How to Compute Proposed PRP for Coal India Officers

 

HOW TO CALCULATE PROPOSED PRP OF EXECUTIVES OF COAL INDIA LTD

 

The Department of Public Enterprises vide memo  F.No.2(70)/08-DPE(WC)-GL-IV/09 Dated 09.02.2009 Issued the methodology for calculation of PRP  as proposed in the chapter 6 the recommendation of 2nd Pay revision committee Report should be adopted.

 

O.M. dated 26.11.2008 stipulates that –

a)      60% of PRP  will be given with the ceiling of 3% of PBT;

b)     40% of PRP will come from 10% of incremental profit;

c)      The total PRP limit will be 5% of the years’ PBT;

d)     For 2007-08 amount available will be 3% of PBT;

e)       PRP scheme will begin from financial 2007-08 and there will be no incremental profit, this being the first year of introduction of PRP.

f)       Following formula has been recommended.

 

 

1

2

3

4

5

6

7

PRP from Current Year’s Profit

0.6

X

Annual Basic

X

MOU rating of Subsidiary

X

Grade Incentive

X

Executive performance rating

X

Ratio of Required amount of PRP to Available Amount of PRP

Annual PRP Amount

PRP from Incremental Profit

0.4

X

Annual Basic

X

MOU rating of Subsidiary

X

Grade Incentive

X

Executive performance rating

X

Ratio of Required amount of PRP to Available Amount of PRP

Annual PRP Amount

Total PRP

 

 

 

 

 

 

Sum of Both the row of Column 7

 

X – Means multiplication

 

 

PERSENTAGE  OF  SUBSIDIARY  MOU  RATING

OUT STANDING – 100% (1.0), VERY GOOD - 80% (0.8), GOOD – 60 %(0.6) , FAIR – 40 % (0.4)

 

PERSENTAGE  OF  EXECITIVE  PERFORMANCE  RATING

OUT STANDING – 100% (1.0), VERY GOOD - 80% (0.8), GOOD – 60 % (0.6) , FAIR – 40 % (0.4)

 

GRADE  INCENTIVE

E1 –E3 -40 % (0.4), E4-E5 – 50 % (0.5), E6 – E7 – 60% (0.6), E8-E9- 70 % (0.7), DIR B – 100 % (1.0), CMD- B – 150 % (1.5),

DIR – A – 150 % (1.5), CMD –A – 200 % (2.0)

 

 

 

DATA FOR CALCULATION OF PRP OF EXECUTIVES OF COAL INDIA

(ALL FIGURES ARE IN Crs.)

DATA OF PBT

 

YEAR

PROFIT BEFORE TAX OF COAL INDIA

2007-08

8738.46

2008-09

5744.10

2009-10

13964.93

2010-11

16463.23

 

 

 

 

 

 

 

 

 

 

 

 

 

DATA OF REQUIRED AMOUNT & AVAILABLE AMOUNT

There is many thoughts about the calculation of Total Amount required for PRP and  Ratio of required amount  of PRP to Available amount of PRP.

 

EXAMPLE  FOR  CALCULATION  OF  TOTAL AMOUNT  REQUIRED  FOR  PRP & RATIO THEREOF

 

CIL’S Actual PROFIT BEFORE TAX has been taken for example

 

CIL’S  PROFIT BEFORE TAX

 

2008-09                      5744.10 Crs.

 

2009-10                      13964.93  Crs

 

THOUGHT No. 1 -  To determine the ratio, Total amount of PRP i.e. 5 % of PBT will be divided by the Total amount required  for PRP i.e. 3% of

                                   PBT + 10 % of   Incremental profit.

 

Total Amount available for PRP is 5 % of PBT of yr 2009-10 ( 5% of 13964.93)   = 698.250 Cr

 

Total amount required for PRP =   3 % 0f  PBT of the year 2009-10 ( 3 % of 13964.93) = 418.947 Crs

 

                                                    10 % of Incremental profit = 13964.93  – 5744.10 = 8220.83 = 822.083 ( 10 % of 8220.83)

 

therefore total amount required for PRP = 418.947 + 822.083 = 1241.03

 

therefore ratio of  required amount to available amount = 698.250 / 1241.03 = 0.56230

 

 

 

 

YEAR

AMOUNT AVAILABLE FOR PRP

 5 % OF PBT

SHARE OF PBT FROM CURRENT YEARS PROFIT

( 3 % OF PBT)

 

SHARE OF PBT AVAILABLE FOR INCREMENTAL PROFIT

( Col. 2 – Col. 3)

AMOUNT REQUIRED FOR INCREMENTAL PRP ( 10 % OF INCREMENTAL PROFIT)

 

AMOUNT REQUIRED FOR PRP

(Col 3 + Col 6)

1

2

3

5

6

7

2007-08

262.15

262.15

NIL

NIL

262.15

2008-09

172.32

172.32

NIL

NIL

172.32

2009-10

698.250

418.947

279.299

822.825

1241.772

2010-11

823.161

493.896

329.265

249.831

743.727

 

RATIO OF REQUIRED AMOUNT TO AVAILABLE AMOUNT ( to be entered in column 6)

 

YEAR

RATIO OF REQUIRED AMOUNT TO AVAILABLE AMOUNT ( Col.2 / Col. 7)

2007-08

1.0

2008-09

1.0

2009-10

0.56230

2010-11

1.0

 

THOUGHT No. 2 -  To determine the ratio, Separate ratio to be calculated for  PRP from Current year’s profit  and  PRP from Incremental Profit. Logic behind this is that as there is profit in current year so full PRP i.e. 3 % of PBT will be considered in current year.

YEAR

AMOUNT AVAILABLE FOR PRP

 5 % OF PBT

SHARE OF PBT FROM CURRENT YEARS PROFIT

( 3 % OF PBT)

 

AMOUNT REQUIRED FOR CURRENT YEAR PRP( 3 % OF PBT )

SHARE OF PBT AVAILABLE FOR INCREMENTAL PROFIT ( Col. 2 – Col. 3 )

AMOUNT REQUIRED FOR INCREMENTAL PRP( 10 % OF INCREMENTAL PROFIT)

1

2

3

4

5

6

2007-08

262.15

262.15

NIL

NIL

NIL

2008-09

172.32

172.32

NIL

NIL

NIL

2009-10

698.250

418.947

418.947

279.299

822.825

2010-11

823.161

493.896

493.896

329.265

249.831

 

RATIO OF REQUIRED AMOUNT TO AVAILABLE AMOUNT ( to be entered in column 6)

 

YEAR

PRP FROM CURRENT PROFIT Col.3 / Col.4)

PRP FROM INCREMENTAL PROFIT( Col.5 / Col.6)

2007-08

1.0

0.00

2008-09

1.0

0.00

2009-10

1.0

0.33

2010-11

1.0

1.00

 

METHOD OF COMPUTING BASIC OF  01.04.2007,  01.04.2008,  01.04.2009  &  01.04.2010

 

Basic of 01.04.2011 /1.03 = Basic of 01.04.2010 / 1.03 = Basic of 01.04.2009 / 1.03 = Basic of 01.04.2008 / 1.03 = Basic of 01.04.2007

/  - Means Division

MOU   RATINGS OF COAL INDIA & ITS SUBSIDIARY

YEAR

CIL

BCCL

ECL

CCL

CMPDIL

MCL

NCL

SECL

WCL

2007-08

E

VG

F

VG

E

E

E

E

E

2008-09

E

VG

F

VG

E

VG

E

E

E

2009-10

E

E

VG

VG

E

E

E

E

E

2010-11

VG

VG

VG

VG

VG

VG

VG

VG

VG

 

INDEX -  E = EXELLENT, VG = VERY GOOD, F = FAIR