, the property engineers and mansionsrelish to have, in the cement they work with. Malabar super is finer when compared to normalOPC, meaning rate of hydrogen and rate of strength gain is bestBenefitsMalabar super superiors setting properties, quick early strength gain, and higher finishedstrength, 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 placementpractices. Malabar super is therefore economicalMalabar classicMalabar classic offers better setting properties delayed initial set and early final set offeringbetter working time and reduced observation time, it is a superior class of its own amongcementsMESCE Department of Management Science Page 29
  30. 30. Major Project Report 2012The structures achieve excellent dimensional stability with the heat resistant properties ofMalabar classic. It also reduces heat generation during hydration, making it a better workablefinished product absolutely reliable. The extra fineness welded into it allows Malabar classicbetter coverage and finish in wall and roof plastering. This in turn, reduces paint consumption.Product characteristicsThe cement most suited to the south Indian climate proudly invented by us, through in housestudies and continues researchers in product improvement a way of life in MCL. An outcome ofthis is Malabar classic. With scientifically proportioned sand and coarse aggregates, the mostcohesive mix possible with Malabar classic, will avoid the otherwise in the rent drawbacks ofconcrete segregation and bleeding. The fly ash interweaved with Malabar classic makes itsulphate resistant; a basic property, that cement should posses, for constructions and structures insea co and in alkaline waters. Malabar classic is best suited to resist alkali aggregate reaction, adefect eventually resulting in excessive cracks and subsequent unserviceability of structures.BenefitsThe extra fineness welded in to it allows Malabar classic better coverage and finish in wall androof 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 mixgain can go up to 30%Malabar aiswaryaMalabar aiswarya brings prosperity in many ways. It increases the life of your structures bysafeguarding against sulphate attack. Aiswarya offers high quality at reduced price.Aiswarya generates less heat of hydration, reduces the formation of getting cracks. This productis 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 forproduct manufacturing. With very low magnesium oxide content this provides shape stability forconcrete structures.Major playersMESCE Department of Management Science Page 30
  31. 31. Major Project Report 2012The 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 cementVisionMCL industrial units have a capital outlay of Rs. 69 cores. The factory is rated to produce Rs 4.2lakh tones cement per annum (24000 bags per day). The company meets about 10% of the totalcement consumption of Kerala and the company will reach near 13% of total consumption by2010 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 aregetting strain day by day. MCL a well run public sector company of the state, committed to thesociety nurtures a corporate theme ―of building values strengthening relationship‖ which alsorelevant to its products.Ownership pattern MCL is fully owned by the government of Kerala. Initially there were some loans takenby the company, which is fully repaid now. Government share capital currently is 2500 87 lakhs.MESCE Department of Management Science Page 31
  32. 32. Major Project Report 2012At the end of 2005-06 the company has working capital of Rs 107 lakhs from different banks ofthe company.Human resource department According to jucins ―human resource refers to a whole consisting of interrelated,interdependent and interacting, psychological, sociological, and ethical components‖. Thushuman resource represents the quantitative and qualitative measurement of workforce required inan 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&AAll 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 officersMalabar cements ltd has a large but dedicated and skilled workforce. The personnel/humanresource department is the big at the same time important department of the company. Thedepartment 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 activitiesMESCE Department of Management Science Page 32
  33. 33. Major Project Report 2012In 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 examinationMESCE Department of Management Science Page 33
  34. 34. Major Project Report 2012 Employment Final approvalIn MCL tests are conducted only when the number of applicants is proportionately more.Medical examination is compulsory before inductionInterviewThe 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 selectedPlacement Once the candidate is employed there is probation period of 1 year during which his/herperformance 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 stipulatedman 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 trainingMESCE Department of Management Science Page 34
  35. 35. Major Project Report 2012 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 andpromotions 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 pmThe working time will be rotated for each worker, so that every worker should work for all thethree shifts. There are 25 working days in a month. Working time for office staff is 8.30 am to 5pm.Compensation MCL pays compensation to the employees in exchange for their valuable contribution tothe organization. All permanent employees of MCL should be included in group personnelaccidental insurance. An employee will get compensation either due to Death inside the company Death during his journey to the companyA welfare fund board is functioning in MCL in which every employee should be a member. Thefund provides a certain amount to the diseased person’s family Rs 2500 for the funeral expenseof the employee and a lump sum amount to his family and also job to his dependents.Wage paymentEmployees of MCL are categorized into two namelyMESCE Department of Management Science Page 35
  36. 36. Major Project Report 2012 Managerial Non managerialFor non managers employee wages are decided by the central wage board. During every 5 yearsit will be revised. For managerial employees the pay scale relates to the Kerala government scaleof payments.Incentives Incentives are decided by the recognized union and company. MCL follows productioncum 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 staffsBonus Every person is eligible for minimum bonus as per the payment of bonus act. Bonuspercentage will be demand at government level.Employee grievances MCL employees have every freedom approach the welfare officer to redress theirgrievances. On close talk with the employees there it was found that the employees had opinionabout the management and they even said that the management never hesitate in giving awaytheir 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 theirdate of retirement. Separate files of each employee are kept in MCL.MESCE Department of Management Science Page 36
  37. 37. Major Project Report 2012Fringe 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 providedRecreation facility MCL also providers recreational facilities to its employees such a club facilities, sportsand cultural activities.Trade unionThere 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 themembership in committee, safety committee, canteen committee etcLabor welfare activitiesStatutory welfare measuresWelfare 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 rateVoluntary welfare measures Purified drinking water Health centre Safety measures Medical centre Rest rooms are provided to the laborsMESCE Department of Management Science Page 37
  38. 38. Major Project Report 2012 Library Recreation club Cooperative society Ambulance Accommodation facilities Annual giftsExistence of welfare committeesVarious welfare committees exist in the MCL of which the representatives of the recognizedunions will be a member. The various welfare committees are Works committee Canteen committee Safety committee Labor welfare committeeWelfare 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 employeesAllowancesThe various allowances are Dust allowances Union allowances Medical allowancesMESCE Department of Management Science Page 38
  39. 39. Major Project Report 2012Industrial relations A good employee employer relation is important to the smooth functioning of anorganization. Industrial relations mean not only the complex relation between the trade union andthe management but also refer to the general way of relationships normally obtaining betweenemployees and employers.MESCE Department of Management Science Page 39
  40. 40. Major Project Report 2012CHAPTER: 4LITERATURE REVIEWMESCE Department of Management Science Page 40
  41. 41. Major Project Report 2012A study on ―Employees perspectives regarding performance appraisal and reward philosophy ininsurance sector in Haryana‖ was conducted by ―Neeraja & Aman‖ (2005). This paper talksabout the employee’s perspectives regarding performance appraisal and reward philosophy andthe effect of demographic variables on it. The sample is selected on the basis of convenientsampling method. This study based on the hypothesis that demographic variables andemployee’s opinion are independent of each other. This paper analysis the data by using factoranalysis, reliability test and chi-square test. The basic premise of the paper is concentrated on thefact that performance pay jobs that reward productive characteristics of workers have a morecompetitive pay structure than other factors. They analyzed that compensation in performancepay jobs is more closely tied to both measured and unmeasured productive characteristics ofworkers.The study on ―merit based performance appraisal & productivity: do employees perceive theconnection‖ was conducted by ―Gerald T Gabris & Kenneth Mitchell‖ (1985). The article reportsthe findings of a study of the Biloxi, Mississippi, merit bonus pay plan. It compares employees atdifferent levels in the organizational hierarchy with regard to their perceptions of whether thenew system has increased their individual or group productivity. Findings indicate that employeereaction 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 thebiggest supporters of the merit pay plan. Middle managers, who bore the brunt ofimplementation, were the systems most severe critics. First-line rank and file employees, therecipients of the bonuses, were mixed in their reactions. Thus it appears that whether employeesperceive merit pay as a direct stimulus to their productivity is not a black and white issue. Manyapparently do not perceive a connection between merit pay and productivity.The study on ―Perceived Fairness of Performance Appraisals in the Federal Government‖ wasconducted by ―Seok Eun Kim & Dian Rubianty‖ (2000). Studies suggest that the success of theperformance appraisal system may depend on how to manage employees’ perceptions of itsfairness, not the system per se. using the 2005 Merit Principles Survey, this study tests theefficacy of perceived fairness of performance appraisals as a key determinant of intrinsicmotivation. The purpose of this article is twofold: (a) to identify factors of perceived fairness ofperformance appraisal and (b) to assess the differential impact of each factor of perceivedMESCE Department of Management Science Page 41
  42. 42. Major Project Report 2012fairness of performance appraisal on intrinsic motivation. An exploratory factor analysisgenerated three separate but interrelated notions of perceived fairness variables: distributive,procedural, and interactional fairness. Using these three perceived fairness variables, ahierarchical regression analysis was performed. The results showed that although all threeperceived fairness variables positively associated with intrinsic motivation, they accounted foronly 5% of variance in prediction. When control variables were added, only perceivedprocedural fairness appeared to positively affect intrinsic motivation. The results raise thequestion of the role of performance appraisals as a motivational tool for performanceimprovement. Nonetheless, managing perceived procedural fairness may still be a useful leverfor enhancing intrinsic motivation.The study on ―Employee perceptions of performance appraisals: a comparative study on Indianbanks‖ was conducted by ―Shrivastava a & Purang P‖ (2011). Performance appraisal is the mostcritical human resource practice and an indispensable part of every organization; however, thepractice continues to generate dissatisfaction among employees and is often viewed as unfair andineffective. Indian banking sector is one of the biggest and fastest growing financial servicesectors. The post-liberalization era has witnessed significant changes in the structure andoperations of banks operating in India. Arrival of new private and foreign banks has given acause 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 newprivate sector banks are outscoring public sector banks in terms of technical and economicefficiency parameters. However, no study could be found that compared public and private banksin India on fairness perceptions of performance appraisal system. Therefore, this research studiedthe differences between public and private sector banks with respect to perception of fairness ofthe performance appraisal system and performance appraisal satisfaction. Perception of fairnessof the performance appraisal system has been studied through nine factors. The study usedindependent samples t-test and qualitative analysis to study the mean differences between thetwo banks. Results indicated that private sector bank employees perceive greater fairness andsatisfaction with their performance appraisal system as compared to public sector bankemployeesMESCE Department of Management Science Page 42
  43. 43. Major Project Report 2012The study on ―Employees’ Perceptions about the Effectiveness of Performance Appraisals: TheCase of Pakistan‖ was conducted by ―Muhammad Kashif Saeed and Nosheen Shahbaz‖ (2011).The current research investigates employees’ perceptions about the outcomes of performanceappraisal and aims to identify the factors which can harm the successful implementation ofperformance appraisal. The sample of 120 employees at managerial level was selected on thebasis of simple random sampling technique from the plastic furniture manufacturingorganizations located in the province of Punjab in Pakistan. The findings suggest that theemployees are aware of the useful outcomes of the performance appraisal but they lackknowledge in implementing an effective performance appraisal system. A significant differencein perceptions regarding the outcomes of performance appraisal was found among therespondents. The study will help policy makers in designing effective performance managementsystems for their organizations by minimizing the perceived risks and detriments to effectiveimplementation of performance management systems.The study on ―Multi-Source Performance Appraisals: Employee Perceptions of Fairness‖ wasconducted by ―Linda deLeon and Ann J. Ewen‖ (1997). Performance appraisal is crucial toeffective human resource management, but there is evidence that current processes are not veryeffective This study reports on experience with a relatively new appraisal system in theoperations 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 employeeComparison of survey results from before and after implementation of MSA found significantimprovement in employee perceptions of the fairness and effectiveness of appraisals, particularlyamong protected classes The implications of these findings and suggestions for future researchare discussed.The study on ―An ―expert witness‖ perspective on performance appraisal in universities andcolleges‖ was conducted by ―John Simmons‖ (2002). Effective performance management ofprofessionals in knowledge based organizations has particular significance, but is an underresearched area in the literature. Universities and colleges are knowledge based organizationsespecially dependent on the expertise, commitment and innovation of their staff. The paperanalyses performance appraisal systems in universities and colleges with particular emphasis onstaff perspectives and expectations. A brief history of performance appraisal in HE and FE isprovided and related to issues of power, accountability and control. Academic staff from twoMESCE Department of Management Science Page 43
  44. 44. Major Project Report 2012business schools, together with a national sample of those teaching performance appraisalswithin CIPD professional programmers’, was constituted as an ―expert witness‖ group and theirviews sought on performance appraisal in their institutions. These data are used to develop aphilosophy of performance appraisal for academic institutions, to assess the acceptability ofparticular performance criteria to academic staff, and to highlight the importance of staffinvolvement in appraisal system design.The study on ―Performance appraisal fairness perceptions in supervisory and non- supervisoryemployees: 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 organizationinfluence reactions towards performance appraisal system (PAS). The present study investigatesfairness perceptions of PAS among supervisory (appraisers/appraises) and non-supervisoryemployees (appraises) in the civil service of Pakistan. Data was collected from civil servantsworking 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 thatthere was significant difference of fairness perceptions among supervisory and non supervisoryemployees working in the two public sector departments. And supervisory employees perceivethe system fairer as compared to non-supervisory employees. In the article we discuss literatureof organizational justice and fairness of PASs. Subsequently, we discuss methods, limitationsand directions for future research in the PAS of the civil service.The study on ―employee perceptions of performance appraisal fairness in two organizations‖ wasconducted by ―Evans, Elaine M.; McShane, Steven L‖ (1988). Studied the characteristicscomprising the appraisal process from the employees perspective and how those characteristicsrelated to employee perceptions of performance appraisal fairness. Based upon factor analysis ofsurvey data from a total of 397 management and professional employees in 2 large Canadianorganizations, 6 characteristics were found to comprise the appraisal process: appraisersknowledge of the employees 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 importanceof these characteristics to overall appraisal fairness ratings was different in the 2 companies. Thefavorableness of the most recent appraisal was associated with the employees belief in theMESCE Department of Management Science Page 44
  45. 45. Major Project Report 2012overall fairness of the appraisal process in both companies. (French abstract) (PsycINFODatabase 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 appraisalis a key element of management practices. Performance appraisal plays an important role forcontinuous improvement. Lot of researchers has worked on performance appraisal from bothemployee and organizations point of view. This study is aimed to find out the relationshipbetween perceived fairness in performance appraisal and organizational citizenship behaviorconsidering the mediation effect of organizational commitment. For the study 318 employees ofbanking sector were randomly selected. Questionnaire was used for data collection. Findings ofthe study indicate that there is significant and positive relationship between perceived fairness inperformance appraisal and OCB while organizational commitment mediates this relationship.The study on ―perceived fairness of and satisfaction with employee performance appraisal‖ wasconducted by ―marie burns walsh‖ (2003). Employee performance appraisal is one of the mostcommonly used management tools in the United States. Over 90 percent of large organizationsincluding 75 percent of state employment systems require some type of annual performanceappraisal (seldon, ingraham & jacobson, 2001). Performance appraisal is one of the most widelyresearched areas in industrial/organizational psychology (murphy & Cleveland, 1993). However,the traditional research agenda has done little to improve the usefulness of performance appraisalas a managerial tool. Recent research has moved away from studies of rater accuracy andpsychometric measures to themes of employee reactions towards performance appraisal asindicators of system satisfaction and efficacy. Employee perception of fairness of performanceappraisal has been studied as a significant factor in employee acceptance and satisfaction ofperformance appraisal. This study investigated employee reactions to fairness of and satisfactionwith an existing performance appraisal system utilizing a hypothesized four-factor model(Greenberg, 1993) of organizational justice as the theoretical basis. The underlying hypothesiswas that the conceptualized four-factor model, which differentiated between the constructs ofinteractional and procedural justice, would best represent the underlying factor structure of theMESCE Department of Management Science Page 45
  46. 46. Major Project Report 2012data. Data were obtained via a survey questionnaire from 440 participants from twoorganizations that were part of a large public employment system. Ten multi-item scales xrepresenting four factors of organizational justice and performance appraisal fairness and threescales indicating satisfaction were included. The findings of the study indicated that respondentsperceived the performance appraisal system was to be fair as indicated by their agreement with 9of the 10 scales used to measure reactions to fairness. The respondents also indicated theirrelative satisfaction with their most recent performance appraisal rating and with theirsupervisor. Less satisfaction (although not dissatisfaction) was indicated with the performanceappraisal system overall. The conceptualized four-factor model was not found to represent theunderlying factor structure substantially better than alternative plausible three-factor models. thebest fit three–factor model, however, provided some support for the differentiation betweenprocedural and interactional organizational justice factors, which is a distinction that has beendebated in the organizational justice literature.The study on ―employees’ perception of the problems and practices of employee performanceevaluation: 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 andproblems of performance evaluation in awash international bank to this end; the study has theobjective to assess the perception of employees towards the problems and practices ofperformance evaluation. on the basis of data collected through questionnaires and interviewwhich are founded on the theoretical assessment of related literatures; i have tried to unearthsome of the real problems of appraisals based on the opinion of the rates in that particularorganization. The questionnaire was distributed to 80 employees of the bank working in fourbranches: bole, head office, stadium and art kilo branches in which only 65 were fully completedand returned. The questionnaire was distributed to the employees on the basis of conveniencesampling based on the willingness and cooperation of the respondents. The data collected wereanalyzed using spss software. On the basis of the data obtained from the respondents, the studyidentified the lack of transparency both during the evaluation and after evaluation as its majorfindings. Almost all the participants vented out that they are not allowed to see the result of theirratings. As a result, they do not have a confidence on the appropriateness of the evaluation tomake crucial human resource decisions. The lack of clarity of performance evaluation criteriaand the subjectivity involved in the evaluation which resulted in role ambiguity and frustrationMESCE Department of Management Science Page 46
  47. 47. Major Project Report 2012viii among the employees were identified to be the other problem of performance appraisal inawash international bank (aib). On the other hand, the subjective nature of the standards againstwhich the performance of employees are judged lead raters to manipulate the evaluation for theirown personal agendas. The universal purpose of performance evolutions across the board werealso common problems in the system. The performance evaluation forms do not reflect theperformance of the employees as they can be irrelevant for some jobs. In this regard, it wasidentified 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 ofPerformance Appraisal System‖ was conducted by ―Mert, Ibrahim Sani‖ (2011). Althoughperformance appraisal is one of the most important functions of human resources management, itcannot be said that the organizations have obtained the full benefit from performance appraisalsystem as they expected. Lack of enough investigation about employees’ perception toward theeffectiveness of the performance appraisal system can be mentioned as one of the reasons. Theperception of employees toward the effectiveness of performance appraisal system helps humanresources employees and researchers to obtain the benefit expected from performance appraisalsystem. Therefore, the employees’ perception of the outcomes and detriments of an effectiveperformance appraisal system were investigated in this research. According to the findings of thestudy, the perceptions of employees toward the performance appraisal system have an effect ontheir thoughts of their own appraisals. Besides, it was determined that women perceive theperformance appraisal system as more effective than men and the employees who work as amanager have a more sensitive perception toward the detriments of performance appraisalsystems than who do not. It is thought that, the findings of this research may be beneficial to boththe researchers who study performance appraisal and human resources employees to evaluate theeffectiveness of performance appraisal systems.The study on ―Boswell, Wendy R. and Boudreau, John W. , "Employee Attitudinal Effects ofPerceived Performance Appraisal Use‖" was conducted by Boswell, Wendy R. and Boudreau,John W. (1997). This research investigates how employee perceptions of performance appraisaluse relate to employee satisfaction with the performance appraisal and with the appraiser—theemployees’ immediate supervisor. Employee perceptions that appraisals were used forMESCE Department of Management Science Page 47
  48. 48. Major Project Report 2012development positively associated with both attitudinal variables, after controlling for justiceperceptions, performance, and demographics. Perceptions of PA use for evaluation did not showa significant relationship with either employee attitude. Implications of these findings arediscussed.The study on ―Managers theories of subordinates: A cross-cultural examination of managerperceptions 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 aglobal organization in North America, Asia and Latin America researched on managersperception of their employees motivation and which kind of motivation according to themrelated better with performance appraisal of the employee. While North American managersperceived their employees to be extrinsically motivated and considered intrinsic motivation to bebetter related with performance appraisal, Latin American managers perceived their employeesto be intrinsically motivated and considered extrinsic motivation to be better related withperformance appraisal. Asian managers perceived their employees to be both extrinsically andintrinsically motivated and both kinds of motivations related with performance appraisal. Incontrast, the employees reported to be more intrinsically motivation.The study on ―Linking strategic HRM, performance management and organizationaleffectiveness: perceptions of managers in Singapore‖ was conducted by ―Pauline &alanNankervis‖ (2011). Strategic human resource management (SHRM) theory is predicated on theassumption that effective human resource management (HRM) processes have the capacity tocontribute 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 HRMprocesses as a whole. Few have focused on the links between strategic HRM, performancemanagement systems and organizational effectiveness, and even fewer have examined theserelationships in Southeast Asia. This paper addresses this gap in the literature by examining theperceptions of a split sample of senior managers in Singapore. It reveals an interesting gapbetween their rhetoric and the realities of their performance management systems, and suggestsfuture research directions.MESCE Department of Management Science Page 48
  49. 49. Major Project Report 2012Theoretical backgroundPerformance appraisal system is one of the oldest and most universal practices of management. Itis widely used technique to evaluate the people. Formal appraisal of an individual’s performancebegan in china in 221-265 AD. Later on in 1883, the New York City civil service in USAintroduced formal appraisal program shortly before the World War 1. US Army adopted the manto man rating system evaluating military personal. In India the formal appraisal system startedafter World War 2 nd. In the early fifties performance appraisal technique was called merit ratingand to use for technical, managerial, and professional personal.MeaningIt is the process of evaluating the performance and qualification of employee in terms of therequirements of the job for which he is employed, for the purpose of administration, includingplacement, selection for promotion providing financial rewards and other actions. Performanceappraisal is the process of evaluating personnel job performance and his potential fordevelopment. 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.DefinitionsAccording to Scot, clothier and spreigal.‖Performance appraisal is a process of evaluating anemployee’s performance of a job in terms of its requirements.‖Edwin B Flippo defines, performance appraisal system is the systematic, periodic and so far ashumanly possible, an impartial training of an employee’s excellence in matters pretaing to hispotentialities 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 planMESCE Department of Management Science Page 49