Difference between NPS and EPS

I dedicate this project to my father and mother and am indebted
towards the Almighty to lead me whenever I needed His support.
Last but not the least, to all my friends who supported me in all
aspect of life!!!!!

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ACKNOWLEDGEMENT

“The Marvelous richness of human experience would lose some thing of rewarding joy if
there were no limitations to overcome. The hilltop hour would not be half so wonderful if
there were no dark valleys to traverse”
This project is a product of the invaluable insights, facts and experience I had with
various people. The experience was more than what was visualized as.
A special note of gratitude goes to Mr. P.K. Dhirsamanta (Dy. Manager, NEPFT,
NALCO) and Mr. A.K. Rout (Senior Manager), NEPFT NALCO for his advice and
encouragement
that
helped
me
makes
this
project
a
reality.
I am deeply indebted to Ms. Kakoli Sen (Faculty), for her constant source of inspiration
and guidance throughout this project.

My heartful thanks to Ms Shegorika Lalchandani, (Faculty), for her advice and
encouragement
that
helped
me
to
make
this
project
a
reality.
Most of all, I express my thanks to “GOD ALMIGHTY” and my family members
especially my father Mr. Swadesh Ranjan Pattnaik without whose love, blessing, support
and
strength
I
could
not
have
complete
this
project.

Sandeep Ranjan Pattnaik

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EXECUTIVE SUMMARY

During these six weeks of internship at Nalco, I came across various practical skills
which are very much different from that knowledge that are imparted to us in the
classroom teaching. I am very much obliged to my project mentor in the organization
who not only gave me the idea about how to design and equip a good project but also
passed on the information beyond the bound of the curricula of our project.
Here the project revolves around a vital element of society – Social Security which is
most important duty on the part of government to provide it to its citizen. Social Security
caters to the universal human need for reassurance and support in times of
unemployment, illness, disability, death and old age. The State bears the primary
responsibility for developing appropriate systems for providing protection and assistance
to its workforce and their families. Public support systems for social security in India
have gained prominence over traditional family support in tune with the trends of
urbanization and work place migrations. The dependence on social security varies as per
the need and income status.
In India, both Social Insurance and the Social assistance programs provide for Social
Security needs of workers in the contingencies of sickness, maternity, employment,
injury occupational disease, old age and death. So far as Social Insurance programs are
concerned the following schemes are in existence.
In this project, I have tried to bring out the pros and cons of the EPS – 95 and NPS –
2009. For this project, what will be a better place to pursue this project other than
NALCO, a Navaratna PSU which created a bench-mark within the PSU by adopting NPS
– 2009? Now PFRDA has advised other PSU to follow the footprint of NALCO and
adopt NPS – 2009. Even other PSU have approach NALCO for the know-how from
NALCO regarding NPS – 2009. Recently a conference was conducted at Delhi regarding
the social security and NPS – 2009 where it was been decided that Nalco will guide other
PSU in regards to the NPS – 2009.

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Table of Content
Sl. No

Title

Pg No

1.

ALUMINUM SECTOR

6–9

2.

NALCO

10 -19

3.

FINANCIAL OVERVIEW OF NALCO

20-23

4.

PEER GROUP COMPARISON AND SWOT ANALYSIS OF NALCO

24-25

5.

EXPANSION PROGRAMMES

25

6.

NALCO – A LEAP AHEAD

26

7.

GUIDELINES OF CSR FOR CPSEs

8.

NALCO CSR

9.

SOCIAL SECURITY

32-39

10.

EMPLOYEES’ PENSION SCHEME -1995

40- 46

11.

NEW PENSION SCHEME – 2009

47-67

12.

STATEMENT OF PROBLEM

13.

OBJECTIVE OF STUDY

68 – 69

14.

METHODOLOGY

69 – 70

15.

FACTS AND FINDING OF NPS – 2009

70

16.

RESULTS/FINDINGS

70

17.

CONCLUSION AND RECOMMENDATION

71

18.

ANNEXURE – I AND II

19.

27-30
331

68

72 – 75

REFERENCES

76

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Aluminum Sector - An Overview
Aluminum Industry in India is a highly concentrated industry with the top 5 companies
constituting the majority of the country’s production. With the growing demand of
aluminum in India and world market, the Indian aluminum industry is also growing at an
enviable pace. In fact, the production of aluminum is currently outpacing the demand.
Moreover, India has huge reserves of high-grade bauxite and it caters to about 5% of the
world aluminum demand of 54 million tonnes. World aluminum growth rate seems to
touch 4.9%. India has huge reserves of bauxite spread across Odisha, Madhya Pradesh,
Jharkhand and other states. Large reserves of good quality alumina and proximity ot
Asian markets have attracted global aluminum reserves of good quality alumina and
proximity to Asian markets have attracted global aluminum producers in the world
towards India. The availability of cheap labors has given the Indian an edge over its
peers. India serves as a ready market for perpetually aluminum demanding nations like
China. Aluminum Industry in India is a highly concentrated industry with the top 5
companies constituting the majority of the country’s production. With the growing
demand of aluminum in India and world market, the Indian aluminum industry is also
growing at an enviable pace. In fact, the production of aluminum is currently outpacing
the demand.
Though India’s per capita consumption of aluminum stands too low (under 1 kg)
comparing to the per capita consumption of other countries like US and Europe (range
from 25 to 30 kgs), Japan (15 kgs), Taiwan (10 kgs) and China (3 kgs), the demand is
growing gradually. In India, the industries that require aluminum most include power
(44%), consumer durables, transportation (10-12%), construction (17%) and packaging
etc.
The Indian aluminum industry is dominated by four or five companies that constitute the
majority of India’s aluminum production. Following are the major players in the Indian
aluminum industry –






Hindustan Aluminum Company(HINDALCO)
National Aluminum Company(NALCO)
Bharat Aluminum Company(BALCO)
Madras Aluminum Company(MALCO)
Indian Aluminum Company(INDAL)
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Hindalco: Hindalco, an Aditya Birla Group flagship company is the biggest player in the
aluminum industry in India with around 39% of market share.. Hindalco has its
aluminum plant at Renukoot in Uttar Pradesh. It has various aluminum products with a
market share of 42% in primary aluminum, 20% in extrusions, 63% in rolled products,
31% in wheel and 44% in foil.
Sterlite Industries: The aluminum business of Sterlite Industries Limited comprises of
two aluminum giants – MALCO and BALCO. While BALCO is a partially integrated
producer of aluminum, Malco is a fully integrated producer of aluminum. Sterlite has got
a market share of around 32%.
NALCO: It is one of the leading aluminum producers in India. Government of India has
stake of 81.15% in this company. Its aluminum refinery is located at Damanjodi. It also
has a smelter located at Angul, Odisha. Currently, NALCO is concentrating on a capex
program to increase its production from 345,000 tonnes to 460,000 tonnes.
SOME OTHER COMPANIES IN THIS SECTOR –







Hindustan Zinc
Jindal Stainless
Kennametal India
INDAL
Sujana Metal Products
Ratnamani Metals

ALUMINUM-STRUCTURE
 The Aluminum industry in India can be classified as:
(a) The primary producers who produce ingots and billets (primary form of
Aluminum) using bauxite.
(b) The secondary producers who add value to the ingots and billets to produce
semi-fabricated products..
 All the primary producers have integrated forward into the manufacture of high
value semi-fabricated products like rods, rolled products, extrusions and foils.

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Regulated till 1989
 Until 1989, the Aluminum Control Order (ACO) required all domestic
manufacturers to ensure that atleast 50% of their ingot production was electrical
grade, for use by the transmission power industry. The government fixed ingot
prices on the basis of a Retention Pricing Mechanism, taking into consideration
the average retention prices of all producers and a minimum return on equity.
 The above control resulted in a skewed product mix and shortages of aluminum
for other sectors. The problem was further compounded by the vulnerable
financial position of State Electricity Boards (the main users of electrical grade
aluminum) and high import and excise duties. The producers resorted to inflated
prices for other types of Aluminum to compensate for the disadvantages they
suffered because of this regulation.
The ACO was scrapped in 1989 and in 1991 the government lifted restrictions on
capacity additions resulting in a free market environment.

Aluminum – Inputs
 The aluminum industry in India can be classified as: Captive power, ample bauxite
reserves, coupled with cheap labour costs make Indian companies amongst the
most competitive Aluminum producers globally.

 The main raw material for the manufacture of Aluminum includes bauxite, caustic
soda, calcined petroleum coke, coal tar pitch, and LS/FS furnace oil. The
production process for manufacture of Aluminum is briefly outlined below.
 The mined bauxite ore is mixed with caustic liquor and is refined to produce
alumina. This is then smelted (through electrolysis in a smelter) to obtain
Aluminum. Depending on the quality of bauxite, 2.5 – 3 tonnes are required for
manufacture of 1 tonne of alumina. In turn, 2 tonnes of alumina are required for
manufacture of 1 tonne of Aluminum.

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Salient features of Indian Aluminum Industry
















Highly concentrated industry with only five primary plants in the country
Controlled by two private groups and one public sector unit
Bayer-Hall-Heroult technology used by all producers
Electricity, coal and furnace oil are primary energy inputs
All plants have their own captive power units for cheaper and un-interrupted
power Supply
Energy cost is 40% of manufacturing cost for metal and 30% for rolled products
Plants have set internal target of 1 – 2% reduction in specific energy consumption
in the next 5 – 8 years
Energy management is a critical focus in all the plants
Two plants have declared formal energy policy
Each plant has an Energy Management Cell
Achievements in energy conservation are highlighted in the Annual Report of the
Company.
Energy targets are based on best energy figures achieved in their sector / region
and by the plant itself in the past
Generally, government policies were rated as conducive to energy management
‘Task Force’ formed by BEE in this sector to work as catalyst in promoting energy
efficiency
High cost of technology is the main barrier in achieving high energy efficiency

9

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NATIONAL ALUMINUM COMPANY LIMITED (NALCO)
National Aluminum Company Limited (NALCO) is considered to be the turning point in
the history of Indian Aluminum Industry. In a major leap forward, NALCO has not only
addressed the need of self-sufficiency in aluminum but also given the country a
technological edge in producing the strategic metal as per world standard. It is India’s
largest integrated public sector producer of alumina and second largest producer of
aluminum. Its combination of modern assets, excellent logistics, cheap power and captive
port facilities has all contribution to making it one of the lowest-cost producers of
alumina in the world.
In Orissa, for setting up Asia's largest integrated alumina-Aluminum complex in 1981,
National Aluminum Company Limited acquired 7263 acres of land at Damanjodi in
Koraput district and 4057 acres at Angul. During the inception of the company, 635
families in 51 villages were displaced - 600 families in Damanjodi sector and 35 families
in Angul sector. From these 635 displaced families, employment has been provided to
625 nominees. Confusion regarding educational background and nomination status of
balance 10 families has been taken up at appropriate level. Besides, 1495 families were
substantially affected (i.e. parting with one third or more land) in Angul sector. Even
from these, jobs have been provided to 1060 persons. Nalco has also been sponsoring ITI
training to such persons and 543 have been technically trained so far. Apart from
financial compensation, employment and rehabilitation packages, Nalco has also spent
more than Rs. 100 crore towards various social sector development activities. Creation of
infrastructure in the surrounding villages for communication, education, health care and
drinking water gets priority in the periphery development plans of the company.
Community participation in innovative farming, social forestry and sanitation programs
apart, encouragement to sports, art, culture and literature are all part of Nalco's deep
involvement with the life of the community. Successful operations of the company have
led to employment and income generation for the local people in many significant ways.
It was incorporated as a public sector enterprise of the Government of India in 1981
under the Ministry of Mines. Government of India had a share of around Rs 1289 crore in
the total funding of Rs 2408 crore as Capital Cost and the rest of Rs 1119 crore has been
met by Euro-Dollar loan a consortium of International Banks. It boasts of some of the
world’s latest and finest technology in the Aluminum manufacturing industry.
Commissioned during 1985-87, NALCO has emerged to be a star performer in
production and export of alumina and aluminum, and more significantly, in propelling a
self-sustained growth. It has made the country more than self sufficient in alumina and
aluminum needs and has quite impressive export figures as well. Being the largest
exporter of the metal in the country, it has its own section of port facility at
Visakhapatnam. All units of NALCO employ the latest in technology and are some of the
advanced manufacturing units in the world.
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The main units of NALCO are at Damanjodi (Mines and refinery complex) and NALCO
nagar, Angul (Smelter and Captive Power Plant Complex). The Bauxite mines are
situated atop a set of five mountains called Panchpatmalli. These mines are open cast
mines. The refinery complex for producing bauxite is located in Damanjodi. The
company’s headquarter are located in Bhubaneswar, which is the capital of Odisha.
NALCO is considered to be the one of the best profit making PSU n India and reaps
impressively huge benefits every year. It is expanding by currently employing new
projects. The ongoing second phase of expansion is set to make it the sixth largest
producer of the metal in the world.
The company has numerous awards to its credit, some of them being prestigious awards
and recognitions. The company received Indira Priyadarshini Vrikshamitran Award from
Government of India for its contribution in the field of afforestation and wasteland
development. The 960 MW Captive Power Plant of the Company also received the
prestigious Indira Gandhi Paryavaran Puraskar for the year for the year 2000 from
Government of India for its outstanding contributions in the field of environment
management. Besides these, the Company and its Units have received various National,
State and Institutional awards for excellence in Safety and Environment Management.
NALCO received ISO 9001:2000 awards and OHSAS 140001 for its excellence in
production technology and occupational health and safety systems respectively.

Share Holding Pattern/Ownership Pattern

Percentage of Holding
Promoter
5%

FII

DII

Other

5% 3%

87%

The huge chunk of the share is held by Government while the rest is distributed among
the FIIs, DIIs and other investors. Before the recent divestment, the scenario was slightly
11

PG20095052

different. The Government holding was 87.11%, FII was 5%, DII was4.5% and the rest
of 2.39%. But the recent divestment has been done to meet the future expansion policy.

Vision of NALCO:
To be a company of global repute in Metals and Energy Sectors.

Mission of NALCO:

 To achieve sustainable growth in business through diversification, innovation and
global competitive edge.
 To continuously develop human resources, create safe working conditions,
improve productivity and quality and reduce cost and waste
 To satisfy the customers and shareholders, employees and all other stakeholders.
 To be a good corporate citizen, protecting and enhancing the environment as well
as discharging social responsibility in order to ensure sustainable growth.
 To intensify Research and Development for technology development.

HR Vision of NALCO:
To attain organizational excellence through trust, openness, commitment, creativity,
innovation and providing opportunities for growth, well being and professional
enrichment.

HR Mission of NALCO:
To create a learning and knowledge based organizational through continuous innovation,
evaluation and realignment HR practices with the business strategies and to attract,
nurture and retain talent. To inculcate a spirit of creativity, quest for learning, to create a
responsive and competent work force and inspiring and motivational organizational
climate.

HR Philosophy of NALCO:
The philosophy of NALCO in the field of human resources and management has been:
 To attract competent personnel with growth potential and develop their skill and
capability in a congenial work and social environment through opportunities for
training, recognition, career advancement and other incentives.
 To develop and nurture favorable attitude among employees and to obtain their
best contribution to the organization by providing stable employment, safe
working conditions, job satisfaction, quick redress of grievances and through good
pay and welfare amenities, commensurate with the company’s capacity to spend
and the government guideli9nes.
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 To foster fellowship and sense of belongingness among all sections of employees
through closer association of employees with the management and by encouraging
healthy trade union practices.

Human Resources at NALCO
(As on March, 2010)

Mines

Alumina

Smelter

Captive Power Plant

Port (Vizag)

Corporate

Delhi

Kolkata

Chennai

Mumbai

Non-Permanent
Worker
Units

Permanent (as on March 2010)

Mines

493

Alumina

1806

Smelter

3160

Captive Power Plant

1456

Port (Visakhapatnam)

60

Corporate

4000 Contract
Workers
and
12,000 Casual
Workers to whom
Payment were made
on daily basis.

383

Delhi

44

Kolkata

26

Chennai

17

Mumbai
Total

14
7459

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Quality Policy at NALCO
“Quality will form the core of our business philosophy. Meeting the needs and
expectations of the customer and consistently improving our systems and works ethos
will be our chosen path in achieving excellence in business and fulfilling our social
obligations.”
Guiding Principles:
 To ensure a healthy return on investment by maximizing Operational efficiency,
Capacity utilization and Productivity.
 To continually improve and redesign Systems, Processes and Practices in order to
ensure error prevention and improve response time.
 To adopt internal Customer focus as a means to external customer satisfaction.
 To treat human resource as the key to the Quality excellence and ensure
development, involvement and satisfaction of employees.
 To ensure high quality of inputs through proactive interaction of employees.
 To meet obligations towards the society as a responsible corporate citizen.
 To provide value for money to all stake holders.
 To follow ethical business philosophy at all times.
Commitment:
We declare ourselves to the Quality Policy and Objectives of the Company in letter ad
spirit and commit to continuously to their fulfillment.

Social Accountability Policy
We at NALCO are committed to provide a socially accountable work environment to all
employees and uphold ethical business practices by respecting employees’ rights.
We shall achieve these by adopting a company wide culture, which will help to promote:





Involvement of all employees in sustenance of SA 8000 standard;
Continual improvement initiatives in all social issues;
Learning and training opportunities to all employees;
Fulfillment of relevant statutory rules and regulations, ILO requirements,
applicable international instruments and their interpretation.
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PG20095052

Occupational Health and Safety Policy
NALCO is committed a Safe, Healthy and Sustainable work environment in all its
operations. This shall be achieved by:
 Focusing on prevention of Accident and Occupational Health Issue.
 Complying with all legal requirement and other requirements related to Safety and
Occupational Health of persons and establishing clearly defined goals and
procedures to achieve the same.
 Ensuring Safety and Health of all employees and contract workers in its premises,
including those involved in transportation, cleaning and other such activities.
 Conducting Periodic Safety Audit, Environment Audits, Health Check-ups and
Risk Assessment by both internal and external qualified persons.
 Considering aspects related to Safety and Health of the personnel as well as the
environmental issues at the time of procurement of equipment and selection of
technologies.
 Ensuring health of persons in the peripheral locations, likely to be affected by our
operations.
 Periodically monitoring and reviewing safety and occupational health issues at
relevant levels, including the highest levels.
 Communicating Safety Hazards and health related issues to all concerned through
suitable means, including training.
 Involving the workmen in Policy implementation as well as identification of
potential issues.
 Considering Health and Safety performance of individual at different levels during
their career advancement, as per NALCO’s policy.
 Establishing and maintaining suitable set-up with competent persons to monitor
and bring to the notice of the management any issues related to unsafe conditions
and practices.
 Striving for continual improvements, exceeding statutory compliance levels,
wherever feasible.

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Environment Policy
In recognition of the interests of the society in securing sustainable industrial growth,
compatible with wholesome environment, National Aluminum Company Limited
(NALCO) affirms that it assigns high importance to promotion and maintenance of a
pollution-free environment in all its activities.
 To use non-polluting and environment-friendly technology.
 To monitor regularly air, water, land, noise and other environmental parameters.
 To constantly improve upon the standards of pollution control and provide a
leadership in the environment management.
 To develop employees’ awareness on environmental responsibilities and
encourage adherence to sound environmental practices.
 To work closely with Government and local authorities to prevent or minimize
adverse consequences of the industrial activities on the environmental practices.
 To comply with all applicable laws governing environment protection through
appropriate mechanisms.
 To actively participate in social welfare and environmental development activities
of the locality around its Units.

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BAUXITE MINE
A fully mechanized open-cast mine of 48, 00,000 tonne per annum, on Panchpatmali hills
of Koraput district in Odisha, serves feed-stock to the Alumina Refinery at Damanjodi,
located 16 km downhill. The transportation is done through a 14.6 km long single flight ,
multi-curve, cable belt conveyor of 1800 TPH(Tonne per Hour) capacity. The mining
capacity has been expanded to 63,00,000 TPA.
Area of Deposit

: 16 Sq. Km

Resource

: 310 million tonnes

Mineralogy

: Over 90 % gibbsitic

Ore Quality

: Alumina 45%, Silica 2%

Ore Thickness

: 14 mtr (avg.)

Alumina Refinery
The 15,75,000 TPA energy efficient Alumina Refinery, having three parallel stream of
equal capacity, located in the picturesque valley of Damanjodi. The Refinery provides
alumina to the Company’s Smelter at Anugul and exports the balance alumina to
overseas markets through Visakhapatnam Port. Presently, it is being expanded to
21,00,000 TPA capacity.

Smelter Plant
The 3,45,000 TPA capacity and Alumina Smelter, located at Anugul in Orissa, is based
on advanced technology of smelting and pollution control. Its capacity is being further
expanded
to
4,60,000
TPA.
Some of the key features of the Plant include:
 180 KA cell technology
 Manufacturing of carbon anodes, bus bars, anode stems etc
 Integrated facilities for manufacturing Ingots, Sows, Billets, Wire Rods, Strips and
Rolled Products. Advanced 180 KA cell technology
 Micro-processor based pot regulation system
 Fume treatment plant with dry-scrubbing system for pollution control
and fluoride salt recovery
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 Integrated facility for manufacturing carbon anodes, bus bars, anode
stems etc.4 x 35 tone and 4 x 45 tone furnaces and 2 x 15 TPH and 2 x 20 TPH
ingot casting machines
 4 x 45 tonne furnaces and 2 x 9.5 tph wire rod mills
 2 x 45 tonne furnaces and 60/42 per drop billet casting machine
 2 x 1.5 tonne induction furnace with a 4 tph alloy ingot casting machine
 26,000 tpa strip casting machines

CAPTIVE POWER PLANT
Close to the Aluminium Smelter at Angul, a Captive Power Plant of 720 MW capacity,
comprising 6 x 120 MW clusters, has been established for firm supply of power to the
Smelter.
Presently, the capacity is being expanded to 960 MW.
The salient features:







Micro-processor based burner management system for optimum thermal efficiency
Computer controlled data acquisition system for on-line monitoring
Automatic turbine run-up system
Specially designed barrel type high pressure turbine
Electrostatic precipitators with advanced intelligent controllers
Wet disposal of ash

The water for the Plant is drawn from River Brahmani through a 7 km long double
circuit pipeline. The coal demand is met from a mine of 3.5 million tpa capacity
opened up for Nalco at Bharatpur in Talcher by Mahanadi Coalfields Limited. The
Power Plant is inter-connected with the State Grid.

Port Facilities
On the inner harbor of Visakhapatnam Port on the Bay of Bengal, NALCO has
established mechanized storage and ship handling facilities for exporting alumina in bulk
and importing caustic soda. This facility can handle ships up to 35,000 DWT.
Ship Loading Rate : 2200 TPH
Alumina Storage
: 3 x 25,000 tonnes
Besides, Nalco exports from the port of Paradeep and Kolkata.
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Rolled Products Unit
After acquisition and merger of International Aluminum Product Ltd.(IAPL), Nalco has
started production from this 50,000 TPA plant. The Rolled Production Unit is presently
producing standard coils and sheets. Besides, it has facilities to produce foil stock, fin
stock, cable wrap stock, coil stock and closure stock for a variety of end uses.

Products Manufactured by NALCO:

 Aluminum Metal:
 Standard Ingots (each approx. 20/22.5 kgs)
 Sows Ingots (each max 750 kgs)
 Billet (in four sizes: 127+/- 1.5mm, 152+/- 1.5mm,178+/- 1.5mm,
203+/- 1.5mm)
 Wire Rods (in coil form : 9.5/11.95 mm dia, weight approx. 2 MT)
 Alloy wire rods ( Max. width 1600 mm, gauge 6 – 10 mm)
 Cast Strips

 Alumina Hydrate:
 Calcined Alumina
 Alumina Hydrate

 Zeolite-A

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PG20095052

Financial Overview of Nalco
To give a better picture of the company’s performance, it is better on our part to give
some graphical representation of the performance of the company not only on the
financial part but on the part of production and sales for the better understanding to the
evaluator of the project.

PRODUCTION and SALES
ALUMINA
(in ‘000 MTs)

Chart Title
1600
1400

Axis Title

1200
1000
800
600
400
200
0
Production
Export

2005-06
1590

2006-07
1475

2007-08
1576

2008-09
1577

863

774

860

852

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ALUMINUM
(in ‘000 MTs)

Chart Title
400
350

Axis Title

300
250
200
150
100
50
0
Production

2005-06
359

2006-07
359

2007-08
360

2008-09
361

Export Sales

96

93

101

82

Domestic Sales

258

263

252

271

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POWER
(in ‘000 MTs)

Chart Title
Axis Title

7000
6000
5000
4000
3000
2000
1000
0

2005-06

2006-07

2007-08

2008-09

Generation

5679

5968

5609

5541

Sales

322

421

129

81

Consumption

5357

5547

5480

5460

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FINANCIAL PERFORMANCE
Turnover and Net Profit
(Rs. in Crore)

Chart Title
7000
6000

Axis Title

5000
4000
3000
2000
1000
0
Sales Turnover
Net Profit

2005-06
5324

2006-07
6515

2007-08
5474

2008-09
5531

1562

2381

1632

1272

Sales Turnover
(Rs. in Crore)

Axis Title

Chart Title
4500
4000
3500
3000
2500
2000
1500
1000
500
0

2005-06

2006-07

2007-08

2008-09

Export

2306

2586

2134

2085

Domestic

3018

3929

3340

3446

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Dividend Payment
(Rs. in Crore)

% of Dividend
80
70
60
50
40

% of Dividend

30
20
10
0
322.00

483.00

387.00

322.00

2005-06

2006-07

2007-08

2008-09

Expenditure Breakdown
(Rs. in crore)

Rs. in Crore
Raw Material

Staff Cost

Repair and Maintenance

Power and Fuel

Depreciation

Others

7%

13%

18%
20%

35%
7%

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PEER GROUP COMPARISON
NAME OF THE
COMPANY
NALCO
HINDALCO
CENTURY
EXTRUSIONS
GUJURAT FOIL

CURRENT
MARKET
PRICE
367.00
138.45

MARKET
CAPITALIZATION(Rs.
in million)
EPS(Rs.) P/E
236461.77
8.13
45.18
265297.50
7.16
19.34

P/B.V.
2.42
1.12

DIVIDEND
60
135

5.85
63.05

468.00
517.10

1.72
3.92

10.00
0.00

0.54
3.51

10.83
17.96

*FIGURE AS ON 11TH FEBRUARY, 2010

SWOT ANALYSIS OF NALCO
STRENGTH:
1.
2.
3.
4.
5.
6.
7.
8.

Availability of huge deposit of bauxite
“state of the art” technology
Huge power production.
Low energy consumption
Maintenance of production and quality of metal production
Presently it is the market leader
High profitability leader.
Co-ordination among the various department thereby decreasing the chances of
conflict
9. Increased customer satisfaction
10. Last but not the least, the feather of NAVRATNA status studded to the crown of
NALCO.

Weakness:
1. High transportation cost from the refinery to the smelter.
2. Prices of Aluminum depend upon London Metal Exchange quotes.
3. The cash reserves are increasing each year without any further utilization or
investment.

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Opportunity:
1. Growth of the potential domestic market
2. Widespread uses of Alumina for various purposes
3. Utilization of the idle cash reserves in other booming sector like Nuclear Power or
in further expansions.
4. Identifying the prospect of setting up manufacturing units in foreign countries as
well as looking for new source of raw material in foreign countries.

Threat:
1.
2.
3.
4.
5.

Instability of the LME quotes.
High tax rate imposed on the metal.
Devaluation of the rupee leading to the increase of the debt amount
Dumping of the metal at low cost by the European countries.
Depressed LME prices resulting in more import of metal thereby decreasing
demand of product from NALCO.
6. Rejection of LP

Expansion Programme
In order to strengthen its business and increase market share, the company has been
pursuing expansion programs on a sustained basis. Soon after the completion of first
expansion, the Company launched its 2nd phase expansion commenced on October 2004,
which involved fresh investment of more than Rs. 4402 Crore. The ongoing expansion
will raise the capacities of its various segments:

Unit
Bauxite Mines
Alumina Refinery
Aluminum Smelter
Power Plant

After 1st Phase
Expansion
48,00,000 MT
15,75,000 MT
3,45,000 MT
960 MW

Original Capacities
24,00,000 MT
8,00,000 MT
2,30,000 MT
600 MW

After 2nd Phase
Expansion
63,00,000 MT
21,00,000 MT
4,60,000 MT
1200 MW

The Company is now planning for 3rd phase expansion at an investment of Rs.6000
Crore, which will further increase Aluminum Smelter capacity to 5.80 Lakh tonnes and
power generation to 1400 MW per annum.

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NALCO – “A Leap Ahead”
New era has begun. With the advancement of 21st century, Nalco has begun to change its
course of operation to cope up with the flow of modernization. Nalco has started the
process to design itself as a 21st century company. Nalco has designed a plan for its
horizontal as well as its vertical expansion along with the diversification of its operation.
The company is planning to utilize its unused cash reserves so as to decrease the cash
burden on itself. Nalco is planning to raise a part of the amount of the total funding from
public issue of Nalco’s share. The company is going for the issuance of FPO. The fund
raised from the FPO will be utilized for the purpose of both expansion as well as the
diversification. The company is going to divide its operation into three parts at corporate
level – Nalco Power, Nalco Metals and Nalco International.
1. Nalco Power:
Nalco is planning to invest about Rs. 1000 Crore in future project of state-run
Nuclear Power Corporation of India Limited (NPCIL). The two companies had
entered into an agreement to team up with each other for setting up nuclear power
plant in different part of India.
2. Nalco Metals:
Nalco metals will constitute the operation starting from mining of bauxite from
Panchpatmalli, Damanjodi to the production of Aluminum metals in the Smelter in
Angul. Nalco is considering of buying coal, copper, uranium and bauxite mines in
Nambia. It will also be operated under the head of Nalco Metals.
3. Nalco International:
Nalco International will look after the operation of its own International trade
houses which will be set up at Dubai and Singapore. The export of minerals and
aluminum metals produced in the manufacturing unit will be exported to this
Trade houses and from this houses they will be forwarded to its consumer
countries as per the demand.
\

NALCO

NALCO
POWER

NALCO
METALS

NALCO
INTERNATIONAL

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GUIDELINES ON CORPORATE SOCIAL RESPONSIBILITY
FOR CENTRAL PUBLIC SECTOR ENTERPRISES (CPSE)
CHANGE IN APPROACH
With the rapidly changing corporate environment, more functional autonomy, operational
freedom etc., CPSEs today are required to adopt CSR as a strategic tool for sustainable
growth.
CSR, in the present context, means not only investment of funds for social activities but
also integration of business processes with social processes.
NEED FOR LINKAGE WITH COMMUNITY
An Enterprise needs to address the concerns of the society in which the enterprise is
operating. There should be free interaction between enterprises and community
leaders. In order to address the social needs of the community, viable projects need to be
identified to meet its requirements.
OVERARCHING CONCEPT
CPSEs may approach Corporate Social Responsibility as a professional management
process, with a long-term strategy, integrating it with corporate strategies. CSR activities
may be planned in parallel to the business plan, looking at every possible opportunity to
link and integrate business plans with the social and environmental concerns available.
PLANNING THE CSR INITIATIVE
 A long-term Corporate Social Responsibility Plan needs to be prepared matching
with the long-term business plan;
 This may be broken down into short-term and medium term plans, specifying
activities to be undertaken, budgets allocated, responsibilities and authorities
defined, and measurable results expected
IMPLEMENTATION
The Plan must clarify implementation guidelines involving:
 Participation of Voluntary Organizations, Specialist Organizations and
Community-Based Organizations;
 Base-line Surveys;
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 Documentation of the experience;
 Setting up a CSR Hub with participation of Department of PE, SCOPE and
CPSEs;
 Monitoring and Evaluation;
 Lessons learnt for future use.

THRUST AREAS
 Areas related to the business of the PSE as a natural corollary to the business;
 Assistance to be mostly project based rather than donation, so as to generate
community goodwill, create social impact and visibility;
 Finalizing of time-frames and various milestones before commencement of a
project;
 Involving of suppliers in order to ensure that the supply-chain also follows the
CSR principles;
 Emphasis on principles of Sustainable Development, based on the immediate and
long-term social and environmental consequences of the activities undertaken;
 Improvement of the existing ecological conditions;
 Ensuring skill enhancement and employment generation by co-creating value with
local institutions and people.
ACTIVITIES THAT WILL NOT COUNT AS CSR
 Benefits to staff
 Grants to organization/institutions
IMPLEMENTATION MODALITIES
 CSR Activities to be carried out by Specialist Agencies;
 Such activities generally not to be conducted by CPSE employees / staff;
 Specialist Agencies to include NGOs, Institutes, Academic Organizations, Civil
Society / Community-based Organizations, Trusts, Missions etc., who have
requisite expertise;
 Utmost efforts to be made to find out the reliability, and track record of the NGOs
/ Organizations entrusted with CSR activities;
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 Initiatives of State Governments as well as Central Government Departments /
Agencies could be dovetailed/ synergized with CSR activities;
 Avoidance of any duplication of CSR activities by the CPSEs, the State
Governments and local level Programs.
FUNDING
The CSR budget to be mandatorily created through a Board Resolution as a percentage of
net profit in the following manner:
TYPE OF CPSES EXPENDITURE RANGE FOR CSR
Net Profit in a Financial Year (Previous Year)
i.
ii.
iii.

(% of profit)

Less than Rs. 100 crore
3% – 5%
100 crore to Rs. 500 crore
2% – 3% (Subject to a Min. of 3 cr)
500 crore and above
0.5% – 2%
 The CSR Budget to be fixed for each financial year. This funding not to lapse –
must be transferred to a CSR Fund, which will accumulate – as in the case of nonlapsable pool for North East.
 In case CPSEs have different Profit Centers like Factories / Plant locations, they
may be allocated separate CSR budgets to be spent by them under the Annual CSR
Budget allocations.

MONITORING
 Monitoring of the CSR projects is very crucial and needs to be a periodic activity
of the Enterprise;
 The Board of CPSEs should discuss the implementation of CSR activities in their
Board meetings;
 The CPSE should bring a separate paragraph / chapter in the Annual Report on the
implementation of CSR activities / projects including the facts relating to physical
and financial progress
 The implementation of CSR guidelines to form a part of the Memorandum of
Understanding to be signed between CPSE and the Government;
 The performance of CSR should be monitored by the Ministry / Department on
regular basis;
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 In MoU Guidelines from 2010-11 onwards, 20% has been earmarked out of the
non-financial parameters for performance under CSR.
 For proper monitoring of CSR activities, companies may appoint a CSR
committee or a Social Audit Committee or a suitable, credible agency to critically
assess fulfillment of social obligations.
 CSR projects should also be evaluated by an independent external agency. This
evaluation should be both concurrent and final.
MONITORING & EVALUATION BASELINE SURVEYS AND
DOCUMENTATION
 Impacts made may be quantified to the best possible extent with reference to base
line data, which need to be created by the CPSEs before the start of any project.
Hence, Base-line Surveys mandatory.
 The documentation relating to CSR approaches, policies, programs, expenditures,
procurement, etc. to be put in the public domain, particularly through the internet.

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NALCO CSR – “It is not the Charity, It is the Responsibility”
Nalco has always tried to prove itself a responsible and star corporate citizen of the
country. It has always tried to deliver its duty more than its expectation towards the
society. The company has adopted a policy of playing a catalytic role in improving the
quality of the life of people living in the peripheral villages, in collaboration with the
local government authorities. These activities includes: creation of infrastructures for
communication, education and health care, water supply apart from undertaking social
forestry, organizing rural sports and supporting cultural activities. Even before the land is
acquired and foundation-stone is laid for a project, the company launches its CSR
activities in the area to create a favorable mood among the local people towards the
project.

As a policy NALCO allocates 1% of its net profit per year for the periphery development
activities of the succeeding year. Out of this allocable fund, 40% is allocated for the
Damanjodi, 40% towards Angul and the rest 20% is for other areas. Around Rs.136.87
Crore has been allocated towards the periphery development including the special
projects. Nalco has created a trust within the local people towards the company. It will
foster the relation between the company and the people of the local area. Nalco has set up
a Corporate Social Responsibility Foundation and has doubled the allocated money from
1% of its net profit to 2%
.
Nalco is now playing a vital role in the economic development of the area where it
operates. Rehabilitation of displaced families, employment and income generation for
local people, development of infrastructure, environment care and humanitarian goodwill
missions have earned Nalco a special place in the hearts of the local people of the area
where Nalco operates.

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PROJECT

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INTRODUCTION
Social Security protects not just the subscriber but also his/her entire family by giving
benefit packages in financial security and health care. Social Security schemes are
designed to guarantee at least long term sustenance to families when the earning member
retires, dies or suffers a disability. Thus the main strength of the Social Security system is
that it acts as a facilitator – it helps people to plan their own future through insurance and
assistance. The success of Social Security schemes however requires the active support
and involvement of employees and employers.
The term “Social Security” is of almost indefinite connotation as it covers several
measures of protection against various contingencies “from Womb to Tomb” or “from
the Cradle to the Grave”. “It is a scheme of social insurance against interruption and
destruction of earning power and for special expenditure arising at birth, marriage or
death. It is an attack on five giants namely, Want, Disease, Ignorance, Squalor and
Idleness” The concept of Social Security is as old as civilization itself. The concept of old
age, disability and survivor’s protection, as an essential ingredient of Social Security, was
included in the objectives of International Labor Organization, set up after the First
World War in 1919. The oldest institution of social security in the history of mankind is
family. Closely connected by flesh and blood, inspired by the tales of filial devotion,
fraternal affection and parental sacrifice and encouraged by various religions, every
member of the family consider it as a part of his duty to share his weal and woe with
other members. Income from family property and family labor was pooled together and
was used for the maintenance of all members, whether protective or non-protective. The
family is supposed to look after physical needs of its member including food, shelter,
clothing as well as providing comfort and love acceptance and approval. The break-up of
the joint family system following emergence of the urbanization and industrialization has
resulted in the need for social security through the society.

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Main Characteristics of Social Assistance
 It provides for selected social dependency needs.
 The entire cost of the Scheme is borne by the State.
 It applies uniform and statutory means test. It may follow from the above study
that the social assurance has the following features
a. It is a device for providing social security benefit for special cases.
b. Assistance is granted by the state from its own fund directly or through
some appropriate Organization.
c. Assistance is granted as a matter of right.
d. The financial resources of social assistance scheme are of the limited order
and benefits given can be only for a short duration of time.
e. It is granted to those persons who fulfill certain prescribed conditions and
f. Social Assistance is supplemented rather than substitutive to social
insurance.
The purpose of social security:- The fundamental purpose is to give individuals and
families the confidence that their level of living and quality of life will not, so far as
possible, be eroded by any social or economic eventuality. This involves prevention of
the occurrence of contingencies which involve loss of substantial reduction of income.
According to International Labor Organization, there are nine branches of social security
benefits which are – Medical Care, Sickness Benefit, Unemployment Benefit, Old age
benefit, Employment injury benefit, family benefit, Maternity benefit, invalidity benefit
and survivor benefit. In the life of man, there are two stages of dependency – childhood
and old age and in the intervening years of adult life, there are likely to occur spells
during which he can not earn his living. Illness enters into every one’s experience and
apprehension of it is felt at all ages. A person who falls sick is threatened with two stages
of unemployment, at first because he cannot work and later because he would have lost
his job. Similarly every body is exposed to a certain number of risks or contingencies viz.
Unemployment, Sickness, Invalidity, Maternity, Employment Injury, Old age and death
of the bread winner. For the great majority of those who have nothing to live on but their
earnings, any one of these risks on contingencies, resulting inevitably in loss of income
and is liable to plunge workers and their family into extreme poverty.

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Social Security System in India
The constitution of India lays down, in its directive principles (Article-41) “the State shall
within the limits of its economic capacity and development, make effective provisions for
securing the right to work, to education and to public assistance in case of
unemployment, old age, sickness and disablement and in other cases of undeserved want”
In India, both social insurance and social assistance programs provide for Social Security
needs of workers in the contingencies of sickness, maternity, employment, inquiry
occupational disease, old age and death. So far as Social Insurance programs are
concerned the following schemes are in existence.
The principal Social Security Laws enacted centrally in India are the following









The Workmen’s Compensation Act, 1923
The Employees’ State Insurance Act, 1948
The Employees’ Provident Fund and Miscellaneous Provision Act, 1952
The Coal Mines Provident Fund Act
Provident Fund for Tea Plantation in the State of Assam
Seamen’s Provident Fund
The Maternity Benefit Act, 1961
The payment of Gratuity Act, 1972

In addition, a number of social assistance scheme both central and state Government
schemes – provide social assistance benefits for the welfare of specific categories of
workers. Most of these schemes cater to the 90% of the work force which is in the
unorganized sector, for whom the benefits of a Contributory Social Insurance Scheme is
yet to be extended, as is provided to worker in the unorganized sector. Today Social
Security exists for employees in Organized Sector whereas it is absent in the unorganized
sector. In the employee category, the complete responsibility of social security is given to
the Employer and State’s assistance is negligible. Out of 400 million workforces in India,
about 8% of them are brought under the PF/Pension legislation. The Government of India
is very keen to extend this benefit to the unorganized sector.

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Social Security Laws
The Workmen’s Compensation Act, 1923
The Workmen’s Compensation Act is the first piece of legislation towards social
security. It deals with compensation for workers who are injured in the course of
duty. The scheme of the Workmen’s Compensation Act is not to compensate the
worker in lieu of wages. The general principle is that a worker who suffers an
injury in the course of his employment, which results in a disablement, should be
entitled to compensation and in the case of a fatal injury, his dependant would be
compensated. Under the Workmen’s Compensation Act it is the employer who is
responsible to pay compensation (as opposed to the employees State insurance.
Establishments to which the Employees’ State Insurance Act applies to the
liability to pay compensation are on the ESI Corporation). The meaning of
compensation in this Act is limited to compensation granted under the Act for
employment injuries sustained during the course of work. It is also limited to
specifically monetary compensation other than a salary, travel allowance, and any
other form of remuneration that could be paid under normal circumstances of
employment
To get an overall understanding of the Act it is useful to look at the “Statement of
Objects and Reasons’ published with the Act when it was first passed in 1923. To
quote: “ …the growing complexity of industry in this country with the increasing
use of the machinery and consequent danger to workmen, along with the
comparative poverty to workmen themselves renders it advisable that they should
be protected, as far as possible from hardship arising out of accidents.
The Employees’ State Insurance Act, 1948
The Employees’ State Insurance Act, 1948 provides for health care and cash ents
in the case of sickness, maternity and employment injury. The Act is applicable to
non-seasonal factories using power and employing 10 or more employees and
non-power using factories and certain other establishments employing 20 or more
employees. The ESI Scheme is administered by a statutory body called the
Employees’ State Insurance Corporation (ESIC), which has members representing
Employers, Employees, Central and State Governments, Medical Profession and
the Parliament. The Union Minister for Labour & Employment is the Chairman. A
Standing Committee constituted from among the members of the Corporation, acts
as the executive body for administration of the Scheme and is chaired by Secretary
to the Government of India, Ministry of Labour & Employment. There are 24
Regional Boards and 345 Local Committees in existence at present.
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The Employees’ Provident Fund and Miscellaneous Provision Scheme, 1952
The Employee’s Provident Funds and Miscellaneous Provisions Act, 1952 is a
welfare legislation enacted for the purpose of instituting a Provident Fund for
employees working in factories and other establishments. The Act aims at
providing social security and timely monetary assistance to industrial employees
and their families when they are in distress and/or unable to meet family and social
obligations and to protect them in old age, disablement, early death of the bread
winner and in some other contingencies. Presently, the following four Schemes are
in operation under the Act through the EPFO:
 Employees’ Provident Funds Scheme, 1952
 Employees’ Deposit Linked Insurance Scheme, 1976
 Employees' Pension Scheme, 1995
 New Pension Scheme, 2009
The Maternity Benefit Act, 1961 (M.B. Act), which provides for 12 weeks
wages during maternity as well as paid leave in certain other related contingencies.
The Payment of Gratuity Act, 1972 (P.G. Act), which provides 15 days wages
for each year of service to employees who have worked for five years or more in
establishments having a minimum of 10 workers.
Evolution of Income Security for Elder, disabled and Survivor’s in India:
 Government Employees
The concept of old-age Pension was brought to India by the British, because the
person who were brought by them from England to occupy the higher
bureaucracy, had to be given old age pension, as they were entitled to be given old
age pension, as they were entitled to it, if they had remain in their own country.
The benefit was also extended to all Government employees as they had to rule
through them. Moreover it would have looked discriminately if it was available to
only one section of employees, who were British citizen and not available to the
employees of Indian origin. The Central Government employees are also enjoying
the benefit of pension and the payment of pensions is regulated under the CCS
(Pension) Rule, 1972. Similarly the Armed Forces Personnel, Railway Employees
and members of All India Service are enjoying the pensionary benefits at par with
Central Government Civilian employees through separate notifications issued by
the respective Ministries/Department. The pension schemes for the Government
employees are financed from the General Revenue of the Government of India.
Thus, in a sense it is a Social Assistance Scheme.
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In 1965, the Gratuity Scheme was introduced for the Government employees. In
respect of Central Government employees who join the service on or after
1.10.2001, the Government is considering framing of a separate pension scheme
on recommendations of Pension Regulatory Authority set up by the Government
of India.
 Industrial Employees
The Employees’ Provident Funds Scheme was framed under the EPF Act, 1952.
With a view to protect the family of the PF members, who die while in service, a
Scheme name Employees’ Family Pension Scheme was framed under the EPS and
Family Pension Fund Act, 1952 in the year, in the year 1971, as a Social Insurance
Scheme. In the year 1976, the Employees’ Deposit Linked Insurance Scheme was
framed under the EPF and MP Act, 1952, providing lump sum benefit, which was
linked to the PF deposits of the subscribers who dies while in service. On behalf of
the employees, the employer is required to pay the contributions towards the EDLI
scheme, 1976. In the year 1995, the Employees’ Provident Pension Scheme, 1971
was replaced by Employees’ Pension Scheme, 1995 which provides pension on
Superannuation, Family Pension to the family of the member who die while in
service or away from service or while drawing pension. In addition, Disablement
Pension, Children Pension, Orphan Pension, Disabled Children Pension and
pension for nominee and dependent parents and other benefits viz. Return of
Capital and communication are also being provided. The working class in India
was demanding one more retrial benefit and accordingly the Government of India
introduced the payment of Gratuity Act in the year 1972.
 Other Schemes in general
The Public Provident Fund Scheme, 1967 is a statutory Scheme of the Central
Government framed under the provisions of the PPF Act, 1968. The scheme came
into force w.e.f 1.07.1968 the PPF scheme can be availed by any individual in his
or spouse name and this is a boon to the self employed and entitled for income tax
benefits.
 The Government of India included the National Social Assistance Programmes
(NSAP) in the Central Budget for the year, 1995-96 and it came into effect from
15th August, 1995. The NSAP for the time being included:
1. National Old Age Pension Scheme
2. National Family Benefit Scheme (Survivor Benefit Scheme)
3. National Maternity Benefit Scheme
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4. Social Security Group Insurance Scheme for weaker section
NALCO’s Role in Maintenance of Social Security
NALCO Employees’ Provident Fund Trust (NEPFT) looks after the maintenance of the
Laws of Social Security in NALCO. The board of Trustees for NEPFT, headed by the
Chairman-cum-Managing Director of the company, has been reconstituted, following a
meeting of the Board of Trustees on June 15, 2009. The meeting was presided by Shri
C.R Pradhan, CMD while Shri B.L. Bagra, Director (Finance), attended the meeting as
special invitee. The representative of NEPF Trust and officials were also presented on the
occasion. The new board of Trustees for the NEPF with the following members
(nominated by Employees’ Recognized Union and Management) has been constituted
(W.E.F 1st January, 2009).
Employees’ Representative






Shri B.P. Kar, Senior PS, Corporate
Shri B.N. Soren, EA (Administration), Mines
Shri L.D. Rout, EA (HRD), Alumina Refinery
Shri Malaya Swain, Accountant, Smelter
Shri P.K. Behera, Sr. EA, (HRD) Smelter

Employer’s Representative
 Shri S.C. Das, Executive Director (Finance), Corporate Office
 Shri S.K. Das, Dy. General Manager (Finance), Smelter & Plant Complex
 Shri K Ravindranath, Dy. General Manager (Electrical), Mines & Refinery
Complex
 Shri S.K. Mishra, Dy. General Manager (HRD), Corporate Office
 Shri A.K. Rout, Sr. Manager (Finance),NEPFT, Corporate Office
 Shri P.K. Dhirsamant, Dy. Manager (Finance), NEPFT, Corporate Office

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Employees’ Pension
Scheme – 1995
(w.e.f. 16th November 1995)

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INTRODUCTION
The Employees’ Pension Scheme (EPS), 1995 is one of the three subordinate legislations
coming under the Employees’ Provident Fund Act, 1952 and is the latest among the
three, coming into effect from 16th November, 1996. On introduction of the Employees’
Pension Scheme, 1995, the erstwhile Employees’ Family Pension Scheme, 1971 ceased
to operate and all assets and liabilities of the old scheme were transferred and merged
with the Employees’ Pension Fund. The Employees’ Pension Scheme 1995 has been
designed as a “Benefit defined Social Insurance Scheme” formulated following
“actuaries principles” for ensuring long term financial viability. The Scheme is a
defined contribution as well as defined benefit scheme and aims at providing for
economic sustenance during old age and survivorship coverage to the member and his
family. The Employees’ Pension Scheme, 1995 derives its financial resource by partial
diversion of 8.33% from the employer’s share of Provident Fund contribution. The
Central Government contributes at the rates of 1.16% as done in old scheme. The benefits
and entitlements to the members under the old scheme are protected and continue under
the new Pension Scheme, 1995.
The Scheme on its application applies to all existing members of the Provident Fund who
were contributing to the Employees’ Family Pension Scheme, 1971. The new entrants to
the membership of Provident Fund from 16.11.1995 onwards shall also acquire
membership of the scheme on compulsory basis. The existing members of the Provident
Fund who did not opt for joining the erstwhile Employees’ Family Pension Scheme, 1971
shall have a option to join the new Pension Scheme. The Employees’ Pension Scheme
though effective from 16.11.1995 has a provision for retrospective application from
1.04.1993 in selective cases for outgoing members of the ceased Employees’ Family
Pension Scheme, 1971 during the period between 1.04.93 to 15.11.95. Members of the
old scheme who died between 1.04.1993 and 16.11.1995 are deemed to join the new
scheme and their beneficiaries are entitled for the pensionary benefits under EPS-1995.

Benefits and Eligibility
The Employees’ Pension Scheme, 1995 provides the following varied benefits to the
members and their families
I.

Monthly Member Pension:
 Superannuation Pension:
With a minimum service of 10 years and attaining the age of
superannuation.

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 Early Pension:
With a minimum service of 10 years and any time before attaining the age
of superannuation but after 50 years of age provided the member retires or
otherwise ceases to be in employment.
II.

Disablement Pension
Paid to the member on permanent and total disablement during the service if at
least one month’s contribution has been paid.

III.

Widow/Widower
The widow or widower pension shall be payable to the spouse of the member
when member dies
 While in service
 Away from Service
 As a pensioner
This pension is payable upto the death of the spouse or upto date of remarriage
whichever is earlier.

IV.

Children Pension
The children pension to each child shall be 25% of the widow/widower pension
and is payable to two children at a time upto their age of 25 years and will run
from the oldest to the younger in that order. The pension shall be paid
concurrently along with the widow/widower pension. The legally adopted children
of the member are also eligible for children pension

V.

Orphan Pension
The orphan pension to each child shall be 75% of the widow/widower pension and
is payable to two children at a time up to their age of 25 years and will run from
the oldest to the younger in that order, on the death or remarriage of the spouse of
the member.
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PG20095052

VI.

Disabled Children/Orphan Pension
If the child or children of the member is/are permanently or totally disabled at the
time of death of the member, then a disabled children or orphan pension is payable
up to the entire lifetime of the child irrespective of the age and number of children
in the family in addition to the normal children/orphan pension payable to the
other normal children.

VII.

Nominee Pension
If there is no spouse or an eligible child for the member on his death, then the
nominee executed through the Nomination proforma in Form 2 for the EPS-95
would be eligible to get a nominee pension up to his/her life time with quantum of
pension same as the widow pension.

VIII.

Pension to the dependent father/mother
If there is no spouse, children or a valid nominee to a member, then a pension
equal to the widow pension shall be payable to the dependant father up to his
death and then to the dependant mother up to her entire life time.

Previously under the old Employees’ Family Pension Scheme, 1971, only
widow/widower pension was payable, in case of only death while in reckonable service
and prior to completion of 60 years of age. In absence of widow or on cessation of
Widow Pension, pension was payable to the eldest child up to the age of 25 years and
then it was to pass on to the younger children, one at a time, subject to the age limit of of
25 years. There was no provision for pension to member and capital return or
commutation or disablement pension. At the time of leaving the service, the employee
was entitled to withdrawal benefit only.

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PG20095052

METHOD OF CALCULATION OF PENSION AND THE MINIMUM AMOUNT
PRESCRIBED
Monthly Member Pension
The quantum of pension payable to a member on superannuation and/or exit from service
on attaining the age 58/50 years shall correspond to the period of pensionable service
rendered by the member and his pensionable salary i.e. the last twelve months’ average
pay drawn by him at the time of exit. The pension is calculated by the formula
(Pension

Salary

x
70

Pensionable

Service)

Those retiring after 16-11-1995, shall have also the benefit of past service pension for the
period of membership under the erstwhile Employees’ Family Pension Scheme, 1971 on
factor formula basis provided in Paragraph 12(3) in the EPS-1995 as below:
Years of Past Service

Salary up to
Rs.2500/- per
month

Salary more than
Rs.2500/per month

Up to 11 years

80

85

More than 11 years but up to 15 years

95

105

More than 15 years but less than 20 years

120

135

Beyond 20 years

150

170

However, the amount shall be multiplied by the corresponding Table B factor for the
period that had elapsed between 16-11-1995 and the date of exit is date of attaining 58
years for superannuation/early pension, date of death for widow/widower pension and
date of disablement for disablement pension.
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PG20095052

Both the amounts would be aggregated to calculate the total monthly member pension
subject to the minimums prescribed as below:
Date of
Commencement of
Pension

Minimum formula
Pension For Pension
For Pensionable
Service

Minimum
Aggregate
Pension

Minimum after
proportionate
reduction for
eligible service
less than 24 years

From 16.11.1995 to
15.11.2000

335

500

265

From 16.11.2000 to
15.11.2005

438

600

325

From 16.11.2005

635

800

450

However these minimums are prescribed only to the existing members. For new
entrants the pension would be as per the formula.

Disabled Member Pension:
The pension is calculated as above subject to a minimum of Rs.250/- per month

Widow/Widower Pension:
If Member dies in service then
Widow Pension = Member Pension treating the date of death of retirement (or) Table ‘C’
factor (or) Rs.450/- whichever is higher
If the members dies away from service before 58 with service of more than 10 years
then
Widow Pension = Member Pension treating the date of exit from employment as date of
retirement (or) Table ‘C’ factor (or) Rs 450/- whichever is higher

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If the members dies away from service before 58 with service of less than 10 years
then
Widow Pension = Table ‘C’ factor, if the member is a bachelor otherwise a lump-sum
amount equal to 100 times of pension payable to the nominee or patent
If the member dies as a pensioner then
Widow Pension = 50% of the Member Pension (or) Rs.450/-, whichever is higher
Children Pension
25% of the widow pension calculated as above or Rs.150/-whichever is higher
Orphan Pension
75% of the widow pension calculated as above or Rs.250/- whichever is higher

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PG20095052

New Pension Scheme –
2009

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GLOSSARY

PFRDA
NPS
GOI
CRA
CRA-FC
KYC
NSDL
T+1
NPIN
T-PIN
PRA
PRAN
PF/PFM
RFP
ASP
TB
PoP
PoP-SP

UAT

Pension Fund Regulatory and Development Authority
New Pension System
Government of India
Central Recordkeeping Agency
CRA Facilitation Centre
Know Your Customer
National Securities Depository Limited
Transaction Plus One Day
Internet Personal Identification Number
Telephonic Personal Identification Number
Permanent Retirement Account
Permanent Retirement Account Number
Pension Funds/Pension Fund Managers
Request for Proposal
Annuity Service Provider
Trustee Bank
Point of Presence (NALCO)
Point of Presence - Service Provider (Authorised
branches of
POP for NPS)
User Acceptance Test

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PG20095052

PENSION FUND REGULATORY AND DEVELOPMENT
AUTHORITY (PFRDA)
Pension Fund Regulatory and Development Authority (PFRDA) was established by the
Government of India on 10th October 2003 to promote old age income security by
establishing, developing and regulating pension funds, to protect the interests of
subscribers to schemes of pension funds and for matters connected therewith or incidental
thereto.

1.

The Central Government has introduced the New Pension System (NPS) with effect
from 01 January 2004. The new pension system covers, at present, new entrants to
Central Government services (excluding Armed Forces) some State Government
services and autonomous bodies at their discretion and all citizens of India on a
voluntary basis with effect from 1st May 2009.

2.

The NPS is based on a unique individual Permanent Retirement Account Number
(PRAN) created for individual subscribers. In this system, a subscriber shall
periodically contribute savings into his/her Permanent Retirement Account (PRA)
while he/she is working and shall use the accumulations at retirement to procure a
pension for the rest of his/her life. Subscribers in this system shall enjoy a variety of
important facilities and rights including portability across jobs and locations, rights
and choices regarding selection of Pension Fund(s) and schemes, freedom to switch
between Pension Funds and service providers and nationwide access over a period
of time.

3.

PFRDA has already put in place the institutional framework and infrastructure
required for administering the 'New Pension System' (NPS) for government
employees. Various institutional entities such as Central Record Keeping Agency
(CRA), Pension Fund Managers (PFM), Trustee Bank (TB), Custodian and NPS
Trust have been appointed and are now functional.

4.

The recordkeeping and administration functions for all subscribers of the New
Pension System will be centralized and performed by a Central Recordkeeping
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PG20095052

Agency (CRA). The CRA will issue the unique PRAN to each subscriber, maintain
a master database of all pension accounts and record the transactions related to each
subscriber's PRAN.
5.

This pension system is envisaged to be based on two types of sub-accounts created
for individual subscribers:
a. Tier-I non-withdrawable pension account, and
b. Tier-II withdrawable savings account.

6.

PFRDA has already appointed 21 Points of Presence (PoP) and is now undertaking
the task of expanding the Pop network for all citizens of India. For this purpose,
PFRDA proposes to select and authorize entities as Points of Presence (POPs) to
extend customer interface for non-government subscribers/individual citizens.
PFRDA has undertaken the process of registration of PoP(s) in phases. This is the
second phase of registration in which interested entities fulfilling the eligibility
criteria as laid down in this document will be registered as PoP(s).

7.

PFRDA will authorize designated branches of PoP(s) as service providers. Such
authorized branches will henceforth be referred to as POP-Service Providers (POPSP). PoP-SPs shall offer to all account holders all services related to the NPS and
PRA, as may be specified by PFRDA from time to time.

8.

The POPs and associated POP-SPs shall also abide by such regulations, directions
and guidelines that PFRDA may issue from time to time.

9.

All the eligible bidders are requested to note that the current selection of PoP(s) is
for expanding the existing network of PoPs for all citizens of India.

10. The proposed appointment of PoP(s) will be valid for 5 years subject, however, to
review on the passage of the PFRDA Bill. The PoP(s) are expected to commence
their operations immediately after entering into agreement with PFRDA.

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PG20095052

Funds Flow

Graphic Representation of NPS Architecture

The key stakeholders of the New Pension System are as follows:
Pension Fund Regulatory and Development Authority (PFRDA)
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PG20095052

PFRDA is the regulator for the NPS. PFRDA is responsible for appointment of various
intermediaries in the system such as Central Record Keeping Agency (CRA), Pension
Funds, Custodians, NPS Trustee Bank, etc. PFRDA shall also monitor the performance of
the various intermediaries. PFRDA has a significant role to play in safeguarding the
interest of subscribers. It will regulate the manner in which subscriber contributions are
invested by PF(s) and will make all efforts to ensure fair play for subscribers. It shall also
ensure that all stakeholders comply with the guidelines/regulations issued by PFRDA
from time to time.
Central Recordkeeping Agency (CRA)
The recordkeeping, administration and customer service functions for all subscribers of
the New Pension System will be centralized and performed by the CRA. The CRA shall,
on the basis of instructions received from subscribers, transmit such instructions to the
appointed Pension Funds on a regular basis. The CRA will also provide periodic,
consolidated PRAN statements to each subscriber.
Pension Funds (PFs)/Pension Fund Managers
Appointed PFs would manage the retirement savings of subscribers under the NPS. PFs
would use their secure access codes to confirm receipt of netted assets and instructions
regarding fund allocation, confirm allocation of funds and communicate the NAV of each
scheme to CRA on a regular basis. The PFs will be required to invest strictly in
accordance with guidelines issued by the PFRDA.
Annuity Service Provider (ASP)
ASPs would be responsible for delivering a regular monthly pension to the subscriber for
the rest of his/her life. On receipt of personal and banking information details of
subscriber from CRA and of specified sum from the trustee bank the ASP would use its
access codes to confirm receipt. ASP would then begin payments of annuities to the
subscriber.
Trust & Trustee Bank (TB)
A Trust would be responsible for taking care of the funds under the NPS. The Trust
would hold an account with a bank and this bank would be designated as NPS Trustee
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PG20095052

Bank. NPS Trustee Bank will facilitate fund transfers across various entities of NPS
system viz. PFM, Annuity Service Providers, subscriber, etc. PFRDA has already
established NPS Trust under the provisions of the Indian Trusts Act w.e.f. 27th February
2008 and Bank of India is functioning as NPS Trustee Bank. The NPS Trust is being
administered by the Board of Trustees, as constituted by the PFRDA.
Point of Presence (POP)
POP shall be the first point of interaction between the voluntary subscriber and the NPS
architecture. PoP shall perform the functions relating to registration of subscribers,
undertaking Know Your Customer (KYC) verification, receiving contributions and
instructions from subscribers and transmission of the same to designated NPS
intermediaries. Detailed functions to be performed by the PoP(s) are listed out in section
2 of this RFP., PoP(s) and their authorized branches (PoP-SPs) shall also be required to
comply with the provisions of the Prevention of Money Laundering (PML) Act , 2002
and the rules framed thereunder, as may be applicable, from time to time.
Voluntary Subscribers
Subscribers will have complete control on how their contributions and savings in PRAN
are managed. They will be able to select a professional Pension Fund ( PF) from a pool of
competing Pension Funds. Each PF in this system will offer a limited number of simple,
standard investment schemes with different risk and return profiles. They will also be
able to seamlessly switch savings between investment schemes subject to such conditions
as prescribed by PFRDA from time to time.

FUNCTION OF POPs
The following sets of functions are primarily expected from PoP/PoP-SP. However, these
are not exhaustive.

INITIAL CUSTOMER INTERACTION FOR NPS
a) Addressing queries of potential subscribers regarding NPS.
b) Providing and displaying PFRDA approved information/material on NPS and
application form/ offer document/other publicity material
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PG20095052

The application and other request forms as prescribed by PFRDA for various services
under NPS would be required to be printed, stored and made available to NPS subscribers
by the PoP. In addition, these forms shall also be made available in downloadable format
on the PFRDA, PoP and CRA websites.
SUBSCRIBER REGISTRATION
a) Receive the duly filled application form along with the KYC documentation as
may be applicable from time to time.
b) Verification of KYC documents as may be required from time to time.
c) At the time of registration, PoP-SP shall collect and verify contributions that may
be received through cash/cheque/Demand Draft.
d) Collection/deduction of NPS application processing fees and issue of receipt to the
subscriber against the same.
e) Duly accepted application form shall be submitted on a daily basis, to CRA/CRAFacilitation Centre (FC) for digitization by hand where the PoP-SP and the CRAFC are co-located. Where the PoP-SP and CRA-FC are not co-located, the former
shall have the option to transmit the documents (original application form along
with documents) to the nearest CRA-FC either by hand or through post. For the
purpose, PFRDA/CRA may map PoP-SP(s) to nearest CRA-FC location.
f) Currently CRA-FC(s) are existing in approx 50 cities.
g) CRA would, on successful digitization, dispatch the PRAN kit directly to the
subscriber. The CRA shall also inform the PoP-SP of the PRAN numbers allotted
to its subscribers.
h) On receipt of PRAN numbers, PoP-SP shall upload the subscriber contribution
files into
CRA system and simultaneously arrange to transfer the funds into the account of
the NPS trust maintained with the Trustee Bank. For this purpose, the PoP/PoP-SP
is expected to maintain a separate, earmarked account for the NPS contributions
received.
i) The initial contribution of subscriber shall be remitted to the trustee bank on the
day it receives information from CRA about the PRAN number allotment to the
subscriber
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PG20095052

j) On successful digitization, the CRA shall retain the original NPS application form
and the
KYC documents for storage.
MAINTENANCE OF HARD COPIES AND RECORD OF TRANSACTIONS
(i)

(ii)

PoPs and PoP-SPs shall ensure maintenance, reporting and retention of records
of
all
transactions in accordance with the provisions of PML Act, 2002 and Rules
framed
thereunder, as may be applicable, from time to time.
CRA shall store hardcopy of the NPS application form and other supporting
documents
submitted by the subscriber at the time of registration towards fulfilling the
KYC norms. In addition, CRA shall also maintain documents submitted by the
subscribers for effecting any changes in demographic details.

Note: NSDL/CRA has agreed to store the hard copy documents on behalf of PoP/PoPSP. This arrangement would, accordingly, need to be formalised in writing between
the PoP/PoP-SP and NSDL. NSDL shall however not be charging PoP/PoP-SP for
storage of such KYC documentation. The responsibility for KYC verification shall,
however, be that of PoP/PoP-SP.
REGULAR SUBSCRIBER CONTRIBUTION UPLOAD
a) Verify PRAN card details on the deposit slip, the format for which shall be
prescribed by PFRDA.
b) Collection and verification of contributions that may be received
through cash/cheque/Demand Draft/ Electronic Clearing System (ECS).
c) Collection/deduction of contribution processing fee and issue of receipt to the
subscriber against the same.
d) Uploading subscriber contribution details online into the CRA system, in respect
of subscribers for whom clear funds are available, on a daily basis.
e) Remit clear funds into the account of the NPS trust maintained with the Trustee
Bank on a T+1 basis.
f) Maintain hard copies of deposit slips
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PG20095052

SUBSCRIBER SERVICING
On a regular basis, PoP/PoP- SP is expected to provide following range of services to the
NPS subscribers:
a) Carry out changes in subscriber details on request by subscriber subject to the
conditions stipulated by PFRDA.
b) Receiving switch request for change in PFM and/or investment option from
subscriber and transmitting the same to CRA.
c) Receiving withdrawal requests from subscriber and transmitting the same to CRA.
For this purpose, subscriber would put in a withdrawal request to PoP-SP. The
subscriber's corpus would be credited directly to his bank account by trustee bank,
on receiving instructions from CRA, through RTGS/NEFT or by way of a pay
order where his/her personal bank details are not available.
d) Attending to subscriber's request for shift to another PoP-SP.
- Recording the request
- Updating records in CRA system.
e) Any other NPS account related service as may be prescribed by PFRDA from time to
time
In order to execute above instructions/requests PoP/PoP-SP shall follow maker - checker
principle.

GRIEVANCE HANDLING
PoP/PoP-SP shall be expected to carry out the following in respect of receiving,
transmitting, verification and redressal of grievances from the subscribers and other NPS
Intermediaries:

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PG20095052

a) Receiving of grievances submitted by the subscriber against PoP / PoP-SP or any
other NPS Intermediary in the format prescribed by PFRDA and uploading of all
grievances in the Central Grievance Management System (CGMS) of CRA on a
daily basis. The CGMS system of CRA would route the grievances to respective
NPS intermediaries.
b) Subscriber may, in addition, raise grievances against the PoP/PoP-SP, at the CRA
call centre or electronically through CGMS.
c) Receiving grievances raised by the subscriber against PoP/PoP-SP through the
CRA call centre/CGMS of CRA by accessing the CGMS.
d) If PoP/PoP-SP has grievances against any NPS Intermediary such as CRA or TB,
it shall raise grievance using CGMS of the CRA or at the CRA call centre.
The grievances relating to PoP/PoP-SP raised either by the subscriber or by the NPS
Intermediary shall be resolved within 7 days of receiving of grievance and the resolution
shall be posted in the CGMS system for each grievance. Supporting CGMS infrastructure
will be available with CRA system.

INTER/INTRA POP OPERABILITY CRITERIA FOR DELIVERY OF SERVICES
Sl. No Nature of service(s)
A

B

C
D

Inter/Intra-operability considerations
in service delivery to NPS subscriber
Registration of Subscriber
Subscriber has the right to choose any
PoP/PoP-SP
for
registering
himself/herself as NPS subscriber. The
PoP-SP through which he/she has been
registered would be termed as 'Parent
PoP-SP'.
Acceptance of subscriber contribution
Shall be accepted at any authorized
branch (PoP-SP) of any PoP. There will
be complete inter-PoP operability in this
regard.
Acceptance and upload of switch/scheme Initially, only at the parent PoP-SP
preference change request1
Changes in subscriber's details.
Initially, only at the parent PoP-SP
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PG20095052

E
F
G

H

Withdrawal Request processing

At the current PoP-SP to which the
subscriber is linked in the CRA system
Receiving Grievances and their redressal Initially, only at the parent PoP-SP
Subscriber shifting within the same PoP Initially the subscriber has the option to
shift from his/her Parent PoP-SP to any
other PoP-SP within the same PoP.
Subscriber shifting from one PoP to any In due course of time (as stipulated by
other PoP
PFRDA) the subscriber will have the
option to shift from one PoP to any
other PoP registered with PFRDA.
PFRDA will lay down the procedures as
and when inter-pop operability is
established.

SERVICE LEVEL STANDARDS/REQUIREMENTS
Sl.No
A

Functions of the PoP
Registration of Subscriber

B

KYC Verfication, Retention
and maintenance of record of
transactions
Transmission of funds to NPS
trust account maintained with
TB
Switch/Scheme preference
change

C
D
E

Grievances

F

Subscriber shifting

G

Subscriber shifting from one
PoP to any other PoP

Service level/Standards
Submission of application forms to CRA-FC by
end of the day (EoD)
As per the provisions of the PML Act, 2002 and
the rules framed thereunder, as may be
applicable, from time to time.
Clear funds have to be transferred to the
Trustee Bank on a T+1 basis.
Request to be uploaded into the CRA system as
and when received from subscriber by PoPSP/PoP.
Grievances against the PoP-SP to be normally
resolved within 7 days from the date of receipt
of grievance.
Request to be uploaded into the CRA system as
and when received from subscriber by
PoP/PoP-SP.
In due course of time (as stipulated by PFRDA)
the subscriber will have the option to shift from
one PoP to any other PoP registered with
PFRDA. Operational details to be prescribed by
PFRDA in due course.
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PG20095052

TECHNICAL ELIGIBILITY CRITEREA FOR PoP
Any institution bidding for PoP Registration is required to fulfill following basic
technical eligibility condition to be registered as PoP under NPS.
a) Regulated by both Reserve Bank of India, Securities and Exchange Board of India
or Insurance Regulatory and Development Authority.
b) Having a minimum of 25 branches, covering at least 25 districts spreading over 3
or more States with each branch conforming to IT infrastructure and capacity to
electronically link to the CRA (detailed IT requirement as mentioned in section
3.2 of this document). Each of these branches should have demonstrated capability
to electronically transmit in an efficient and secured manner clear NPS subscriber
contribution and subscriber information on at least "T+1" basis.
c) Minimum net worth (paid-up capital+reserves+surplus) of INR 1.00 Cr as on 31st
March 2009.
d) A three year track record of profitability (Profit after tax) as of 31st March 2009.
e) The institution should be in business of marketing/selling of retail financial service
Note: While a PoP must satisfy conditions at (a) to (e) above, any branch of the PoP
seeking authorization from PFRDA to function as PoP-SP will have to satisfy the
requirement of conforming to IT capability which will enable it to transfer funds and
information on at least "T+1" basis.

REGISTRATION OF CONTRACT
REGISTRATION CRITERIA
Any bidder who satisfies all the technical eligibility conditions laid out in this RFP and
submits the requisite commercial undertaking as specified in Annexure V will qualify for
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PG20095052

registration as PoP under NPS. The bidder has to provide sufficient evidence of being a
responsible and responsive bidder whose proposal conforms to the RFP.

PFRDA'S RIGHT TO ACCEPT OR REJECT ANY OR ALL PROPOSALS
The PFRDA reserves the right to accept or reject any proposal, and to annul the RFP
process and reject all proposals at any time prior to award of contract, without incurring
any liability to the affected bidder or bidders or any obligation to inform the affected
bidder or bidders of the grounds for PFRDA's action.

NOTIFICATION OF AWARD
Prior to expiry of the validity period, PFRDA will notify the successful bidder in writing
that its proposal has been accepted..Immediately on receipt of acceptance letter from
PFRDA, the successful bidder should initiate the process of registration of its branches as
PoP-SP. The successful bidder should log on to the NPS architecture and establish
necessary connectivity with CRA and Trustee Bank so as to be ready for participating in
Orientation programme. The authorised and registered branches (PoP-SP) of the PoP
should become fully operational and registration of minimum 25 branches completed
within time frame prescribed by PFRDA in the contract.
SIGNING OF CONTRACT
Once the PFRDA notifies the successful bidders that their proposal has been accepted,
PFRDA shall enter into a separate contract, incorporating service level agreements (will
be provided in detail to successful bidders separately) between PFRDA and the
successful bidders.

PROCESSING FEE AND PERFORMANCE BANK GUARANTEE
Processing Fee of Rs. 25,000/- (Rupees Twenty Five Thousand only) in the form of DD
drawn in favour of "The Pension Fund Regulatory and Development Authority" and
payable at New Delhi must be submitted along with the Technical Bid.
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The successful bidder shall at its own expense deposit with PFRDA, within fifteen (15)
working days of the date of announcement of eligibility or prior to signing of the contract
whichever is earlier, an unconditional and irrevocable Performance Bank Guarantee
(PBG) from a scheduled bank acceptable to the PFRDA, payable on demand, for the due
performance and fulfilment of the contract by the bidder. The Performance Bank
Guarantee will be of Rs. 500,000 (Rupees Five Lakh only). All incidental charges
whatsoever such as premium, commission etc. with respect to the Performance Bank
Guarantee shall be borne by the bidder. The PBG shall be valid till 120 days after the
completion of the registration period/termination of the registration.
In the event of the bidder being unable to service the contract for whatever reason, the
PFRDA would invoke the PBG. Notwithstanding and without prejudice to any rights
whatsoever of the PFRDA under the contract in the matter, the proceeds of the PBG shall
be payable to the PFRDA as compensation for the bidder's failure to perform/comply
with its obligations under the contract. The PFRDA shall notify the bidder in writing of
the exercise of its right to receive such compensation within 14 days, indicating the
contractual obligation(s) for which the bidder is in default.
Before invoking the PBG, the vendor will be given an opportunity to represent before the
PFRDA. The decision of the PFRDA on the representation given by the vendor shall be
final and binding. If circumstances so warrant, the matter may be referred to an arbitrator
to be appointed by the PFRDA in consultation with registered PoP. .

REGISTRATION FEES
Due to the fact that NPS is at its development stage no registration fee has been
prescribed for PoP at present. PFRDA, however, reserves the right to impose registration
fees for PoP in due course.

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PG20095052

POP REGISTRATION CONDITION
On signing of the contract with PFRDA, the successful bidder would be allowed to
operate as POP for NPS under the following terms and conditions:

RENEWAL OF REGISTRATION AFTER THE FIVE YEAR TERM
The initial registration period as PoP will be for 5 (five) years. After the completion of
the five years term, the PoP will be required to re-bid to be considered for subsequent
appointment as a PoP. The selection process and criteria may be different from the
criteria adopted in the present process. On an ongoing basis, PFRDA or the NPS Trust at
their discretion may register more PoP(s) and also review the performance of the existing
PoP(s).

GOVERNING LAWS/ JURISDICTION ARBITRATION

Any matter relating to the appointment of PoP shall be governed by the Laws of Union of
India. Only Courts at New Delhi (with exclusion of all other Courts) shall have the
jurisdiction to decide or adjudicate on any matter or dispute which may arise.

TERMINATION OF THE REGISTRATION

The initial registration of PoP(s) will be for a period of 5 (five) years. The tenure of
registration of the PoP will end if:
1) PoP contravenes the conditions/clauses as specified in the contract with PFRDA;
or
2) At the end of the tenure as specified in the letter of registration.
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PG20095052

PoP once registered will have to ensure that the eligibility conditions laid out in this RFP
are strictly adhered to during the entire currency of the registration period and any
extension thereto. A certificate evidencing compliance with the eligibility conditions
shall have to be furnished by the registered PoP to PFRDA on annual basis within 15
days of completion of each financial year.

Minimum Contribution by an Individual Subscriber
The minimum contribution by an individual subscriber is Rs. 500 per month or Rs.6000
per year and a minimum number of 4 contributions per year.

Benefits of NPS – 2009
 It is voluntary on the part of the Indian citizen to choose their own contribution to
the pension fund.
 It is simple to open an account with any one PoP and get their PRAN.
 It is optional on the part of the subscriber to choose their own investment option.
 It can be exchanged in between the cities and jobs as well as the pension fund
managers.
 It is regulated by PFRDA, with transparent investment norms and regular
monitoring and performance review of Fund Manager by NPS trust.

On attaining normal retirement age (60 years), there should be compulsorily annuitize
of 40% of the total fund and the rest 60% can be withdrawn in a lump sum or in a phased
manner. In case if the subscriber opt for phrasal withdrawal,
 Minimum 10% of the pension wealth should be withdrawn every year.

 Any amount lying to the credit at the age of 70 years should be compulsorily
withdrawn

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INVESTMENT CHOICE
The NPS would have two choices in front of the subscriber.
 Active Choice – Individual Funds (Asset Class E, Asset Class C and Asset Class
G)
 Auto Choice – Lifecycle Fund

Active Choice – Individual Fund

It is at the will of the subscriber to decide the investment option of the NPS Pension
Wealth.
Asset Class E –investment in predominantly in equity market instrument
Asset Class C – investment in fixed income instruments other than Government
Securities
Asset Class G – investments in Government Securities
If the subscriber opts for Asset Class E then 50% of the fund would be invested in Equity,
30% in Government Securities and the rest 20% in corporate bonds and other income
instrument other than Government Securities. If the subscriber opts for Asset Class C,
then 100% of the fund would be invested in Corporate Bonds and other fixed income
instruments other than the government securities. The option of Asset Class G would give
the subscriber a choice to invest 100% in Government Securities.

Findings on Active Choice:
 The subscribers have to consider the both risk and return part of investment. The E
Asset Class has higher potential return than the G Class Asset. But it also carries
the risk of investment loss. Investing entirely in Asset Class G would not give a
higher return but is a safer option.
 It is advisable to reduce the risk by diversifying the investment. The three
individual assets allow broad range of investment options, its good not to put “all
eggs in one basket”.
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 The amount of risk the subscriber can sustain depends upon the investment time
horizon. The more the time the subscribers have before investment, the more risk
the subscriber can take. (This is because early losses can be later offset by later
gain.
 Periodically the subscriber should review the investment choices and check the
distribution of his/her account balance among the funds to make sure that the mix
they choose is still appropriate for his/her situation. If not, rebalance the account to
get the allocation they want.

Auto Choice:
NPS offers an easy option for those subscribers who do not have the required knowledge
their NPS investments. In case the subscriber is unable/unwilling to exercise any choice
as regards to asset allocation, their fund would be investment in accordance with the Auto
Choice option.

TABLE OF LIFECYCLE FUND

AGE
Upto 35 years
36 years
37 years
38 years
39 years
40 years

ASSET
CLASS E

ASSET
CLASS C
50%
48%
46%
44%
42%
40%

ASSET
CLASS G
30%
29%
28%
27%
26%
25%

20%
23%
26%
29%
32%
35%

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41 years
42 years
43 years
44 years
45 years
46 years
47 years
48 years
49 years
50 years
51 years
52 years
53 years
54 years
55 years

38%
36%
34%
32%
30%
28%
26%
24%
22%
20%
18%
16%
14%
12%
10%

24%
23%
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
11%
10%

38%
41%
44%
47%
50%
53%
56%
59%
62%
65%
68%
71%
74%
77%
80%

CHARGES
NPS offers Indian citizen a low cost option for planning their retirement. A 0.0009% fee
(based on Asset under Management) is charged for managing the wealth, makes the
pension funds under NPS perhaps the world’s lowest cost money manager. Following are
the charges under NPS:

Service Charge

Charge Head

Method Of Deduction

Intermediaries
Rs.50

PRA Opening Charges

CRA

Through Cancellation
of unit
Rs.350

Annual PRA
maintenance
Charge per account

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Charges per transaction
PoP(Maximum
Permissible Charges
for each subscriber)

Trustee Bank

Rs.10

Initial subscriber registration and
contribution upload

Rs.40

Any Subsequent Transaction

Rs.20

Per Transaction emanating from
a RBI location

Through NAV
deduction
Zero

Per Transaction emanating from
a
non- RBI location

Rs.15

0.0075%p.a. for
electronic segment
&0.05%p.a for physical
segment

Asset servicing charges
Custodian (on asset
value in custody)

0.0009% p.a.

Investment Management
PFM charges

To be collected upfront

Through NAV
deduction

Through NAV
deduction

Fee

STATEMENT OF PROBLEM
It was hard on our part to define a problem because both of EPS-1995 and NPS-2009
have their own pros and cons. But still we have to find out from both of this Pension
Scheme that which one is better for the Pensioner. Because both of this Scheme are the
part of Social Security. And Social Security is about securing the income of citizen of a
country whether it may be at the time of old age, sickness or death of earning member. So
it is for the well being of citizen of a country. And Government of India, in order to
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lessen the burden of expenditure along with maximum benefit to the pensioner, replaced
the EPS – 95 by NPS – 2009. In EPS, the contribution was made by employers and the
employees and the accumulated fund will also bear the contribution from the Government
of India. Government contributed to this fund Rs.2500 Crore (fig. as in2006) annually.
And on the NPS part, Government will have no contribution to the Pension Fund.
Government is in full support of this scheme. But the biggest drawback in this scheme is
when the pensioner while withdrawing 60% of the fund at time of retirement would have
to pay the tax on it. Even the PFRDA got only Rs. 8 Crore for the advertisement
campaign to create the awareness of NPS - 2009 which is very less. The six fund
manager will get only 0.0009% fee on the total fund held by them. So it is not luring for
the fund managers. Because in comparison to the other funds, this funds carries a very
low rate. And this may affect the interest of the fund managers to promote the pension
fund among other financial products.

OBJECTIVE
 To find out the better scheme for the pensioner of PSU
 To analyze the pros and cons of both of the scheme.
Elaboration of the objective
The Government of India has designed these pension schemes – namely Employees’
Family Pension Scheme – 1971, Employees’ Pension Scheme – 1995, New Pension
Scheme – 2009 to secure the income of the working mass of India at the time of old age,
death or inability to work. Through the aspect study of EPS – 1995 and NPS – 2009 we
can find out the pros and cons of both of the schemes.

METHODOLOGY
a) Type of Study:
The study is based on the analysis of the data provided by the NALCO
Employees’ Provident Fund Trust (NEPFT). The data provided by the NEPFT was
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based on the Phase-I conversion of EPS account to NPS account which included
the conversion of 1247 out of 7459 EPS accounts
b) Type of Data:
The data can be divided into two categories namely primary data and secondary
data.
 Primary Data:
The primary data was collected from the NEPFT and the data provided by
them. The PRAN entry also helped me a lot to analyze the data and to find
out the number of accounts in NPS-2009.
 Secondary Data:
This type of data was collected from various websites and journal to find
out various circulars and notification issued by the Government of India
and PFRDA regarding the New Pension Scheme as well as the Social
Security. The secondary data was also helpful in providing data regarding
the Employees’ Pension Scheme – 1995.

c) Sources of Data:
The sources of the data were the data provided by the NEPFT and Financial
Report and other financial statement was provided by the financial department of
NALCO. And for the part of the secondary data source, the circulars and
notification of PFRDA and the Government of India, internet was used.

Facts and Findings about NPS – 2009:
 Investment in New Pension Scheme – 2009 is exempted from Security
Transaction Tax and Dividend Distribution Tax.
 The NPS – 2009 is being put under Exempt Exempt Tax (EET) regime with the
majority amount is being taxed.
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 Final Receipt from NPS – 2009 is taxed, unless it is being invested in the annuity
in the same financial year.
 Other Peer products like Provident Fund and Public Provident Fund is not being
taxed at any stage and is under Triple Exempt Regime.
RESULTS/FINDING
The Pensioner, in NPS – 2009, is given option to decide where the money in the fund
would be invested. There would three options in front of the Pensioner to decide their
investment channel. The three options would be G, C and E. The return from the NPS
would be better than the Provident fund and EPS – 1995 but it is not exempted from tax
as the peer products are. Even another drawback in the NPS is that it is a financial
market product and its benefit and schemes are need to be well-communicated and
advertised. But unfortunately the record keeper or the fund managers get very low
incentives and they cannot spare a part of it for promotions. The positive side for the NPS
is that there are 40 Crore of working population in India but only 12-13% are enrolled
under the EPS -1995 so there is still a scope to bring the rest of the working population to
take into its grip. Where as in EPS – 1995, the employee do not get any option to decide
their investment patterns. Moreover in EPS – 1995, the return is lower than the NPS –
2009. The positive side of EPS – 1995 would be that it is not taxable at any point of time
as it is in NPS – 2009.

CONCLUSION AND RECOMMENDATION
.
The EPS – 1995 has a larger liking than that of the NPS because of the promotions and
knowledge the pensioner have about the benefits in EPS – 1995. People also have a very
wrong perception about the NPS that it is a financial market product so it is more risky
than EPS – 1995. Pensioners need a secure investment option to plan their retirement so
they prefer EPS more over NPS. Moreover the amount at the maturity of the NPA
depends upon the NAV at the time of retirement. But the NPS – 2009 is better than EPS –
1995 on the aspect of transparency and the Pensioner get the option to plan out the
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investment strategy of their pension fund. The return on the pension fund is better than
EPS – 1995. In NALCO only 1247 employees out of 7459 are enrolled under NPS –
2009. Most of them were from Corporate of NALCO. This proves that the employees in
the middle level and top level management are more enrolled in the NPS – 2009.

Recommendation:
 The Government needs to think over the recommendation given by the PFRDA to
make the amount at the maturity of Pension Fund tax-free.
 The Government needs to think over the increase in the money allocated for the
promotion of NPS.
 The PFRDA as well as the Government should try to increase the fund manager
fee so as to encourage them to promote NPS over and along other Pension Scheme
and other retirement investment plan.
 The lack of knowledge and promotion is one of the major lacunae which the
Government should think upon.
 On the part of NALCO, the NEPFT should carry out extensive promotional
activity like seminars among the labors and labor union.

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ANNEXURE – I

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ANNEXURE - II

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REFERENCE
 Annual Report 2007-08, 2008-09 of NALCO
 Circulars of PFRDA to NEPFT
 CSR report of NALCO
 Article of Association of NALCO


http://www.nalcoindia.com/newsdefault.htm



http://www.nalcoindia.com/productsmain.asp



http://www.nalcoindia.com/productsmain.asp



http://pblabour.gov.in/pdf/acts_rules/maternity_benefit_act_1961.pdf



http://pfrda.org.in/



http://www.dnaindia.com/money/report_a-layman-s-guide-to-the-new-pensionscheme_1253551



http://epfindia.nic.in/pension.htm



http://www.youtube.com/watch?v=krmKmpJoDwg



http://www.youtube.com/watch?v=8fuh_gkX9Hk
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