In a letter to employees, dated April 29, Hital Meswani, executive director, RIL, said: “The hydrocarbon business has been adversely impacted due to reduction in demand for refined products and petrochemicals. This has put pressure on our hydrocarbon business.”
Meswani said this pressure has necessitated optimisation and cost reduction on all fronts of the business.
With this, RIL joins the list of conglomerates that have announced payment deferrals. Last week, Larsen & Toubro told its employees it would defer its monetary appraisals, while Tata Consultancy Services has announced it would freeze salary hikes.
While 10 per cent cut will be in the fixed component of salaries of those earning more than Rs 15 lakh annually, those earning less than the threshhold will see no cuts. RIL’s board of directors will forgo 30-50 per cent of their compensation.
Annual cash bonuses and performance linked incentives due in the first quarter of the financial year stand deferred. All these measures are effective April 1.
Ambani's annual compensation stands at Rs 15 crore. The billionaire has kept his salary capped at the same level since 2008-09, forgoing increments that other board members received.
Overall, RIL had 194,056 employees in FY19 and reported a employee benefit expense at Rs 5,834 crore.
A segment break-up of employee strength and expenses for the hydrocarbons segment is not available.
In the letter, Meswani said the company would closely monitor the economic and business environment and reevaluate its response to the situation on a continuous basis.
People in the know said this was one of the rare occasions where RIL executed a pay cut — it had refrained from doing so during the 2008 global economic crisis.
Due to the lockdown in the country and restrictions on travel, demand for petroleum products has fallen drastically. Oil executives pegged demand for products like petrol and diesel at one-third of the usual up to April 20.
The financial year 2019-20 closed with India's fuel demand barely growing 0.2 per cent, its worst growth rate in over two decades. With the partial lifting of lockdown for industries, demand for products like diesel has improved marginally to about one half of the normal demand.
Demand for aviation fuel has almost diminished, with a fall of more than 90 per cent. RIL’s core business — oil, petrochemicals, refining — contributes almost 60 per cent to its overall earnings before interest, taxation, depreciation and amortisation (Ebitda).