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Modernization of Mind at Tata Steel

Author(s): Mirza S. Saiyadain


Source: Indian Journal of Industrial Relations, Vol. 36, No. 3 (Jan., 2001), pp. 363-375
Published by: Shri Ram Centre for Industrial Relations and Human Resources
Stable URL: http://www.jstor.org/stable/27767731
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CASE STUDY

IJIR, Vol. 36,No. 3, January 2001

MODERNIZATION
Mirza

OF MIND AT TATA STEEL

S. Saiyadain

INTRODUCTION
TATA STEEL entersthenewmillenniumwith theconfidenceofa
learning,knowledgebased and a happy organisation. We will
establishourselvesas thesupplierofchoicebydelightingour cus

tomers with our services and our products. In the coming decade,
we will become themost cost
steel plant and so serve
competitive
"
the community and the nation.
"Where Tata Steel ventures.others

will follow.

So goes thevision statementof Tata Steel; a vision that took its


roots in the year 1839when a boy was bom in thepriestly Parsee
family

at Navsari,

a small

town

in Gujarat.

On

his birth the sooth

sayerpredicted thatsome day he would be well known and famous.


And so itcame topass. Thiswas the time in thehistorywhen British
a climate
had initiated a number of reforms to provide
government
were
in India. Those days themining rules
of industrialisation
"sim
a fair illustration of the normal demeanour
of
the
ply
government

towards businessmen in India" (Harris 1958). In 1899 Lord Curzon,

the Viceroy,
liberalized
the mineral
concession
policy and opened
doors for Indians to venture into the industrialisation
of India (Lala,

1981). However, much before this in 1882 theboy,born 43 years ago,

Dr. Mirza S. Saiyadain is FORE Chair Professor, FORE School ofManagement.


Case material of FORE School ofManagement, New Delhi is prepared as a basis
for class

or

discussion.

incorrect

handling

are not
to present
designed
of administrative
problems.

Cases

illustrations

of either

correct

Copy right? 2001, FORE School ofManagement, New Delhi.


The author is grateful to FORE School ofManagement for providing financial
support

in the

preparation

of this case.

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364

Indian Journalof IndustrialRelations

read a report by German

geologist,

Ritter Von Setriwartz

on the avail

ability of iron ore inChanda district in theCentral Province (now


Madhya Pradesh) which gave him the idea of giving India a Steel
plant. The boywas Jamsetji
Nusserwanji Tata and theplant Tata Steel.
a
J.N. Tata's incessant efforts got Charles
Page Perin,
consulting
a survey of the
to
New
from
conduct
of
York,
engineer
availability

raw material and JulianKennedy of Pittsburg to build the plant.


The site chosen was thevillage of Sakchi, themeeting point of two
riversKhorkai and Subernareka which provided themuch needed
came from 8,000 investors who
sub
required
capital
to the shares floated in Indian market.
The actual construc

water.

The

scribed

tionof plant began in autumn of 1908 and itpoured its firststeel on


February 16,1912. The steel plant did not develop around a town
but brought along a town in itswake. On January 2, 1919 Lord
Chelmsford visited iron and steelworks. He renamed the town of
Sakchi as Jamshedpur inhonour of theman who gave India its first
integrated ironmill (Pandey, 1989).
Tata Steel, India's largest fully integrated private steel plant is
comparable with any integrated steel plants in theworld. Today
theHouse of Tatas owns close to 25 per cent of its equity and the
company

has

an asset base

of over

9000

crores.

Export

volume

is

about 0.426 million tonnes equivalent toUS$ 170million. It grew


from initial capacity of 0.1million tons in 1912 to 3.89million tons
by year 1990-2000. Besides going through theusual teethingprob

a number ofmore serious


It
lems, Tata Steel experienced
problems.
a 13 month
went
cost
strike:
became
steel
less
ef
through
making
be
fective, competition with foreign and local steel manufacturers
came severe and consumers
started shifting their loyalty to local

manufacturers

TECHNICAL

of recycled

MODERNIZATION

For Tata Steel


ing and

products.

approach.

to reorient itself to new think


necessary
Modernization
became
the guiding principle.

itbecame

Tata Steel started theprocess of closing down old units and setting

up new ones
modernization
varied

in 4

The process of
phases of technical modernization.
started in 1980 and went on till 1997. The four phases

in terms of time
period

as seen below:

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365

Case Study
Phase
Phase
Phase
Phase

one
two
three
four

1980
1984
1990
1995

- 1983
-1989
- 1995
- 1998

During themodernization period stretchingover 18 years the


following units were closed and new facilitieswere added at the
7 thousand

cost of about
UNITS

crores of rupees.

FACILITIES

CLOSED

SMS # II

ADDED

L.D. SHOP # 1

MERCHANTMILL# I

OXYGEN PLANT

PLATE MILL

TAR DOLO

SMS#I

BBSP#II

BAR FORGESHOP

PLANT

WIRE ROD MILL # I

SHEET MILLS

POWER HOUSE

SMS # III

HOT STRIPMILL

ROLLINGMILL #I

L.D SHOP #11

ROLLING MILL

COKE OVENS BATTERY #V, VII & VIII

# II

STRIP MILL

G-BLAST

# IV

FURNANCE

3 RD CONVERTER
3 RD SLAB CASTER

MODERNIZATION

(L.D. # II)
(L.D # II)

OF MIND

the enormous

investment in technological modernization,


to
the new chal
reorient
theworkforce meeting
necessary
were
initiated in hu
and opportunities.
changes
Systematic

Given
in became

lenges
man resource

to create new perform


strategy through programmes
ance ethics at Tata Steel.
senior
when
interviewed
managers
Many

pointed out to these strategic shifts in theminds of employees to

on these initia
as a fact of
reality. While
reflecting
accept change
in
tives one senior HR manager
said, "we have always been good
a direction."
were
we needed
directions
These
crystallized
running,
a cli
a
to generate responsiveness,
variety of schemes
by initiating
uti
mate of creative thinking, a feeling of involvement,
to
courage
a
lize resources, accept challenge,
positive attitude, and change the

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366

Indian JournalofIndustrialRelations

way employees think. All thiswas done to bring about customer


cost

sensitivity,

consciousness,

improve

create

and

productivity

betterworking and living conditions. The new HR policy aims at

fairness, and equity in all its dealings with


transparency,
"ensuring
to foster a cli
its employees. ?Tata
Steel will strive continuously
?Tata Steel recog
mate of openness, mutual
trust and team work.
are the
source of its
nizes that its people
primary
competitiveness."
was
Steel is an extremely protected,
industry. It
capital-intensive
a sunset
was made
and
investment
hence
industry
capital
becoming
inmodernizing

the plant.

While

Tata

Steel,

as a company,

is very

old itsplants have become verymodern. To be able towork on the

modern

itwas

plants

necessary

to create a knowledge

learn

based

ing organisation,which ispossible iftheminds are open. Therewas


a need to create a will towork and will towin. While the formal
Phase V, 'Modernization ofMind' startedon April 1,1999work had
already been underway. Long before Tata Steel had recognized the
need tomake change in theirway of thinking,investment in chang
was
"We have been
ing their attitude and culture
already initiated.
success
is the greatest enemy
However
continued
very successful.

of change. Change had been accepted but thepace of change had to

be

improved.

Hence

an

on-going

non-time

bound

change

process

must go on all the time.Wedded to Steel industrywe did notwant


todie with itso change became a part of our thinkingparticularly in
the lightof changes takingplace in theenvironment because of glo
The proc
and opening of Indian economy."
liberalization
balization,
a
ess of
was
of
initiated
variety of pro
acceptance
through
change

grammes, significantamong them are brieflydescribed below.

CUSTOMER
"If we

ORIENTATION

do not take care of our customers?some

one else will".

must take
This declaration aptly summarises the feeling thata shift
place inmaking customer delight as themajor focus of all its en
deavours.

The

was

(pre-1992)
was
available

shift became

imperative
concessional

predictable,
and the focus was

on

because

finance

promoter's
to uncertain

the environment

in close markets
wealth

and

social
mar

Post 1992, this changed


environment,
objectives.
and focus on share
ket based finances in globally
markets
integrated
holders value.
there was a virtual SAIL, TISCO
Similarly, pre-1992

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367

Case Study

duopoly in a sellersmarket with no emphasis on quality, customer


service

and

cost reduction.

over

Post-1992

capacity

was

generated

because of theentryofnew players (Essar, Jindal,Ispat,Lloyds) cre


a

on
buyers market, players competing
price and hence
to cost reduction and
shifting
quality improvement.

ating

Tata

Steel

a customer

has

base

of over

customers

5000

focus

out of

which 158 have been identifiedas key customers accounting for51


One per cent increase in sale to key
per cent of the total business.
crores.
customers
Rs.
contributes
1.8
Tata Steel ensures preferential
in the area of redressai of com
treatment to these key customers

plaints and quick handling of accounts. An Enterprise Resource


Planning System has been implemented to improve availability and
of customer

analysis
agement,

quality

needs

assurance

and other market


and accounts

demands,

stock man

management.

Tata Steel has wholeheartedly accepted Mahatma Gandhi's ob

servations

on customers.

"A customer

on our

is themost

on us. We

He
is not dependent
premises.
him. He is not an interrupter on our work.
We are not doing a favour by serving-him.

He
He

important visitor
are
on
depended
is the purpose
of it.

is doing

us a favour

by giving us an opportunity todo so." Tata Steel has issued several

as ameans
of change.
posters to bring about customers consciousness
a
so
international
market
still
awaits
and
does
However,
large
tough
competition.

PERFORMANCE

ETHICS PROGRAMME

Performance
Ethics Programme
for executive category came into
as a follow up on
exer
report on transformational
being
Mckinsey
cise and restructuring of the organisation
to convert Tata Steel into a

high performingorganisation. The process requires identifyinghigh


impact positions and staffthepositions with best suited persons.

All

these positions

would

have

greater accountability,

autonomy

and

higher profit and loss responsibility. The move is to break away


from functionally organised systemwith individuals reporting to
to
structure based on business
superiors
designing
units as profit centres. Each business
unit has its own autonomous
set up and greater freedom to
its own agenda
and targets
develop
inmind
the
customers
and
business
orientation.
The choice
keeping
their functional

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368

IndianJournalof IndustrialRelations

of staff is based

on

objective

assessment

and merit-based

process

with the support froma qualified external agency. While thenew


structurewould come into effectfromApril 1, 2001 staffingwould
be done in threecycles. Cycle 1 forthe first100 positions has been
completed by November 2000. Cycle 2 fornext 250-300 positions
will take place during November-January 2001 and cycle 3 in the
second half of 2001.
In terms of the actual mechanics,

each

head

department

signs

an internalMoU with theCEO as a promise todeliver. In addition,


internal MoUs

within

the department,

across

departments

and with

customers forcompliance on efficiencyand quality and with provi


sion of constant

The

review

focus is to give what

are to be
monitoring
signed.
are
not given last year. All executives

and continuous
was

given KRAs and balance code cards forpeople upto divisional head
quarters

are to be maintained.1

No

value

or low value

items would

be reduced in future and eventually eliminated. Since all this is


done tohelp employees tomake best use of operating units,which
are young both in terms of age and
given on the basis of performance.

facilities,

incentives

are to be

and cost conscious


the focus on demand,
Keeping
competition
ness at the level of workers
is introduced.
This is to
cluster manning
overtime
to
correct
control
and
and
"soul
allowance
help
acting
These
destroying
job without much
challenge".
teams
loaded
with
discretion,
empowerment,
In all cases Tata Steel standards
innovativeness.

are

self-managed
room for
and

(JRQM),

same

as

ISO, are to be applied. A fall-outeffectof the restructuringhas led


to debureaucratization

is reduced,
of positions
Number
process.
is pushed
to lowest level and paper move
decision making
down
ment has been minimized.

RIGHTSIZING
As on January1,1994 Tata Steel had 78,276 employees on itspay
roll. In order to best fitthenumber of employees with the require
ments of jobs,Tata Steel started theprocess of rightsizing eventually
bringing down theworkforce to 50,910 as on October 1, 2000. The
near
attempt is to further reduce it to 48,000 level in
were
a
to
able
downsize
very strong workers
given
they

future. How
union

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on the

Case Study

369

one hand, and a traditionof guaranteed employment to thewards of


the employees on theother?2According to theGeneral Secretaryof

Tata Workers'
negotiations

Union, the dissociation was not painful because


the union got a good deal for itsmembers.

through

The good deal basically refersto "Early Separation Scheme" pro


posed by Tata Management. According to this scheme employees
became

who

surplus

as a result of
restructuring

exercise were

given

the option toperform any duty not necessarily that forwhich they
hired or take a pension.

were

amount

The pension

varied with

the

age of the employee and theyears of service. But all of themwere


assured thepension upto the age of sixty.Thus thosewith less than
40 years of age and less than 10 years of service were offered a
monthly pension equivalent to thebasic and DA of lastdrawn sal
ary, those upto theage of 45 years got 1.25 times and those crossing
the age of 45 years received 1.50 times the lastdrawn basic and DA.
In addition, theywere provided medical facilitiesat company's hos
loan of Rs. 2 lakhs

pital/dispensary,
ence in
assigning

a kiosk

ROAD THROUGH

to start a business,
area.

and

in Jamshedpur

prefer

EDUCATION/TRAINING

The road to change and tomake Tata Steel a knowledge based


learning
themore

organisation

took many

significant

endeavours

of themost

influential

one of
shapes and terms. Perhaps
and
to change came from education

trainingperpetuated by threeagencies.
One
through

an exposure

was
fostered
attempts tomodernize
to Tata Heritage,
and
Community
Technology

Centre housed in Russi Mody Centre forExcellence.


information

consolidated

housed

on the House

of Tata.

In addition

it has

16 professional
associations
an ambience
a
in
ancient
of
civilizations
roof
of
single

the first business


under

archive

in India

It provides

and

Egypt,Greece and Babylon. The Centre is journey throughhistory


of the achievement

how

dreams

tional

value

The

of House

of Tatas

and

to realities.
got converted
for all interested in change.

second

agency

is the Information

of
learning experience
It has tremendous
educa

Department.

Itwas

set

up in 1955with theprinciple objective of keeping the technical, re

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370

Indian JournalofIndustrialRelations

search andmanagerial personnel abreast in theirfieldof knowledge


its libraries and
publications.

through

runs

Information Department

96 libraries in Jamshedpur and 51 libraries outside Jamshedpur. It


and disseminates
collects, processes
It has
and steel and allied subjects.

to large number of technical


on-line catalogue
for books,

CDs.

information

in the field of iron

over 2.5 lakh books, subscribes


journals, has inter and intranet facility,

videos

CD

cassettes,

and music

Roms

It also has a book bank scheme foremployees' children of 2nd


and

standard

a kid's

and

above,

corner

for showing

them educa

tional films. Since knowledge is thegreatest driver forchange ithas

of Rs.

budget

1.6 crores.

The thirdagency of knowledge dissemination is TISCO Man


agement

Centre, which

Development

arranges

training programmes

forTata Steel employees. In a given year itorganises more than 70

programmes

on different
aspects

and each of these

ofmanagement

programmes is offered several times in theyear. Since the focus of

has
management
on 'Modernization

shifted

ofMind:

to change,

special

Thinking

Away

one-day programmes
are or
from Mindset'

ganised. Many of the trainingprogrammes listed in theirdirectory


which have
have been conceived to respond tonew ways of thinking
as a result of
dialogue
in various
fonims
employees

emerged

among the Tata Steel


to in the section on reaching

and discussions

referred

out.

CO-DETERMINATION
Tata Workers'

union

is one of the earliest

in India.

trade unions

It's history dates back to 1920. Over the years ithas seen the in

volvement

of political

stalwarts

(e.g. C. F. Andrews,

CR.

Das

and

Motilal Nehru) and officebearers of such calibre as Subhash Chandra


Bose, Prof. Abdul Bari andMr. Michael John.Except fora 13month
long strikeduring 1928 therehas been no major industrial strifeat
Tata Steel during the last 70 years. While therearemany registered
unions

in Tata Steel, Tata Workers'

Union

is the sole bargaining

agent.

The Union has been able toget some visible benefits fortheworkers
(e.g. Joint Councils,
grievance
recognised
and better community
and social
life).

higher wages
procedure,
The management
has al

ways been enlightened and has been able toprovide many labour

welfare

measure

much

before "they were

enforced

by law

(See Ex

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Case Study

371

hibit 1). Community and health facilities areway above those of


fered by any comparable
Yet
organisation.
about the quality and cost of these services.

there is some

concern

The proactive attitude ofmanagement isvisible inopen sharing


of informationwith the elected members of theUnion, 6 times a
year followed by lunch. Union leadership is so impressed byman
agement

that its secretary, while

transparency

talking about Dr.

Irani,

said Yeh Shaks ImandariSe Sach BoltaHai (Thisman honestly talks


the truth).
themodernization plan started in 1980 both union and

When
management

agreed

on no

redundant

retrenchment,

labour

to be

retrained and redeployed in suitable jobs. Talking aboutmoderni

to
zation, Mr. D.K. Singh, General
Secretary said that Union
agreed
new
was
it
consulted.
"We co-operated
bring
technology because
to serve the company
because we wanted
and we got a good deal.

There was

continuous

dialogue,

and

openness

transparency

and

schemes suggested bymanagement were not very painful towork


ers.We found a common path by joint consultationwhich has been
a culture

in Tata Steel."

The

relationship

between

union

and man

agement is best vocalized byMr. Singh when he said "we have dif
ferent paths

REACHING

but our destiny

is same."

OUT

Consistent with the policy of openness,


as a vehicle of
change, Tata Steel introduced

trust and transparency


of
several programmes

sharing informationwith the employees and the communitywith


?
the intentionof sharing truth
nothing but the truth.Somewhere
around themiddle of 1994 the idea of organising Employee Aware
ness Programme (EAP) was initiated. InMay 1995 the firstformal
EAP was launched inMedium and Light StructureMill. The topics
covered dealt with such themes as personnel policies, safe habits,
career
health and healthy
life, occupa
training and
development,
tional health, welfare amenities, work discipline,
system
suggestion

and working towards higher productivity.

Wife ?fMD initiatedDomestic Management Programmewhere


wives of theemployees go througha threeand half-daysprogramme

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Indian JournalofIndustrialRelations

372

with inputsprovided on such themes as budget, safety,hygiene and


child welfare. In addition, wives of the employees are invited to
visit husbands' work place and have lunchwith them in company
cafeteria. They are informed abut safety and productivity by ex
perts. The aim is to involve families of the employees in affecting
change. This programme goes on every day and the attempt is to
cover all 50,000

in the next 2-3 years.

employees'

wives

endeavour

is to create

The

specific

purpose is to inspire theirrole and integrate them into the change


takingplace in company and society.
Tata Steel's

awareness

at the lowest

level

at large because
in the company
of
and community
'Modernization
a substantial
as a
commu
Mind'
segment of
concept must reach to
MD
In
the
has
to
addition
the
above-mentioned
programmes,
nity.

regularmeetings with the female employees, dialogue with senior


citizens in the cityof Jamshedpur. Ithas also started thepractice of
naming 'Person of theMonth'. Respect is given to the union and
regular meetings

with

the elected members

of the union

are organ

ised. Mr. Ratan Tata goes to theunion instead of calling them tohis
officeduring his visits to Jamshedpur.
SUCCESS

INDICATORS

Phase 5,Modernization ofMind, formallybegan onApril 1,1999.


During theyear and a half thepicture has drastically changed. Cus
tomer awareness
lowest

to the
is great, decision making
has been pushed
levels are reduced
has been demolished,
level, bureaucracy

from 13 to 4 among officers,O level reports to E level despite the


fact that thereare 5 levelswithin O Category. Employment of chil
dren has been stopped and thanks to ESS work force is reduced to
50,910without any ripple. Seven to tenpercent of theprofitgoes to
township and community development; 38 per cent of all employ
ees

are covered

in improvement

projects

and

all departments

are

getting ISO ratings. There has been no major disruption byway of


strikeor gherao during the last 70 years. There is a general accept
ance of change among the employees and theydemand and desire
to learn
beyond

their regular

jobs. There

is greater

transparency

in

the system. Emphasis has shifted to productivity, profit and cus


tomer instead of products

and opportunity

for experimentation

openness to accept ideas (learning humility).

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and

Case Study

373

concrete

The

indicators

and

their growth

over

the

4 years pe

riod as reported inAnnual Report 1999-2000 are presented below:


Indicators qfGrowth
1998-99

_1997-98

1999-2000

Overall output
(million tonnes)
1.Hot

metal_351_^63_3.89

2. Crude

Steel_^_323_3?6_3.43

3. Works Saleable Steel

3.01

Works Saleable Steel

_311_3.29

(million tonnes)
1. Production
2.

3.01

3.29

_3.11

Despatch_^_3?l_^09_3.30

Sinter Production

3.373.45

3.69

1.831.96

2.12

Specific Lubrication
Consumption (Kg/tss)

1.080.88

0.70

Water Pollution

0.27 0.30

(million tonnes)
Coke Production
(million tonnes)

0.21

(Kg/tss) _._
Turnover

Inventory

Ratio

Solid Waste Utilization

(%)_16.45_16.55_14.70

66.08

(%)

68.24
67.00

In addition, savings through suggestions improved from523


lakh in 1997 to Rs. 720 lakh in 1998 and Rs. 865 lakh in 1999.
During 1999-2000 rollingmill No.2 was phased out and Tata Steel
achieved full capacity utilisation in all new production units such
as coke
plant No.2, hot strip mill, L.D. shop No. 2 and Slab Caster
in the very first year after modernization.
has
Cluster manning

been

introduced

in 13 departments

To
covering 5147 employees.
all major produc
covered
programme

tal operation
performance
tion and services
department

in the norms

during

1999-2000.

Coke quality in terms of strength is best in theworld,


achieved

lowest

cost

in steel production

in the world,

and

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it has
it pro

374

Indian JournalofIndustrialRelations
tonnes of iron in the new plant in the

duces the fastestmillion


world.

The largestprivate steelproducer in the country,Tata Steel is the

lowest

cost

producer

or Steel.

The

company

may

not be making

as

much profit today as ithoped tobut the real testwould come later
itwould

when

have

international

competition.

There

is also a lurk

ing doubt in theminds of some executives whether the attempts to


modernize mind would sustain over a long period of time.
The spirit and direction ofModernization ofMind is best sum
marized in theTata Steel InformationBulletin, January-March2000
which claims that "Perfection in any endeavour is an aiming point,
not a startingpoint. Let thedesire foritpush you but don't let the
absence of it stop you. Ifyou are going to get any thingdone you
start some where.

must

More

specifically,

you must

start where

you are." For Tata Steel the journeyhas begun but the road is long
and winding and thedestination is faraway.
NOTES
All executives at Tata Steel have been recommended to read a book "Who
Moved My Cheese" by Spencer Johnson. The book deals in a parable fashion on
how to anticipate change, adapt to change quickly, enjoy change and be ready to
1.

change quickly again and again.


2.

are

There

instances

in Tata

Steel

of having

employed. However, this is changing now. Merit


weightage in employment.

fourth

generation

workers

instead of kinship is given

REFERENCES
Harris, Frank, (1958), JamsetjiNusserwanji Tata:A Chronicle ofHis Life,Blackie and
Sons Limited, Bombay.
Lala, R. M.

(1981), The Creation ofWealth, IBH Publishers Pvt. Ltd., Bombay.

Pandey, S. N.

(1989), Human Side ofTata Steel, Tata McGraw Hill, New Delhi.

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All use subject to JSTOR Terms and Conditions

375

Case Study
1 : Labour Welfare Measures

EXHIBIT

measures-

Welfare

Tisco

in Tata Steel

Intro.

Enforced

by Law

Legal

Measures

Factories Act

Eight hour Working Day_1912_1948


19151948
Free M?dical Aid

Employees State
Insurance

Establishment ofWelfare

19171948

Act

Factories Act

Department

Schooling facilities for


Children

1917

Formation ofWorks
Committee forhandling

1919

complaints,
conditions

1947

IndustrialDisputes
Act

service

and

grievances

19201948

Leave with pay

Factories Act

Workers Provident Fund

1920

Workmen's Accident
Compensation Scheme

1920

Technical Institute for


Training of Apprentices,
Craftsmen & Engineering

1921 1961

Apprentices Act

Maternity Benefit

1928
1946

Bihar Maternity
BenefitAct

1952
Scheme
1924

Employees'
Provident Fund
Workmen's
Act

Compensation

Graduates

Profit Sharing

Bonus_1934_1965

Bonus

Retiring Gratuity

1937

Ex-gratia Payment forRoad


accident while coming to or
returning fromduty

1979

1972

Act_.
Payment of Gratuity

_Act_

Audit

Social

_1980_-_First

in India

Pension Scheme 1989


Social Responsibility as a
Key

Business

1988

Process

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