Government issues ordinance to curtail LIC's ballooning wage bill

The bigger they are the harder they fall. That maxim was rudely brought home to the 55,129 employees of the monopolistic monolith, the Life Insurance Corporation (LIC) - income Rs 1,297 crore, revenue from premiums Rs 875.37 crore - last fortnight following a landmark government ordinance that gave itself the right to amend the terms and conditions of service of LIC employees. The ordinance, issued with retrospective effect from June 30, 1979, was obviously a desperate effort on the part of the Government to curtail LIC's ballooning wage bill - estimated at Rs 133 crore - and bring it into line with other public sector organisations.Predictably, the governmental ordinance raised a howl of protest from the union ranks. The Marxist-led All India Insurance Employees Organisation, LIC's most powerful union, and the Dange-led faction, the All India LIC Employees Federation promptly staged a wildcat two-day nation-wide strike which effectively shut down LIC operations for the period.The Government, however, stuck to its guns and issued a court notice informing employees that they would be paid bonus for the period July 1979 to March 31, 1980, subject to a maximum of Rs750. Ignoring the Supreme Court ruling that all class III and IV employees must be paid a 15 per cent bonus before April 15, the notification stated that no employee earning above Rs 1,600 per month would be paid a bonus. An additional blow to the LIC staff was that the notification also stated that the dearness allowance (DA) would be restricted to 3 per cent for every four point rise in the Consumer Price Index (subject to a ceiling of Rs 15.80 for every four-point rise).Move Challenged: The All India Employees Federation challenged the notification in the Supreme Court, with good enough reason. In 1976, the Government had moved a similar legislation to modify the corporation's wage structure, but found it being struck down by the Supreme Court following a suit filed by LIC unions questioning its validity. Stormed P.P. Patil, general secretary of the All India LIC Employees Union: "This ordinance is absolutely unethnical, immoral, unjustified and illegal."Not surprisingly, there was hardly any public support for the striking employees. Repeated labour trouble and a corresponding deterioration in customer service was one reason. The main one, however, was directly connected to newspaper reports that LIC employees are an elite club where a mere clerk earning a basic salary of Rs 920 took home a gross pay packet of Rs 3,412 - higher than that of a joint secretary in the Central Government. There was, however, a bit of media exaggeration evident in the reports. There are only 10 clerks in the total work-force who have reached the Rs 920 scale.Despite that, however, the Government's heavy-handedness seemed to have some justifiable basis. LIC's wage structure has, over the past 24 years since nationalisation, developed into an unending spiral that the Government was determined to halt. The wage structure, since 1961, has been linked through the DA to the general price level. In all wage settlements, while basic wages were tightly controlled, the DA continued to fluctuate wildly along with the price level. When the hyperinflation of the '70s pushed the DA up to dizzying heights, LIC employees found themselves getting an incredible 220 per cent of their basic wage as DA.Crack-down: It was this glaring disparity between LIC wage levels and those of other public sector organisations that forced the Government to crack - down on the former."We have been suggesting to our unions that they accept the same settlement as the nationalised banks," said J. R. Joshi, LIC's Chairman, "but they continued to resist the suggestion. Now the ball is in the Government's court and they will bring about the parity through legislation."Apart from the wage parity question LIC's unique price-linked structure has thrown up other anomalies within the company. Since the DA formula for Class I and II staff differs from that of Class III and IV a senior clerk promoted to the lowest officer cadre actually takes with him a shrunken wage packet because of the lower DA rate for officers. "The class III and IV staff get higher DA due to their greater bargaining power," said an official in the company's personnel department, "and that has created a lopsided wage structure."The corporation's labour leaders, however, contest the fact that there is a wage disparity between LIC and other similar corporations. "Banks have only one clerical grade and the promotional prospects are much better in banks. A clerk can become an officer after 10 years of service. In the LIC there are no such avenues for promotion," says Patil. K.K. Raghavan, legal officer to the corporation, agrees that it is difficult to make a fair comparison. "You cannot use the few who draw large salaries as a criteria for comparison," he said.Distraught: The lower level employees are, however, not the only ones incensed at the Government's ordinance. The officer class is equally distraught, and for a very good reason. The new ordinance allows the Government to usurp whatever autonomy the LIC management enjoyed earlier. According to the ordinance, the Government will now be the sole decision maker in all matters pertaining to service conditions of all employees. "Even the chairman is against the ordinance," said an officer who preferred to remain anonymous, "because it has reduced him to even less than a cipher." Joshi, the chairman was noncommittal. "Given the situation there was no other way the wages could be restricted without the ordinance," he said.Meanwhile, it still remains to be seen whether the Supreme Court upholds the constitutional validity of the ordinance. Striking down of the ordinance by the Supreme Court would mean a serious setback to the Government's effort to control costs in the public sector a large part of which has been on strike for 52 days in demand for higher wages. Said a senior bureaucrat in a moment of candour: "It seems that the public sector exists not for the people but for the employees. And as most of them are government-created monopolies they can't but help make massive profits which employees think belong to them."Published By: AtMigration Published On: Nov 26, 2013 09:56 IST--- ENDS ---

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Government issues ordinance to curtail LIC's ballooning wage bill

The bigger they are the harder they fall. That maxim was rudely brought home to the 55,129 employees of the monopolistic monolith, the Life Insurance Corporation - income Rs 1,297 crore, revenue from premiums Rs 875.37 crore.

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