Table of Content

Chapter 1:- Introduction

Chapter 2:- Research Methodology
Objective of Study
Scope and Rationale of Study
Methodology
Limitation of Study
Chapter 3:- Theoretical Background
Chapter 4:- Case Study
Introduction of Company profile and Product
About the work in company done by students
Chapter 5:- Data Analysis
Chapter 6:- Findings
Bibliography
Annexure

CHAPTER - 1

Chapter 1:- Introduction

The law relating to contracts in India is contained in INDIAN CONTRACT ACT, 1872. The
Act was passed by British India and is based on the principles of English Common Law. It is
applicable to all the states of India except the state of Jammu and Kashmir. It determines the
circumstances in which promises made by the parties to a contract shall be legally binding on
them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each
contract creates some rights and duties on the contracting parties. Hence this legislation,
Indian Contract Act of 1872, being of skeletal nature, deals with the enforcement of these
rights and duties on the parties in India.

Indian Contract Act, 1872

Indian Contract Act, 1872
Indian Contract Act 1872 is the main source of law
regulating contracts in India.
Citation

Act No. 9 of 1872

Enacted by

Imperial Legislative Council

Date enacted

25 April 1872

Date commenced

1 September 1872

Development
The Act as enacted originally had 266 Sections, it had wide scope and included.

General Principles of Law of Contract- Sections 01 to 75

Contract relating to Sale of Goods- Sections 76 to 123

Special Contracts- Indemnity, Guarantee, Bailment & Pledge- Sections 124 to 238

Contracts relating to Partnership- Sections 239 to 266

Indian Contract Act embodied the simple and elementary rules relating to Sale of goods and
Partnership. The developments of modern business world found the provisions contained in
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the Indian Contract Act inadequate to deal with the new regulations or give effect to the new
principles. Subsequently the provisions relating to the Sale of Goods and Partnership
contained in the Indian Contract Act were repealed respectively in the year 1930 and 1932
and new enactments namely Sale of Goods and Movables Act 1930 and Indian Partnership
act 1932 were re-enacted.
At present the Indian Contract Act may be divided into two parts

Part 1:deals with the General Principles of Law of Contract Sections 1 to 75

Part 2:deals with Special kinds of Contracts such as

(1)Contract of Indemnity and Guarantee

(2)Contract of Bailment and Pledge
(3)Contract of Agency

2. Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent
there to, the proposal is said to be accepted.
3. Promise 2(b) :- A Proposal when accepted becomes a promise. In simple words, when an
offer is accepted it becomes promise.
4. Promisor and promisee 2(c) :- When the proposal is accepted, the person making the
proposal is called as promisor and the person accepting the proposal is called as promisee.
5. Consideration 2(d):- When at the desire of the promisor, the promisee or any other person
has done or abstained from doing something or does or abstains from doing something , such
act or abstinence or promise is called a consideration for the promise. Price paid by one party
for the promise of the other Technical word meaning QUID-PRO-QUO i.e. something in
return.
6. Agreement 2(e) :- Every promise and set of promises forming the consideration for
each other. In short,

7. Contract 2(h) :- An agreement enforceable by Law is a contract.

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Therefore, there must be an agreement and it should be enforceable by law.

8. Void agreement 2(g):- An agreement not enforceable by law is void.

9. Voidable contract 2(i):- An agreement is a voidable contract if it is enforceable by Law at
the option of one or more of the parties there to (i.e. the aggrieved party), and it is not
enforceable by Law at the option of the other or others.
10. Void contract 2(j) :- A contract which ceases to be enforceable by Law becomes void
when it ceases to be enforceable.

Definition
A contract is a legally enforceable agreement between two or more parties with mutual
obligations. The Indian contract Act 1872, Section 2(h) defines the term contract as an
agreement legally enforceable by law, for the formation of a contract there must be an
agreement, the agreement should be enforceable by law.
1. There must be a "lawful offer" and a "lawful acceptance" of the offer, thus resulting in an
agreement.

2. Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent
there to, the proposal is said to be accepted.
3. Promise 2(b) :- A Proposal when accepted becomes a promise. In simple words, when an
offer is accepted it becomes promise.
4. Promisor and promisee 2(c) :- When the proposal is accepted, the person making the
proposal is called as promisor and the person accepting the proposal is called as promisee.
5. Consideration 2(d):- When at the desire of the promisor, the promisee or any other person
has done or abstained from doing something or does or abstains from doing something , such
5

act or abstinence or promise is called a consideration for the promise. Price paid by one party
for the promise of the other Technical word meaning QUID-PRO-QUO i.e. something in
return.
6. Agreement 2(e) :- Every promise and set of promises forming the consideration for
each other. In short,

7. Contract 2(h) :- An agreement enforceable by Law is a contract.

Therefore, there must be an agreement and it should be enforceable by law.

8. Void agreement 2(g):- An agreement not enforceable by law is void.

9. Voidable contract 2(i):- An agreement is a voidable contract if it is enforceable by Law at
the option of one or more of the parties there to (i.e. the aggrieved party), and it is not
enforceable by Law at the option of the other or others.
10. Void contract 2(j) :- A contract which ceases to be enforceable by Law becomes void
when it ceases to be enforceable.

Acceptance
According to Section 2(b), "When the person to whom the proposal is made signifies his
assent there to, the proposal is said to be accepted."
Rules:
1. Acceptance must be absolute and unqualified. If the parties are not in ad idem on all
matters concerning the offer and acceptance, there is no valid contract. For example "A" says
to "B" "I offer to sell my car for Rs.50,000/-. "B" replies "I will purchase it for Rs.45,000/-".
This is not acceptance and hence it amounts to a counter offer.
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2. It should be Communicated to the offeror. To conclude a contract between parties, the

acceptance must be communicated in some prescribed form. A mere mental determination on
the part of offeree to accept an offer does not amount to valid acceptance.
3. Acceptance must be in the mode prescribed. If the acceptance is not according to the mode
prescribed or some usual and reasonable mode(where no mode is prescribed) the offeror may
intimate to the offeree within a reasonable time that acceptance is not according to the mode
prescribed and may insist that the offer be accepted in the prescribed mode only. If he does
not inform the offeree, he is deemed to have accepted the offer. For example "A" makes an
offer to "B" says to "B" that "if you accept the offer, reply by voice. "B" sends reply by post.
It will be a valid acceptance, unless "A" informs "B" that the acceptance is not according to
the prescribed mode.
4. Acceptance must be given within a reasonable time before the offer lapses. If any time
limit is specified, the acceptance must be given within the time, if no time limit is specified it
must be given within a reasonable time.
5. It cannot precede an offer. If the acceptance precedes an offer it is not a valid acceptance
and does not result in contract. For example in a company shares were allotted to a person
who had not applied for them. Subsequently when he applied for shares, he was un aware of
the previous allotment . The allotment of share previous to the application is not valid.
6. Acceptance by the way of conduct.
7. Mere silence is no acceptance. Silence does not per-se amounts to communicationBank of India Ltd. Vs. Rustom Cowasjee- AIR 1955 Bom. 419 at P. 430; 57 Bom. L.R.
850- Mere silence cannot amount to any assent. It does not even amount to any representation
on which any plea of estoppel may be found, unless there is a duty to make some statement or
to do some act free and offer er must be consent
8.Acceptance must be unambiguous and definite.

Lawful consideration
According to Section 2(d), Consideration is defined as: "When at the desire of the promisor,
the promisee has done or abstained from doing, or does or abstains from doing, or promises
7

to do or abstain something, such an act or abstinence or promise is called consideration for

the promise. "Consideration" means to do something in return.
In short, Consideration means quid pro quo i.e. something in return.
An agreement must be supported by a lawful consideration on both sides. Essentials of valid
considerations are

It must move at the desire of the promisor. An act constituting consideration must have been
done at the desire or request of the promiser. If it is done at the instance of a third party or
without the desire of the promisor, it will not be good consideration. For example "A" saves
"B"'s goods from fire without being ask him to do so. "A" cannot demand payment for his
service.

Consideration may move from the promisee or any other person. Under Indian law,
consideration may be from the promisee of any other person i.e., even a stranger. This means
that as long as there is consideration for the promisee, it is immaterial, who has furnished it.

Consideration must be an act, abstinence or forebearance or a returned promise.

Consideration may be past, present or future. Past consideration is not consideration

according to English law. However it consideration as per Indian law. Example of past
consideration is, "A" renders some service to "B" at latter's desire. After a month "B"
promises to compensate "A" for service rendered to him earlier. When consideration is given
simultaneously with promise, it is said to be present consideration .. For example "A" receives
Rs.50/- in return for which he promises to deliver certain goods to "B". The money "A"
receives is the present consideration. When consideration to one party to other is to pass
subsequently to the maker of the contract, is said to be future consideration. For example. "A"
promises to deliver certain goods to "B" after a week. "B" promises to pay the price after a
fortnight, such consideration is future.

Consideration must be real. Consideration must be real, competent and having some value in
the eyes of law. For example "A" promises to put life to "B"'s dead wife, if "B" pay him
Rs.1000/-. "A"'s promise is physically impossible of performance hence there is no real
consideration.

Consideration must be something which the promiser is not already bound to do. A promise to
do something what one is already bound to do, either by law, is not a good consideration.,
since it adds nothing to the previous existing legal consideration.
8

Consideration need not be adequate. Consideration need not be necessarily be equal to value
to something given. So long as consideration exists, the courts are not concerned as to
adequacy, provided it is for some value.

The consideration or object of an agreement is lawful, unless and until it is:

1. forbidden by law: If the object or the consideration of an agreement is for doing an act
forbidden by law, such agreement are void. for example,"A" promises "B" to obtain an
employment in public service and "B" promises to pay Rs one lakh to "A". The agreement is
void as the procuring government job through unlawful means is prohibited.
2. If it involves injury to a person or property of another: For example, "A" borrowed rs.100/from"B" and executed a bond to work for "B" without pay for a period of 2 years. In case of
default, "A" owes to pay the principal sum at once and huge amount of interest. This contract
was held void as it involved injury to the person.
3. If courts regards it as immoral:An agreement in which consideration ir object of which is
immoral is void. For example, An agreement between husband and wife for future separation
is void.
4. Is of such nature that, if permitted, it would defeat the provisions of any law:
5. is fraudulent, or involves or implies injury to the person or property of another, or
6. Is opposed to public policy. An agreement which tends to be injurious to the public or against
the public good is void. For example, agreements of trading with foreign enemy, agreement to
commit crime, agreements which interfere with the administration of justice, agreements
which interfere with the course of justice, stifling prosecution, maintenance and champerty.
7. Agreements in restrained of legal proceedings: This deals with two category. One is,
agreements restraining enforcement of rights and the other deals with agreements curtailing
period of limitation.
8. trafficking in public offices and titles:agreements for sale or transfer of public offices and title
or for procurement of a public recognition like padma vibhushanor padma sree etc. for
monetary consideration is unlawful, being opposed to public policy.
9. Agreements restricting personal liberty: agreements which unduly restricts the personal
liberty of parties to it are void as being opposed by public policy.
10. Marriage brokerage contact:Agreements to procure marriages for rewards are void under the
ground that marriage ought to proceed with free and voluntary decisions of parties.
9

11. Agreements interfering marital duties: Any agreement which interfere with performance of
marital duty is void being opposed to public policy. An agreement between husband and wife
that the wife will never leave her parental house.
12. consideration may take in any form-money,goods, services, a promise to marry, a promise to
forbear etc.

Contract Opposed to Public Policy can be Repudiated by the Court of law even if that
contract is beneficial for all of the parties to the contract- What considerations and objects
are lawful and what not-Newar Marble Industries Pvt. Ltd. Vs. Rajasthan State Electricity
Board, Jaipur, 1993 Cr. L.J. 1191 at 1197, 1198 [Raj.]- Agreement of which object or
consideration was opposed to public policy, unlawful and void- What better and what more
can be an admission of the fact that the consideration or object of the compounding
agreement was abstention by the board from criminally prosecuting the petitioner-company
from offense under Section 39 of the act and that the Board has converted the crime into a
source of profit or benefit to itself. This consideration or object is clearly opposed to public
policy and hence the compounding agreement is unlawful and void under Section 23 of the
Act. It is unenforceable as against the Petitioner-Company.

Competent to contract
Section 11 of The Indian Contract Act specifies that every person is competent to contract pro
1. He should not be a minor i.e. an individual who has not attained the age of majority i.e. 18
years in normal case and 21 years if guardian is appointed by the Court.
2. He should be of sound mind while making a contract. A person who is usually of unsound
mind, but occasionally of sound mind, can make a contract when he is of sound mind.
Similarly if a person is usually of sound mind, but occasionally of unsound mind, may not
make a valid contract when he is of unsound mind.
3. He is not disqualified from contracting by any other law to which he is subject
There are other laws of the land that disqualify certain persons from contracting.They are:-Alien enemy
-Foreign sovereigns, diplomatic staff etc.
-Artificial persons i.e. corporation, companies etc.

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-Insolvents
-Convicts
-Pardanashin Women

Free Consent
According to Section 13, " two or more persons are said to be consented when they agree
upon the same thing in the same sense (Consensus-ad-idem). According to Section 14,
Consent is said to be free when it is not caused by coercion or undue influence or fraud or misrepresentation or
mistake.

Elements Vitiating free Consent

1. Coercion (Section 15): "Coercion" is the committing, or threatening to commit, any act
forbidden by the Indian Penal Code under(45,1860), or the unlawful detaining, or threatening
to detain, any property, to the prejudice of any person whatever, with the intention of causing
any person to enter into an agreement. For example, "A" threatens to shoot "B"if he doesn't
release him from a debt which he owes to "B". "B" releases "A" under threat. Since the
release has been brought about by coercion, such release is not valid.
2. Undue influence (Section 16): "Where a person who is in a position to dominate the will of
another enters into a contract with him and the transaction appears on the face of it, or on the
evidence, to be unconscionable, the burden of proving that such contract was not induced by
undue influence shall lie upon the person in the position to dominate the will of the other."
(Section 16(2)) States that "A person is deemed to be in a position to dominate the will of
another;

Where he holds a real or apparent authority over the other. For example, an employer
may be deemed to be having authority over his employee. an income tax authority
over to the asessee.

Where he stands in a fiduciary relationship to other, For example, the relationship of

Solicitor with his client, spiritual advisor and devotee.

Where he makes a contract with a person whose mental capacity is temporarily or

permanently affected by the reason of age, illness or mental or bodily distress"
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3. Fraud (Section 17): "Fraud" means and includes any act or concealment of material fact or
misrepresentation made knowingly by a party to a contract, or with his connivance, or by his
agent, with intent to deceive another party thereto of his agent, or to induce him to enter into
the contract. Mere silence is not fraud. a contracting party is not obliged to disclose each and
everything to the other party. There are two exceptions where even mere silence may be
fraud, one is where there is a duty to speak, then keeping silence is fraud. or when silence is
in itself equivalent to speech, such silence is fraud.
4. Misrepresentation (Section 18): " causing, however innocently, a party to an agreement to
make a mistake as to the substance of the thing which is the subject of the agreement".
5. Mistake of fact (Section 20): "Where both the parties to an agreement are under a mistake
as to a matter of fact essential to the agreement, the agreement is void". A party cannot be
allowed to get any relief on the ground that he had done some particular act in ignorance of
law.Mistake may be bilateral mistake where both parties to an agreement are under mistake
as to the matter of fact.The mistake must relate to a matter of fact essential to the agreement.

Agency
In law, the relationship that exists when one person or party (the principal) engages another
(the agent) to act for him, e.g. to do his work, to sell his goods, to manage his business. The
law of agency thus governs the legal relationship in which the agent deals with a third party
on behalf of the principal. The competent agent is legally capable of acting for this principal
vis--vis the third party. Hence, the process of concluding a contract through an agent
involves a twofold relationship. On the one hand, the law of agency is concerned with the
external business relations of an economic unit and with the powers of the various
representatives to affect the legal position of the principal. On the other hand, it rules the
internal relationship between principal and agent as well, thereby imposing certain duties on
the representative (diligence, accounting, good faith, etc.).
Under section 201 to 210 an agency may come to an end in a variety of ways:
(i) By the principal revoking the agency However, principal cannot revoke an agency
coupled with interest to the prejudice of such interest. Such Agency is coupled with interest.
An agency is coupled with interest when the agent himself has an interest in the subject12

matter of the agency, e.g., where the goods are consigned by an upcountry constituent to a
commission agent for sale, with poor to recoup himself from the sale proceeds, the advances
made by him to the principal against the security of the goods; in such a case, the principal
cannot revoke the agents authority till the goods are actually sold, nor is the agency
terminated by death or insanity. (Illustrations to section 201)
(ii) By the agent renouncing the business of agency;
(iii) By the business of agency being completed;
(iv) By the principal being adjudicated insolvent (Section 201 of The Indian Contract Act.
1872)

The principal also cannot revoke the agents authority after it has been partly exercised, so as
to bind the principal (Section 204), though he can always do so, before such authority has
been so exercised (Sec 203).
Further, as per section 205, if the agency is for a fixed period, the principal cannot terminate
the agency before the time expired, except for sufficient cause. If he does, he is liable to
compensate the agent for the loss caused to him thereby. The same rules apply where the
agent, renounces an agency for a fixed period. Notice in this connection that want of skill
continuous disobedience of lawful orders, and rude or insulting behavior has been held to be
sufficient cause for dismissal of an agent. Further, reasonable notice has to be given by one
party to the other; otherwise, damage resulting from want of such notice, will have to be paid
(Section 206). As per section 207, the revocation or renunciation of an agency may be made
expressly or impliedly by conduct. The termination does not take effect as regards the agent,
till it becomes known to him and as regards third party, till the termination is known to them
(Section 208).
When an agents authority is terminated, it operates as a termination of subagent also.
(Section 210).[1]

13

CHAPTER - 2

14

Chapter 2:- Research Methodology

Objective of Study

Primary objective:

To conduct a study of Law of contracts at Airtel.

Secondary Objectives:

To find out various attributes that influence Law of contracts at Airtel..

To measure the effectiveness of Law of contracts at Airtel.

15

Methodology
Research methodology is a way to systematically solve the research problems. a

careful investigation or inquiry specially through search for new facts in any branch of
knowledge. The study that has been used is conclusive and descriptive in nature. Descriptive
research include survey and fact-finding enquiries of different kinds to test that weather staff
are satisfied or not. The descriptive study have been coupled with the conclusive study to
make it more methodical organized and through giving it approach. Collecting the primary
data through survey and questionnaire method does this.

SAMPLE DESIGN AND SIZE

50 Employee out of several departments of the AIRTEL Ltd.

SAMPLING METHOD

Random Sampling Method will be used.

TOOLS USED
There are many tools that can be used for the project work. Some tools are as follows:
Observation Method: - observation method is one of the tools used to collect the
primary data to get past and current information.
Through Questionnaire: - questionnaire can be varying effective tool for the
data collection it contains list of questions sent to the respondent.
Through Schedules: - by this schedule tool we can categories the people in a
different group to know the opinion about their work environment or about the
company.
Interview Method: - in the interview tool the questionnaire are pre-designed for
which the answers are to be obtained.
The two major tools have been used for the research work.
1) Questionnaire Method.
2) Interview Method.

TOOLS OF ANALYSIS
16

To know the response, I have used the questionnaire method in sample survey. If one
wish to find what people thinks or knows, the logical procedure is to ask them. This had led
human resource researchers to use the questionnaire technique for collecting data more than
any other method.
In this method questionnaire were distributed to the respondent and they were asked
to answer questions in the questionnaire. The questionnaires were structured non-disguised
because the questions, which the questionnaire contained, were arranged in a specific order
besides every question asked was logical for the study; no question can be termed as
irrelevant.
DATA COLLECTION
The tasks of data collection begins after a research problem has been defined and
research design / plan chalked out. While deciding about the method of data collection to be
used for the study. The researcher should keep in mind two types of data primary and
Secondary.
PRIMARY DATA SOURCES:

Through interaction with employees.

Through questionnaires filled from the consumer.

The data, which has been collected in this project work, was through close-ended
questionnaire and personnel interview.
1) QUESTIONNAIRE METHOD: - This method of data collection is quite popular,
particularly in case of big enquiries. The major part of my data collection was through
questionnaires, which were analyzed, and various conclusions were drawn. The information,
which has been collected from the AIRTEL LTD, is also a close-ended questionnaire. As a
source of primary data questionnaire has been used which consist of 13 questions. The
question has been designed by determining all level of employee of the AIRTEL LTD.
2) INTERVIEW METHOD: - The interview method has also helped in collecting the
information and helped to know about the opinion of the employee. With the help of
personnel interview, lot of information has been collected which were not possible by
17

questionnaire method. With the help of personnel interview it was easy to know the
satisfaction and dissatisfaction level of the employee and their opinion.
SECONDARY DATA SOURCES:

Through Internet, various official sites of the company.

Through pamphlets and brochures of the company

Journals & Magazine

AREA OF STUDY: AIRTEL

SCOPE OF THE STUDY

This research gives a chance for applications and testing of the theoretical study on
the real work situation. The student got the lesson of experience by meeting various sections
of people conducting on interview knowing opinion of employee tabulating interpreting and
analyzing the data collected and this will help the researcher in future for career building.
This project work also helps the student to get practical knowledge, which is performed by
the employee of the company. It helps the student to know the how HR people work in
reality, how they conduct the training programs, how they know that where is the need of the
training for the employee.

Limitation of Study

Certain limitations that were encountered during the survey were:

1). Limitation of time: Time was not enough considering the amount of work to
be done. Thus limitation of time was one of the major drawbacks of the study.

2). Sample size: Since it was a sample survey and not a census survey, the
number of respondent was too small to draw any conclusion from the research and
hence the out come of analysis cannot be considered as absolutely correct.

3). Non co-operation of employees: Reluctance on part of certain employees to

show their interest on the survey and give their true opinion regarding different
parameters.
18

4). Lack of practical training: Due to lack of training, it was very difficult to
develop the research design and analysis the collected data.

5). Biased information: The study is based on the information gathered from the
employee. Therefore in such case it is possible that the information supplied might be
biased because the employee might have shown partiality towards their company and
superiors.

6). Limitation of Language: The questions were asked to the employee that was
easy to understand but most of the employees were not able to understand because of
the language problem & illiteracy.

19

CHAPTER - 3

20

Chapter 3:- Theoretical Background

Human resource is the very important aspect of any organization. HR policies are made to
run organization in a planned manner and to make employees feel like they are part of
organization only.
Working under HR and being a part of policy implementation was a great experience starting
from recruitment to separation. Recruitment in Corporate Office is very different from local
and state offices and there are separate policies for editorial employees of Airtel. There were
many problem areas shown while working and implementing policies but they must have to
overcome by whole team support.
Each company has a different set of circumstances, and so develops an individual set of human
resource policies and these policies are very important part of any organization. HR policies can
also be very effective at supporting and building the desired organizational culture. The role of
Human Resources is changing as fast as technology and the global marketplace. Historically, the
HR Department was viewed as administration, kept personal files and other records, managed
the hiring process, and provided other administrative support to the business. Those times have
changed and now HR department has evolved from just a supportive function of the company to
main stream department of the organization.
HR policies allow an organization to be clear with employees on:

The nature of the organization

What they should expect from the organization

What the organization expects of them

How policies and procedures work

What is acceptable and unacceptable behavior

The consequences of unacceptable behavior

The objective of this project is to understand the working of Human Resource in Airtel. They
asked me to do this project so that I can understand the human resource policies in practical and
give my feedbacks to the HR and to help them in implementing new policies in the corporate
office. This study has shown me how policies are made and modified and why it is important to
have a policy in every organization. A policy is a predetermined course of action established as a
guide toward accepted objectives and strategies of the organization.
21

The policies were made starting from recruitment of any employees to the separation of Airtelite
from the organization. These policies were designed for the employees and I worked in this for
whole three months of my internship.
The coverage of this project was DB Corporate Bhopal which is the oldest and the biggest
corporate office of Airtel. Three months was a short span of time to be a part of every policy but
due to less manpower in HR department I had an advantage to be a part of many policies, but in
many confidential matters only managers were allowed to be a part of some special policies like
gratuity, business travel policy, sexual harassment policy etc.
This project helps me to give my unbiased feedback to HR about the some policies and the way
they are implemented so that when the policy manual will get revised next year changes can be
made.
Airtel is open for changes and modifications; they slowly started to understand the worth of
human resource department and the policies which were the pathway for them to achieve their
vision and mission. Airtel policies were modified after a long time in April 2012 with all the
major changes in recruitment, compliances, compensation and benefits etc.
The AIRTEL has constant focus on human resources as the most important part of
organisation. Respect for the individual employee, his or her opportunities to develop within
the AIRTEL and a good working climate are our main priorities.
Through our focus on a well functioning management philosophy we aim to have the most
qualified human resources which would help us achieve our goals and remain a leading
company within our business areas.
As a consequence, we prioritise development plans for our employees as well as internal and
external education programmes. The goal is that these initiatives will develop and strengthen
our competencies accordingly.
Being employed, the development of competencies within ones field of work as well as on
the personal level will be supported. It would happen through job experience, as well as
trying different jobs and function areas, supported by internal and external education.
To support the HR policy, every single employee has a job description and we focus on the
annual performance review between the manager and the employee. The performance review
also involves making a development plan for the employee.
22

We make a climate analysis every year in order to focus on continued development our
working climate.

HR POLICIES
Human resource policies are systems of codified decisions, established by an organization, to
support administrative personnel functions, performance management, employee relations and
resource planning.
Each company has a different set of circumstances, and so develops an individual set of human
resource policies.
The establishment of policies can help an organization demonstrate, both internally and
externally, that it meets requirements for diversity, ethics and training as well as its commitments
in relation to regulation and corporate governance.
For example, in order to dismiss an employee in accordance with employment law requirements,
amongst other considerations, it will normally be necessary to meet provisions within
employment contracts and collective bargaining agreements.
The establishment of an HR Policy which sets out obligations, standards of behavior and
document displinary procedures, is now the standard approach to meeting these obligations.
Policy or practice areas those are crucial to effective people management and development:

Recruitment and selection

Training and learning/development

Career opportunities

Communication

Employee involvement

Team working

Performance appraisal

Pay satisfaction

Job security

job challenge/job autonomy

Work-life balance.

Not all policies and procedures will be relevant to all organizations, and some policies are
required by law while others are to promote good practice.

23

The following paragraphs indicate the range of possible policies which apply during the
employment life cycle - more detailed information and the legal requirements on each of these
areas is included.
Recruitment and selection
Successful recruitment depends on finding people with the necessary skills, expertise and
qualifications to deliver organizational objectives and who have the ability to make a positive
contribution to the values and aims of the organization. A diverse workforce that reflects
customer groups in the local community should be encouraged.
Elements to consider when forming a recruitment policy:

Job profile/person specification

Dealing with job applications - whether to use hard copy and/or online forms;
confidentiality

Recruitment advertising - discrimination pitfalls

Selection techniques - training and validation

Interviews

References

Medical examinations

Asylum and immigration

Documentation

Job analysis

Equal opportunities monitoring

Return on investment (ROI)/cost.

There's more information on the website via our Recruitment and talent management subject
pages.
Induction
Designing an appropriate and cost-effective induction program is a complex task. The program
has to find a balance between providing all the information new employees need without
overwhelming or diverting them from integrating into the team.
The length and nature of the induction process will depend on the complexity of the job and the
background of the new employee.
Elements of an induction policy:
24

Organization information - background and structure; departments; products and

services; physical layout

Terms and conditions - hours of work; holidays, travel policy

Financial - pay; bonuses; overtime; pensions

Culture and values - communication

Rules and procedures - data protection; email and internet usage; equal opportunities; use
of mobile phones

Health and safety - first aid; smoking; environmental aspects

Training

Trade unions

Welfare, benefits andfranchising system- alcohol and drugs; employee assistance

programs.

Organizations may find it useful to have checklists that cover the pre-employment period, the
first day, the first week, the first month and the end of the probationary period (if applicable) to
make sure everything has been explained.
During employment
Employee relations look at the partnership between employee and employer, covering areas such
as communication, grievances and discipline. It is equally important in both union and non-union
situations. While employment law is closely linked with managing employee relations, a
successful organization won't just base its actions on compliance with the law - exploring the
concept of the psychological contract, based on trust between employee and employer, may also
be useful.
Policies and procedures that organizations may introduce include:

Health and safety

disciplinary and grievance

maternity and paternity leave and pay

redundancy

absence

whistle blowing

performance management

recognition agreements (union and other)

25

time off and leave for trade union activities, holidays, secondment, volunteering,
eldercare, childcare, bereavement

communication and involvement, including employee voice

Harassment and bullying.

There's more information on many of these issues on the website via our HR practice, Health,
safety and wellbeing and Employment law subject pages.
Managing diversity
Diversity runs through all aspects of an organizations policies. Managing and valuing
diversity is central to good people management and makes good business sense, so it also
makes sense for diversity to be integral within all policies. A diversity policy sets out the
organizations vision and values in relation to diversity. It will often include the remit of
polices, the processes for taking action, who is responsible and the training available.
The basic premise is that people should be valued as individuals and for reasons related to
business interests, as well as for moral and social reasons. A more diverse workforce is likely
to offer a wider range of skills and experiences and greater flexibility to meet business
challenges.
Elements of a diversity policy:

Gender/sex equality

Race equality

Sexual orientation

Religion

Age

Appearance/accent

Formats and accessibility of policies and procedures.

Learning, training and development

Roles and responsibilities are constantly changing, so employees will need to continually renew
and refresh their skills and competences through training. This can happen in the course of
normal working (on-the-job training) or away from the workplace (off-the-job training).

26

Some training is mandatory to comply with legal requirements, such as health and safety or
finance.
Elements of a learning and development policy:

The organizations vision for learning and development

Opportunities available, including secondment, career breaks, courses, coaching,

mentoring

Who to ask to get authorization for training

Support given for learning opportunities

Development reviews and personal development plans

Payment of professional fees

Training available for 'peripheral' workers ie contractors, temporary staff

Record-keeping and administration

Continuing professional development and personal development allowances (if these are
not part of the employee benefits statement)

Follow-up actions and transfer of learning to work.

Reward
Effective reward practices and procedures can underpin activities in recruitment, retention,
turnover and engagement. Effective implementation and communication are essential for
initiatives to succeed.
Reward policies should be clear and simple so that employees know what's expected of them and
what they can expect to receive in return.
Elements of a reward policy:

The organizations vision for reward, including market rates, extra responsibility
allowances

How jobs are graded or evaluated

Pensions/additional voluntary contributions

Permanent health insurance/critical illness cover

Bonuses and incentive pay

Benefits and non-cash recognition

Company cars

Sick pay

Pay reviews
27

Equal pay.

Complementary policies
Other policies that organizations may want to consider in relation to employment include:

A mission or values statement

Parental leave

Work-life balance/family-friendly work practices

Disability

Well-being and 'wellness'

Green/sustainable development

The employment of relatives/friends

Conflict of interest, including personal relationships

Second jobs

Confidentiality

Bad weather/climate conditions

Relocation

Suggestion schemes.

Ending employment
There are many reasons why employment ceases, from voluntary resignation to dismissal or
redundancy.
Areas to consider for ending employment include:

Dismissal

Redundancy

Voluntary resignation

Retirement - retirement age; pre-retirement courses; phased retirement options

End of a short-term contract

End of a probationary period

Death in service.

Exit surveys can record information about why employees say they are leaving. But the data
is not always reliable. Another way to discover the reasons why is through opinion surveys
during employment.
28

 Formatting a policy
Policies should be written in plain English, so that they are user-friendly and easily
understood by all employees.
The culture of the organization and the complexity of the policies will dictate the format.
Options include:

Separate manager and employee manuals

All policies available on an intranet

Key policies on notice boards.

Policies should also indicate who to go to with queries about the content and who is
responsible for updating and reviewing them.

29

Human resource policies are systems of codified decisions, established by an organization,

to support administrative personnel functions, performance management, employee relations
and resource planning.
Each company has a different set of circumstances, and so develops an individual set of
human resource policies.
Purposes
HR policies allow an organisation to be clear with employees on:

The nature of the organisation

What they should expect from the company

What the company expects of them

How policies and procedures work at your company

What is acceptable and unacceptable behaviour

The consequences of unacceptable behaviour

The establishment of policies can help an organization demonstrate, both internally and
externally, that it meets requirements for diversity, ethics and training as well as its
commitments in relation to regulation and corporate governance. For example, in order to
dismiss an employee in accordance with employment law requirements, amongst other
considerations, it will normally be necessary to meet provisions within employment contracts
and collective bargaining agreements. The establishment of an HR Policy which sets out
obligations, standards of behaviour and document displinary procedures, is now the standard
approach to meeting these obligations.
Developing the HR Policies
HR policies provide an organisation with a mechanism to manage risk by staying up to date
with current trends in employment standards and legislation

30

The long-term success of the Company depends on its capacity to attract, retain and develop
employees able to ensure its growth on a continuing basis. This is a primary responsibility for
all managers.
The company policy is to hire staff with personal attitudes and professional skills enabling
them to develop a long-term relationship with the Company.
Therefore the potential for professional development is an essential standard for recruitment.
Each new member joining company is to become a participant in developing a sustainable
quality culture which implies a commitment to the organisation and a sense for continuous
improvement leaving no room for complacency.
HUMAN RESOURCES
Human resources is an increasingly broadening term with which an organization, or other
human system describes the combination of traditionally administrative personnel functions
with acquisition and application of skills, knowledge and experience, Employee Relations
and resource planning at various levels. The field draws upon concepts developed in
Industrial/Organizational Psychology and System Theory. Human resources has at least two
related interpretations depending on context. The original usage derives from political
economy and economics, where it was traditionally called labor, one of four factors of
production although this perspective is changing as a function of new and ongoing research
into more strategic approaches at national levels.[1] This first usage is used more in terms of
'human resources development', and can go beyond just organizations to the level of nations
[2]

. The more traditional usage within corporations and businesses refers to the individuals

within a firm or agency, and to the portion of the organization that deals with hiring, firing,
training, and other personnel issues, typically referred to as `human resources management'.
This article addresses both definitions.
Development
The objective of human resource`s' development (the `s' is important in human resource`s' in
that it underscores individuality/variability) is to foster human resourcefulness through
enlightened and cohesive policies in education, training, health and employment at all levels,
from corporate to national (Lawrence[3] 2000) [4]
31

Management
Human resource management's objective, on the other hand, is to maximize the return on
investment from the organization's human capital and minimize financial risk. It is the
responsibility of human resource managers in a corporate context to conduct these activities
in an effective, legal, fair, and consistent manner.
Key functions
Human resource management serves these key functions:
1. Recruitment & Selection
2. Training and Development (People or Organization)
3. Performance Evaluation and Management
4. Promotions
5. Redundancy
6. Industrial and Employee Relations
7. Record keeping of all personal data.
8. Compensation, pensions, bonuses etc in liaison with Payroll
9. Confidential advice to internal 'customers' in relation to problems at work
10. Career development

GLOBAL HR POLICY
Modern analysis
Modern analysis emphasizes that human beings are not "commodities" or "resources", but are
creative and social beings in a productive enterprise. The 2000 revision of ISO 9001 in
contrast requires to identify the processes, their sequence and interaction, and to define and
communicate responsibilities and authorities. In general, heavily unionized nations such as
France and Germany have adopted and encouraged such job descriptions especially within
trade unions. The International Labour Organization also in 2001 decided to revisit, and
32

revise its 1975 Recommendation 150 on Human Resources Development

[5]

. One view of

these trends is that a strong social consensus on political economy and a good social welfare
system facilitates labor mobility and tends to make the entire economy more productive, as
labor can develop skills and experience in various ways, and move from one enterprise to
another with little controversy or difficulty in adapting. Another view is that governments
should become more aware of their national role in facilitating human resources development
across all sectors.
Controversy
Labour mobility
An important controversy regarding labor mobility illustrates the broader philosophical issue
with usage of the phrase "human resources": governments of developing nations often regard
developed nations that encourage immigration or "guest workers" as appropriating human
capital that is rightfully part of the developing nation and required to further its growth as a
civilization. They argue that this appropriation is similar to colonial commodity fiat wherein a
colonizing European power would define an arbitrary price for natural resources, extracting
which diminished national natural capital.
The debate regarding "human resources" versus human capital thus in many ways echoes the
debate regarding natural resources versus natural capital. Over time the United Nations have
come to more generally support the developing nations' point of view, and have requested
significant offsetting "foreign aid" contributions so that a developing nation losing human
capital does not lose the capacity to continue to train new people in trades, professions, and
the arts.
An extreme version of this view is that historical inequities such as African slavery must be
compensated by current developed nations, which benefited from stolen "human resources"
as they were developing. This is an extremely controversial view, but it echoes the general
theme of converting human capital to "human resources" and thus greatly diminishing its
value to the host society, i.e. "Africa", as it is put to narrow imitative use as "labor" in the
using society.

33

In a series of reports of the UN Secretary-General to the General Assembly [e.g. A/56/162

(2001)], a broad inter-sectoral approach to developing human resourcefulness [see United
Nations Expert Meeting on Human Resources Development. `Changing Perspectives on
Human Resources Development. ST/TCD/SER.E/25. June 1994]

[6]

has been outlined as a

priority for socio-economic development and particularly anti-poverty strategies. This calls
for strategic and integrated public policies, for example in education, health, and employment
sectors that promote occupational skills, knowledge and performance enhancement
(Lawrence, J.E.S.) [7].
Perceptions
Terms like "human resources" and "human capital" may be perceived as insulting to people.
They create the impression that people are merely commodities, like office machines or
vehicles, despite assurances to the contrary.
Corporate management
In the very narrow context of corporate "human resources" management, there is a
contrasting pull to reflect and require workplace diversity that echoes the diversity of a global
customer base. Foreign language and culture skills, ingenuity, humor, and careful listening,
are examples of traits that such programs typically require. It would appear that these
evidence a general shift through the human capital point of view to an acknowledgment that
human beings do contribute much more to a productive enterprise than "work": they bring
their character, their ethics, their creativity, their social connections, and in some cases even
their pets and children, and alter the character of a workplace. The term corporate culture is
used to characterize such processes at the organizational level.
The traditional but extremely narrow context of hiring, firing, and job description is
considered a 20th century anachronism. Most corporate organizations that compete in the
modern global economy have adopted a view of human capital that mirrors the modern
consensus as above. Some of these, in turn, deprecate the term "human resources" as useless.
Yet the term survives, and if related to `resourcefulness', has continued and emerging
relevance to public policy.

34

In general the abstractions of macro-economics treat it this way - as it characterizes no

mechanisms to represent choice or ingenuity. So one interpretation is that "firm-specific
human capital" as defined in macro-economics is the modern and correct definition of
"human resources" - and that this is inadequate to represent the contributions of "human
resources" in any modern theory of political economy.
Human resources development
In organizations, in terms of selection it is important to consider carrying out a thorough job
analysis to determine the level of skills/technical abilities, competencies, flexibility of the
employee required etc. At this point it is important to consider both the internal and external
factors that can have an effect on the recruitment of employees. The external factors are those
out-with the powers of the organization and include issues such as current and future trends
of the labor market e.g. skills, education level, government investment into industries etc. On
the other hand internal influences are easier to control, predict and monitor, for example
management styles or even the organizational culture.
Major trends
In order to know the business environment in which any organization operates, three major
trends should be considered:

Demographics the characteristics of a population/workforce, for example, age,

gender or social class. This type of trend may have an effect in relation to pension
offerings, insurance packages etc.

Diversity the variation within the population/workplace. Changes in society now

mean that a larger proportion of organizations are made up of "baby-boomers" or
older employees in comparison to thirty years ago. Traditional advocates of
"workplace diversity" simply advocate an employee base that is a mirror reflection of
the make-up of society insofar as race, gender, sexual orientation, etc.

Skills and qualifications as industries move from manual to a more managerial

professions so does the need for more highly skilled graduates. If the market is "tight"
(i.e. not enough staff for the jobs), employers will have to compete for employees by
offering financial rewards, community investment, etc.
35

Individual responses
In regard to how individuals respond to the changes in a labour market the following should
be understood:

Geographical spread how far is the job from the individual? The distance to travel to
work should be in line with the pay offered by the organization and the wireless
internet, broadband, fixed line, and infrastructure of the area will also be an
influencing factor in deciding who will apply for a post.

Occupational structure the norms and values of the different careers within an
organization. Mahoney 1989 developed 3 different types of occupational structure
namely craft (loyalty to the profession), organization career (promotion through the
firm) and unstructured (lower/unskilled workers who work when needed).

Generational difference different age categories of employees have certain

characteristics, for example their behavior and their expectations of the organization.

Recruitment methods
While recruitment methods are wide and varied, it is important that the job is described
correctly and that any personal specifications are stated. Job recruitment methods can be
through job centres, employment agencies/consultants, headhunting, and local/national
newspapers. It is important that the correct media is chosen to ensure an appropriate response
to the advertised post.
Where organisations don't have the internal resource to be able to conduct an effective
recruitment exercise this is where they may outsource this to a third party, typically a
recruitment or hr consultancy that specializes in the area that the organisation requires.
Framework
Human Resources Development is a framework for the expansion of human capital within an
organization or (in new approaches) a municipality, region, or nation. Human Resources
Development is a combination of training and education, in a broad context of adequate
health and employment policies, that ensures the continual improvement and growth of both
the individual, the organisation, and the national human resourcefulnes. Adam Smith states,
36

The capacities of individuals depended on their access to education. [8] Human Resources
Development is the medium that drives the process between training and learning in a
broadly fostering environment. Human Resources Development is not a defined object, but a
series of organised processes, with a specific learning objective (Nadler,1984) [9] Within a
national context, it becoms a strategic approach to intersectoral linkages between health,
education and employment.[10]
Structure
Human Resources Development is the structure that allows for individual development,
potentially satisfying the organizations, or the nation's goals. The development of the
individual will benefit both the individual, the organization, or the nation and its citizens. In
the corporate vision, the Human Resources Development framework views employees, as an
asset to the enterprise whose value will be enhanced by development, Its primary focus is on
growth and employee developmentit emphasises developing individual potential and
skills (Elwood, olton and Trott 1996)[11] Human Resources Development in this treatment
can be in-room group training, tertiary or vocational courses or mentoring and coaching by
senior employees with the aim for a desired outcome that will develop the individuals
performance. At the level of a national strategy, it can be a broad intersectoral approach to
fostering creative contributions to national productivity [12]
Training
At the organizational level, a successful Human Resources Development program will
prepare the individual to undertake a higher level of work, organized learning over a given
period of time, to provide the possibility of performance change (Nadler 1984). In these
settings, Human Resources Development is the framework that focuses on the organizations
competencies at the first stage, training, and then developing the employee, through
education, to satisfy the organizations long-term needs and the individuals career goals and
employee value to their present and future employers. Human Resources Development can be
defined simply as developing the most important section of any business its human resource
by, attaining or upgrading the skills and attitudes of employees at all levels in order to
maximise the effectiveness of the enterprise (Kelly 2001)[13]. The people within an
organization are its human resource. Human Resources Development from a business
perspective is not entirely focused on the individuals growth and development,
37

development occurs to enhance the organization's value, not solely for individual
improvement. Individual education and development is a tool and a means to an end, not the
end goal itself. (Elwood F. Holton II, James W. Trott Jr)[14]. The broader concept of national
and more strategic attention to the development of human resources is beginning to emerge as
newly independent countries face strong competition for their skilled professionals and the
accompanying brain-drain they experience.
Modern concept of human resources
Though human resources have been part of business and organizations since the first days of
agriculture, the modern concept of human resources began in reaction to the efficiency focus
of Taylorism in the early 1900s. By 1920, psychologists and employment experts in the
United States started the human relations movement, which viewed workers in terms of their
psychology and fit with companies, rather than as interchangeable parts. This movement
grew throughout the middle of the 20th century, placing emphasis on how leadership,
cohesion, and loyalty played important roles in organizational success. Although this view
was increasingly challenged by more quantitatively rigorous and less "soft" management
techniques in the 1960s and beyond, human resources development had gained a permanent
role within organizations, agencies and nations, increasingly as not only an academic
discipline, but as a central theme in development policy.

38

The telecom industry is one of the fastest growing industries in India. India has nearly 200
million telephone lines making it the third largest network in the world after China and USA.
With a growth rate of 45%, Indian telecom industry has the highest growth rate in the world.
History of Indian Telecommunications started in 1851 when the first operational land lines
were laid by the government near Calcutta (seat of British power). Telephone services were
introduced in India in 1881. In 1883 telephone services were merged with the postal system.
Indian Radio Telegraph Company (IRT) was formed in 1923. After independence in 1947, all
the foreign telecommunication companies were nationalized to form the Posts, Telephone and
Telegraph (PTT), a monopoly run by the government's Ministry of Communications. Telecom
sector was considered as a strategic service and the government considered it best to bring
under state's control.
The first wind of reforms in telecommunications sector began to flow in 1980s when the
private sector was allowed in telecommunications equipment manufacturing. In 1985,
Department of Telecommunications (DOT) was established. It was an exclusive provider of
domestic and long-distance service that would be its own regulator (separate from the postal
system). In 1986, two wholly government-owned companies were created: the Videsh
Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar
Telephone Nigam Limited (MTNL) for service in metropolitan areas. In 1990s,
telecommunications sector benefited from the general opening up of the economy. Also,
examples of telecom revolution in many other countries, which resulted in better quality of
service and lower tariffs, led Indian policy makers to initiate a change process finally
resulting in opening up of telecom services sector for the private sector. National Telecom
Policy (NTP) 1994 was the first attempt to give a comprehensive roadmap for the Indian
telecommunications sector. In 1997, Telecom Regulatory Authority of India (TRAI) was
created. TRAI was formed to act as a regulator to facilitate the growth of the telecom sector.
New National Telecom Policy was adopted in 1999 and cellular services were also launched
in the same year.
Telecommunication sector in India can be divided into two segments: Fixed Service Provider
(FSPs), and Cellular Services. Fixed line services consist of basic services, national or
domestic long distance and international long distance services. The state operators (BSNL
and MTNL), account for almost 90 per cent of revenues from basic services. Private sector
services are presently available in selective urban areas, and collectively account for less than
39

5 per cent of subscriptions. However, private services focus on the business/corporate sector,
and offer reliable, high- end services, such as leased lines, ISDN, closed user group and
videoconferencing.
Cellular services can be further divided into two categories: Global System for Mobile
Communications (GSM) and Code Division Multiple Access (CDMA). The GSM sector is
dominated by Airtel, Vodafone-Hutch, and Idea Cellular, while the CDMA sector is
dominated by Reliance and Tata Indicom. Opening up of international and domestic long
distance telephony services are the major growth drivers for cellular industry. Cellular
operators get substantial revenue from these services, and compensate them for reduction in
tariffs on airtime, which along with rental was the main source of revenue. The reduction in
tariffs for airtime, national long distance, international long distance, and handset prices has
driven demand.
Fixed/Basic Network Services
Although nearly a decade has elapsed since India laid out a regulatory framework for the
liberalization of basic telecom services, competition in fixed local loop telephone services, so
far, extends to only a fraction of the total population. Competitive entry has focused
principally on services for urban customers in relatively affluent areas. Even the pattern of
switching capacity (which indicates the capacity in a circle) indicates that around 57% of the
switching capacity of the private operators at end-September 2003 was in metros and
Category A circles. Further, an estimated 68% of the fixed network telephone connections of
private operators at end-March 2004 were in metros and Category circles.
In terms of subscriber connections, private operators had a market share of around 5.5% at
end-FY2004, as compared with 2.3% at end-FY2003, and 1.5% at end- FY2002. While
private operators accounted for 25% of subscriptions in urban areas at end-March 2004 (17%
at end-September 2003), their market share in rural areas was negligible at 0.2% (0.2% at
end-September 2003). Because subscriber density and income (and ability to pay) are low,
providing access in rural areas is unprofitable because of the higher costs and lower revenues.
The cost of providing telephone service in rural areas is much higher than in urban or
suburban areas. The demand for profitable long distance services and value -added fax and
Internet services is insignificant in rural areas. Above -cost long distance services are often
bundled with cheaper local services in urban areas.
40

Cellular Services
For cellular GSM and CDMA services, there presently exists significant extent of
competition in nearly all service areas. In GSM services, during January 2005, of the 23
service areas (reduced from 24 after the merger of A&N Islands into the WB circle), fourteen
service areas had 4 operators, seven service areas had 3 operators, and two service areas had
2 operators, and one had only one licensed operator. However, the intensity of competition is
higher in Metros and Category A circles, which have higher potential and penetration. For
example, all the four metros and five Category A service areas had four licensed operators.
By comparison, six out of 8 Category B circles, and none of Category C circles had four
operators.
Increasingly GSM service providers are facing competition digital CDMA based wireless
services.
Unlike GSM, which offers seamless national and international roaming, WLL-LM services
did not offer roaming. However, CDMA mobile services are, currently, competitive on
product offerings and prices as compared with cellular GSM services. At end-2004, there
were an estimated 11.08 million CDMA mobile connections, as compared with 37.38 million
cellular subscriptions. Thus, CDMA subscriptions accounted for 22.9% of the total wireless
mobile connections in India at end-December 2004.
National Long Distance
The Indian NLD market was estimated at around Rs. 50 billion during FY2004. Because of
the significant decline in prices of NLD services caused by regulatory interventions and
market competition, the NLD market has declined from around Rs. 59 billion during FY2003.
Though the number of minutes of NLD traffic has increased, the market has shrunk because
of intense competition between the various operatorsBSNL, BIL, RIL, and VSNL.
Competition is steadily leading to a decline in NLD prices as they more accurately reflect
true costs. However, long-distance service hinges on access to local networks, which for now
is controlled by BSNL, MTNL, and private operators such as BTV, and Reliance.
Long-distance service hinges on access to local networks. Thus, new entrants without a
significant fixed/cellular local access customer base will have to use the customer access
41

networks of the existing local access network operators (fixed and cellular) to originate and
terminate their traffic.
International Long Distance
The Indian ILD market was estimated at around Rs. 43 billion during FY2004. Because of
the significant decline in prices of ILD services caused by regulatory interventions and
market competition, the ILD market has declined from around Rs. 50 billion during FY2003.
Though the number of minutes of ILD traffic has increased from 3.7 billion during FY2003
to 5.2 billion during FY2004, the market has declined in value terms because of intense
competition between the various operatorsVSNL, DAIL, BIL, and RIL

In the pre-reform period, growth was primarily driven by public sector monopoly
showing very marginal growth.

Reform process was started with new telecom policy 1994.

When telecom reforms were initiated in 1994, there were three incumbents in the fixed
service sector, namely DoT (Department of Telecom), MTNL and VSNL.

Of these, DoT operated in all parts of the country except Delhi and Mumbai. MTNL
operated in Delhi and Mumbai and VSNL provided international telephony.

New Telecom Policy 94

In 1994, the Government announced the National Telecom Policy which defined certain
important objectives, including availability of telephone on demand, provision of world
class services at reasonable prices, ensuring Indias emergence as major manufacturing /
export base of telecom equipment and universal availability of basic telecom services to
all villages.

NTP 1994 also recognized that the required resources for achieving these targets would
not be available only out of Government sources and concluded that private investment
and involvement of the private sector was required to bridge the resource gap. The
Government invited private sector participation in a phased manner from the early
nineties, initially for value added services such as Paging Services and Cellular Mobile
42

Telephone Services (CMTS) and thereafter for Fixed Telephone Services (FTS). After a
competitive bidding process, licenses were awarded to 8 CMTS operators in the four
metros, 14 CMTS operators in 18 state circles, 6 BTS operators in 6 state circles and to
paging operators in 27 cities and 18 state circles. VSAT services were liberalised for
providing data services to closed user groups. Licences were issued to 14 operators in the
private sector out of which only nine licensees are operational.
New Telecom Policy 99

Access to telecommunications is of utmost importance for achievement of the country's

social and economic goals. Availability of affordable and effective communications for
the citizens is at the core of the vision and goal of the telecom policy.

Strive to provide a balance between the provision of universal service to all uncovered
areas, including the rural areas, and the provision of high-level services capable of
meeting the needs of the country's economy;

Encourage development of telecommunicationfranchising systemin remote, hilly and

tribal areas of the country;

Create a modern and efficient telecommunications infrastructure taking into account the
convergence of IT, media, telecom and consumer electronics and thereby propel India
into becoming an IT superpower; .

Transform in a time bound manner, the telecommunications sector to a greater

competitive environment in both urban and rural areas providing equal opportunities and
level playing field for all players;

Strengthen research and development efforts in the country and provide an impetus to
build world-class manufacturing capabilities.

Enable Indian Telecom Companies to become truly global players.

In line with the above objectives, the specific targets that the NTP 1999 tried to achieve
were:

43

To encourage development of telecom in rural areas making it more affordable by suitable

tariff structure and making rural communication mandatory for all fixed service
providers.

To increase rural teledensity from the current level of 0.4 to 4 by the year 2010 and
provide reliable transmission media in all rural areas.

Achieve telecom coverage of all villages in the country and provide reliable media to all
exchanges by the year 2002.

44

Fig01: Tele-Density Growth Post-Reform

From the above graph we see that:

Growth started in phase I of the reform 1998-2003.

Growth during phase I was not exponential due to the apprehensions private players
had for the government policies.

Phase II growth was mobile driven and was consequent to certain decisions taken by
the govt.
TRAI facilitated huge reduction in forborne tariffs in 2003-05.
Allowed handsets sales in instalments.

The growth in tele-density each year in 2003-04 (2%) and 2004-05 (2%) has been
greater than the growth in the last 50 years 1948-98.

In phase III each year the growth has been greater than 4.5%

Michael Porters Five forces model describes the threats to a companys competitive
advantage in an industry. Here is a breakdown of the "five forces model:
1. Degree of rivalry of existing industry competitors.
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2. Degree of barriers to entry by new competitors in the industry.

3. Threat of substitute products/services.
4. Bargaining power of buyers.
5. Bargaining power of suppliers.
Below are five areas that exemplify the concepts of the five forces and show how
trends can really be pressures on an organizations competitive nature:

Industry Consolidation: As in the wireless / cellular service provider market, this

can mean threats from existing companies who consolidate their position and acquire
additional market share by purchasing their competition (Rivalry).

Wireless Local-Area Networks: The Internet and broadband-based VoIP market

could soon face competitors from the wireless / cellular service providers
(Substitutes) via wireless local area networks, WLANs.

Security/Fraud: When we think about using a free VoIP service, like Skype, we do
not necessarily think about fraud. However, when you start looking at the pay VoIP
services, fraud becomes a much larger issue (Barriers to Entry).

Pricing: Wireless / cellular and traditional phone service providers have seen
demands from consumers dr

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for project
sunil khare
07049777353

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