karnataka state police housing corporation ltd Management discussions

KARNATAKA STATE POLICE HOUSING CORPORATION LIMITED ANNUAL REPORT 2007-2008 MANAGEMENT DISCUSSION AND ANALYSIS The performance of the corporation in the last five years is given in the Tables 1 to 3. TABLE-1: A. Financial Highlights: Rs. in lakhs Particulars/Year 2007-08 2006-07 2005-06 Cost of Buildings completed 4439.53 10605.16 6420.48 and handed over Cost of Work in Progress 57729.57 50979.15 46316.81 Borrowings (Loan Drawn) 0.00 2300.00 5500.00 Direct Work Expenditure 8764.26 6511.98 10201.48 Personnel Expenditure 545.57 449.60 426.01 Administrative Expenditure 229.15 210.39 175.08 Other Income 245.51 202.38 94.48 Interest Income 2150.17 684.50 117.03 Grants from Government of 5500.00 17239.00 12452.99 Karnataka Rs. in lakhs Particulars/Year 2004-05 2003-04 Cost of Buildings completed 6342.11 13641.03 and handed over Cost of Work in Progress 37788.23 30351.86 Borrowings (Loan Drawn) 3003.03 7377.00 Direct Work Expenditure 8835.62 8195.06 Personnel Expenditure 403.28 412.93 Administrative Expenditure 219.38 131.45 Other Income 88.64 108.04 Interest Income 125.38 134.65 Grants from Government of 5488.19 3640.00 Karnataka TABLE-2: Direct Work Expenditure for the last 5 years: Rs. in lakhs Year A B C D 2007-08 2314.01 93.24 8764.26 6357.01 2006-07 3445.41 261.76 2804.81 6511.98 2005-06 6993.33 857.86 2350.29 10201.48 2004-05 3509.43 2161.28 3164.91 8835.62 2003-04 2092.83 5192.18 910.03 8195.04 A = Residential Buildings B = Non-Residential Buildings C = Deposit Contribution Works (which includes Residential & Non- Residential Buildings) D = Total B. Performance Highlights: Number of buildings constructed & handed over: The Corporation has constructed and handed over 18009 residential and 830 non-residential buildings in the last 23 years of its existence till 31st March 2008. Of these, 812 residential and 78 nonresidential buildings have been built and handed over in the current year as compared to 2612 residential and 83 non residential buildings during last financial year. TABLE-3: Physical Achievements of KSPHC since inception: Rs. in lakhs Year A B C D E F 2007-08 812 78 890 1861 184 2045 2006-07 2612 83 2695 2160 154 2314 2005-06 1268 148 1416 4546 160 4706 2004-05 634 214 848 5461 192 5653 2003-04 2765 261 3026 1036 296 1332 2002-03 2739 5 2744 3283 423 3706 2001-02 1274 1 1275 4937 3 4940 2000-01 339 3 342 851 3 854 1999-00 64 1 65 1053 5 1058 1998-99 640 7 647 1133 6 1139 1997-98 352 2 354 1410 6 1416 1996-97 742 - 742 2270 13 2283 1995-96 789 3 792 1678 6 1684 Up to 1994-95 2979 24 3003 - - - TOTAL 18009 830 18839 A = No. of Buildings handed over during the year upto 31st March - Residential B = No. of Buildings handed over during the year upto 31st March - Non- Residential C = No. of Buildings handed over during the year upto 31st March - Total D = No. of Buildings under construction as on 31st March - Residential E = No. of Buildings under construction as on 31st March - Non-Residential F = No. of Buildings under construction as on 31st March - Total Awards received by KSPHC: The Corporation has received the following Awards during this financial year: * National Award (Bronze) by Government of India for e-Governance 2007-08 for implementing Web Based Project Management System as Innovative Usage of Technology in e-Governance. * Karnataka State Environmental Award 20072008 for Conservation and Environmental Awareness Programme by Department of Forest, Environment and Ecology, Government of Karnataka. Management Discussion and Analysis: I. Segment Reporting: Since the Corporation was established as a Special Purpose Vehicle (SPV) of the Government to construct buildings for the Police, Fire Force, Prison and other auxiliary services, the works undertaken by the Corporation can be classified into two major segments i.e. construction of Residential buildings and Non-residential buildings. The physical and financial progress made in these two segments are as under: TABLE-4: Number of Buildings Constructed and Handed over: Financial A B C D E F G H Year 2007-08 812 4344.31 1861 11709.93 78 95.22 184 418.57 2006-07 2612 9709.32 2160 8350.69 83 895.84 154 1645.66 2005-06 1268 1451.93 4546 13877.17 148 943.24 160 9918.74 2004-05 634 2414.11 5461 3364.17 214 4017.86 192 4270.78 2003-04 2765 8566.51 1036 1194.24 261 5074.52 296 3334.74 A = Residential - Buildings Constructed and Handed Over - Numbers B = Residential - Buildings Constructed and Handed Over - Cost as on 31st March C = Residential - Buildings Under Construction - Numbers D = Residential - Buildings Under Construction - Cost as on 31st March E = Non-Residential - Buildings Constructed and Handed Over - Numbers F = Non-Residential - Buildings Constructed and Handed Over - Cost as on 31st March G = Non-Residential - Buildings Under Construction - Numbers H = Non-Residential - Buildings Under Construction - Cost as on 31st March II. Works completed and under progress during the year under various schemes of the Government: i) The Accelerated Housing Scheme-I: This was the first major scheme undertaken and executed by KSPHC. This scheme came to a close in December 2004 and the closure report was sent to all concerned. 5056 quarters were constructed as against the revised target of 4900 quarters. The budgeted cost of the scheme was Rs. 160.00 Crores but it was completed at a cost of Rs.162.27 crores. The over all cost over run was just 1.41 % which is attributable to delayed sanction of the scheme. As far as time overrun is concerned, the scheme was originally scheduled for three years from 1999 onwards, but it was delayed because funds had to be borrowed from Financial Institutions. Protracted negotiations with Financial Institutions on the terms and conditions of lending and paucity of land availability added further to this delay. Construction of extra 156 quarters was possible due to introducing the concept of Professional Project Management. The administrative cost of Rs 4.28 crores for the scheme was met out of Government Grants. The cost of raising loan was Rs.60.00 lakhs. The corporation also contributed about Rs.10.00 crores to the exchequer through collection of direct and indirect Taxes. By successfully executing this mega scheme, KSPHC proved its capacity and credentials that facilitated the corporation to bag other larger projects like AHS II (Rs.180 crores) and K-SAFE- 2010 (Rs.323 crores). ii) The Accelerated Housing Scheme-II: To fulfill the States share towards centrally sponsored Police Modernization Schemes, AHSII was sanctioned in 2002. Initially, the proposal was to construct 5000 quarters for the police personnel at a cost of Rs.180.00 crores in 2 years. In view of the varying shares of the Centre vis-avis State from 50:50 to 60:40 and later to 75:25, the States share became smaller. Consequently, in this State funded scheme, the pace of execution of this scheme got slowed down. With the reduction in the requirement of the States commitment to Police Modernization and increase in the Centers share, it was decided to phase out this programme for execution in three years instead of two years as originally envisaged. So far, 3811 Quarters have been completed and handed over and the work for the remaining buildings is nearing completion. All these projects shall be handed over to the Police Dept. before 31.03.2009. The physical progress achieved as of now is over 76.22%. The physical and financial progress is matching satisfactorily. The cumulative work expenditure incurred by the end of this financial year is Rs.165.42 Crores which is about 91.90% of the total amount estimated. Despite escalation in the price of building materials; especially for steel and cement, the cost per sq. ft. of construction for AHS-11 was maintained at a lower level than it was in the AHS-I Scheme. In addition, the carpet area for each PC Quarters was increased from 400 sq. ft. to 525 sq. ft., thus providing additional living space for the Police families. Some of the interior provisions such as glazed tiles, daddoing the toilet block, providing kitchen platform etc. were upgraded in all the quarters of all ranks. The per capita sq. ft. area of the houses constructed under AHS-11 Scheme has been increased without any substantial increase in cost. It is also expected that there will be some savings in the scheme as remaining 1189 quarters have already reached the final stage of completion. Once the planned 5000 Quarters are completed, the real savings will be worked out and additional quarters will be constructed depending on the savings available after adjusting the excess expenditure incurred in AHS I scheme. This scheme was planned to be funded through Institutional borrowings to the tune of Rs.180.00 crores. Due to continuous hike in interest rates throughout the period, Financial Institutions were reluctant to release funds at the agreed rates. The Government was kind enough to release Rs.135.00 crores as grant and only Rs.45.00 Crores loan was availed from HDFC against Government Guarantee. iii) Non-Residential Buildings (NRB) Scheme: Another major scheme for construction of nonresidential buildings for the Police Dept. was sanctioned by the Government of Karnataka in 2000. The scheme envisaged construction of 429 non residential buildings at 338 locations at a cost of Rs.124 Crores within 6 years. The fund utilized for this scheme as on 31.03.2008 is Rs. 102.73 Crores. In all, constructions of 487 buildings at 348 locations have been taken up. Meanwhile, from the original list of works, 20 works at 13 locations were dropped. So far, 462 buildings at 332 locations have been completed and handed over. Construction of works at remaining locations is in progress. The two important pending works are the Commissioner of Police Building and additions to the State Intelligence Building, both at Bangalore. The foundation stone for the construction of COP building was laid by the then Honble Chief Minister on 2nd October, 2007. The plan for State Intelligence Building is yet to be finalized as the earlier drawings and plans have undergone many changes. Now a proposal has been sent to the state Government to take up this work in the premises of DG & IGP office at a cost of about Rs.45.00 crores. The expenditure shall be met from the savings from NRB I and deposit from the police Department. iv) The Accelerated Housing Scheme-III: Due to increase in the Police force and to meet the housing requirement of the Police staff, this scheme was sanctioned vide GOK G.O. No. HD 34 PBL 2007 Bangalore Dt. 01.02.2008. The proposal is to construct 6000 quarters for the police personnel at a cost of Rs.440.00 crores in 3 years from 2008-09 to 2010-11. The Corporation is in the process of finalizing the locations and is making a priority list in consultation with DG & IGP, Karnataka, after collecting the details of land availability and requirement of quarters. The state Government has provided Rs.45.00 crore in its Budget for the year 2008-09. Since the Corporation has to complete construction of 2000 quarters per year to complete the scheme as per the time frame prescribed in the GO, the funds required is to the extent of Rs.150.00 crores in the first two years. Hence we have requested the state Government to release Rs.105.00 crores as additionality along with Rs.45.00 crores provided in the Budget. v) Deposit Contribution Works (DCW): (a) Prisons Department: For the Prison Department, the Govt. of Karnataka, under a Perspective Plan 2002-07, has approved a plan for construction of Jail Buildings and Staff Quarters etc., for a total outlay of Rs. 5390.00 lakhs. 75% of the works was to be funded by the Centre and executed by KSPHC and balance 25% was to be funded by the State and to be executed by PWD. KSPHC was required to construct 376 staff quarters and 13 Prison/Jails at 36 locations during the period from 2002 to 2007. The sanction for the plan was issued on 16.05.2003. Due to cost escalation, the number of quarters has been reduced to 350. Construction of 350 Quarters and 13 jail/Prisons which include expansion and renovation of two prisons have been taken up. These are to be carried out in 30 locations in the state. Out of these, 317 Quarters at 22 locations and 10 new district prisons have been completed and handed over for occupation. Construction of 33 Quarters at 7 locations and 3 new districts Prison/Sub Jail are in progress. Physical progress achieved is about 91 %. The Prison Department has deposited Rs. 38.67 Crores with KSPHC as on 31.03.2008 out of which Rs. 35.11 Crores has been utilized towards this scheme with a financial progress of 90.77%. Balance works are expected to be completed shortly. Meanwhile, Prison Department has sanctioned construction of new sub jails for 200 prisoners at Chikkaballapur and grant of Rs. 3.5 Crores has been received during February 2008. (b) Police Department: Construction of 258 quarters and 45 Non-residential building at 79 locations have been completed during the financial year with a total expenditure of Rs. 13.49 Crores. Under this Scheme, works like construction of Police Stations, Rest Rooms for women employees in Police Stations, interior work, LAN cabling/networking in DPOs etc. have been taken up. During the year new deposits to the tune of Rs. 6.14 Crores was received out of which an amount of Rs. 82.12 lakhs has been spent. (i) Police Modernization Scheme: From 2001-2002 onwards, Rs.109.44 Crores have been received by our Corporation for construction of Forensic Science Laboratory (Bangalore), Police barracks, Community centre, DNA Centre, quarters for the senior and junior police officers, Training schools, Police Stations Dormitories, Motor vehicles sheds etc., all over the state under Police Modernization Scheme. Out of this, Rs. 66.09 Crores has been utilized towards work expenditure which is 60.38% utilization of funds received by the Corporation. During the current year, we have received an amount of Rs.30.25 Crores as deposit and have incurred an expenditure of Rs.16.86 crores for various works. (ii) XI Finance Commission: The Corporation has received Rs.10.55 crores as deposit from the Police Department under XI Finance Commission. KSPHC has taken up construction of 130 rest rooms and toilets for women police employees in addition to construction of 54 police stations. There are other miscellaneous works to be carried out under this scheme. The Corporation has completed and handed over 92 Rest rooms and Toilets. Out of 54 police stations, 50 have been completed and handed over for occupation. The rest of the works are in progress. The corporation has incurred an expenditure of Rs.8.93 crores as on 31.03.2008. (c) Fire Force Department Karnataka State Accelerated Fire and Emergency Services improvement project (K-SAFE - 2010): A major project of Rs.323.20 Crores was sanctioned in 2005 for improving fire services up to Taluk level in all 179 Taluks in the State. GOK has agreed to release Rs.30.00 Crores as grant for construction of 28 fire stations and the rest of the fund is to be sourced from various agencies like GOI, KUIDFC, RIDF, NABARD, GIC etc. We have received deposit of Rs.45.80 Crores from GOK as on 31.03.2008 and Rs.35.00 crores has been earmarked by the State Government in the Budget for the year 2008-09. Breathing air compressors charging cylinders and rescue vans have been procured. Tenders are invited for 22 works of new fire stations and 506 officers & staff Quarters. One fire station is completed and 16 fire stations and 444 Quarters are in progress and for other works agencies are to be fixed. KSPHC has incurred an expenditure of Rs.29.15 Crores up to 31.03.2008. III. Financial Management: The Karnataka Government in its Budget for the year 2007-08 had provided and released Rs.55 crores for our corporation. This amount was just sufficient to meet Corporations commitments towards repayment of loans and interest. From this fund, Rs.3054.85 lakhs was used to meet the repayment of loans raised in previous years with HUDCO and HDFC and Rs.2445.15 lakhs was utilized to make interest payment to these institutions. The corporation has incurred work expenditure of Rs. 87.64 Crores during 2007- 08 as against the previous years figure of Rs.65.11 crores. In spite of very good financial position, the corporation could not cross the all time record of Rs.102 crores achieved in 2005-06.This was mainly because both AHS II and NRB schemes were nearing completion and no new major scheme was sanctioned by the Govt. except AHS-111 which was sanctioned only in the month of February 2008. The proposal for NRB-11 scheme for a total outlay of Rs. 170 Crores submitted on 31.01.2008, to the govt. is yet to be sanctioned. In this scenario, the Corporation has executed mostly the works under deposit contribution basis specifically of K-SAFE 2010 and Police Dept. works and the remaining works of AHS-II. However, adequate funds were marshalled throughout the year for the on-going schemes and there was no dearth of funds for payment of work bills. The timely payment of work bills facilitated completion of projects as scheduled. The corporation has paid Rs.269.97 lakhs during 2007-08 to GOK towards Guarantee commission payable for the year 2006-07 out of its own revenue. The overall Fund Flow position for the year 2007-08 is given in table 5 given below: TABLE-5: Funds Inflow and Outflow for the year 2007-08: Rs. in lakhs Financial Year 2007-08 2006-07 Inflow Loan from Financial Institution 0.00 2300.00 Government Grants 5500.00 6656.00 Government Grants for Project 0.00 10583.00 DCW Deposits 8698.94 5659.14 Other Income 286.72 202.38 Interest income from fixed deposit 2257.03 0.00 Total inflow of Funds 16742.69 25400.52 Outflow of Funds: Direct Work Expenditure 8764.26 6511.98 Finance Expenditure 2483.94 2514.63 Repayment of loan 3054.85 3059.03 Personnel Expenditure 545.57 449.60 Administrative Expenditure 229.15 253.75 Fixed Asset Purchased 131.08 59.49 Increase in Current Assets 1533.84 12552.04 Total outflow of funds 16742.69 25400.52 The interest rates continued to increase during this year also. In spite of the rising interest regime, the Corporation has been able to contain the weighted average interest rate at 9.82 % on the total loan outstanding of Rs. 25037.95 lakhs as on 31.03.2008. The cost of capital by way of overall interest increased marginally as detailed below in table 6: TABLE-6: Rs. in lakhs Particulars/Year 2007-08 2006-07 2005-06 2004-05 2003-04 Total Loan Amount Outstanding 25037.95 28092.80 28850.46 25556.15 24750.71 Weighted Average Interest Rate 9.82% 9.05% 8.41% 8.45% 8.49% The corporation is able to post a net profit of Rs.13.16 crores after providing for income tax of Rs.7.80 crores. The corporation also made provision for declaration of dividend of 100% on the equity share capital. Out of the net profit of Rs.13.16 crores, Rs.5.50 crores is provided for the construction of Corporate Office of KSPHC. KSPHC has requested the Government to transfer the land located at Broadway Road to construct its Corporate Office. In addition, Rs.3.00 Crore has been provided for purchase of land for the construction of KSPHC staff quarters. Rs.3.21 Crore has been transferred to the General Reserve as per the provisions of Companies Act and Rs.0.50 crore is provided for R&D and Business Development activities of the corporation. The remaining net profit is left in the Profit and Loss Account. The work-in-progress or the inventory of the corporation has been increasing over the years mainly because PWD has expressed its inability to take possession of the completed buildings which have been handed over to the User Departments. The work-in-progress of Rs.577.29 crores reflected in Corporations Books of Accounts includes Rs.456.01 Crores works expenditure on account of completed buildings handed over to the User Departments but not taken over by PWD so that the value of these buildings can be reduced from work in progress by way of contra entry in Corporations books of accounts. However, the Government, in its revised operational guidelines Dtd. 19.5.2008 has instructed the Corporation to hand over the completed buildings to the Police department or other user departments for further maintenance. Government order also says that the completed buildings which are still in the inventory of KSPHC should be transferred to the user departments before 31.03.2009. IV. Quality Initiatives: KSPHC is an ISO 9001:2000 Certified Company since May 2005. Our Quality Policy is to deliver improved quality products and services that are cost effective. Our quality standards have prescribed time frame for all the processes so that projects are executed in time. The Corporation has standardized all its processes and procedures through well defined Quality Policy, Quality Manual, Quality System Procedures and Quality Objectives. It was an initiative to revamp the organization and re-engineer the processes and systems in order to emerge as a market leader and a model organization in the government sector specifically in the construction sector. There is a continuous collective effort to meet the standards through fixing a higher target for quality standards and periodic surveillance audits by an internal as well as external audit teams. During the year, two of KSPHCs officers, namely Shri Syed Nayeem Ahmed (EE Systems) and Shri B. Ramachandra (AE PM) have successfully qualified the IRCA QMS 2000 Auditor Certification Scheme. The Corporation is ensuring adherence to quality standards and prescribed timeframe in the areas of cost & time overrun, clearance of bills and customer satisfaction in all its constructions. It has an independent Quality Division to monitor quality aspects of the projects undertaken and executed by the Corporation. In addition, independent external agencies are also engaged to oversee adherence to quality standards. The tenders stipulate stringent penalty clauses for violation of the terms and conditions of the contract. As an incentive to agencies executing the work, there is also a provision of bonus for completion of projects ahead of the stipulated deadline. Non-compliance to the quality parameters by any Division/Section is viewed seriously and corrective actions are taken immediately. Similarly, the terms and conditions of contract for execution of work are also improved from time to time in light of the higher quality parameters. The corporation got its ISO 9001:2000 recertification on 09.06.2008 after an external audit. KSPHC has received ISO 14001:2004 Environmental Management System certificate on 12th May 2008 by Moody International covering design, development, construction of buildings & associated infrastructures, project management, e-Commerce, e-tendering services etc. These ISO standards are applicable to all the Divisions and Head Office. This certification will help in constructing and maintaining eco-friendly and environmental protective Buildings. This certificate is another achievement of the Corporation that shows its commitment towards issues and concerns relating to environmental protection. The quality parameters have also been built into the Web-based Project Management System of the Corporation. By adhering to the tenets of Right to Information Act and Karnataka Transparency in Public Procurement Act (KTPP), the Corporation has taken steps to establish codes of good practices to ensure greater transparency and to improve accountability. V. e-Governance: KSPHC follows Transparency in Public Procurement Act 1999 and Right to Information Act 2000 in true spirit. KSPHCs model of a governance has the power of combining information, communication and technology at the field level with the decision-making body at the head office through the power of internet. In this model, the common man is also a stakeholder as the projects are publicly funded projects and every citizen has a right to know the details and give his feedback. KSPHCs WBPMS allows any citizen to view the status of our projects along with basic details besides giving him an opportunity to write in confidence to the C&MD of KSPHC. To popularize e-governance initiatives taken by the corporation among all its stakeholders viz. contractors, employees, Government departments and other police housing corporations, KSPHC organized a two day symposium in the Banquet Hall of Vidhana Soudha on 27th and 28th of August 2007.The theme of the conference was Good Governance through Professional Project Management. This conference was organized in association with Government of Karnataka, AstroWix India Projects Solutions Pvt. Ltd. and Microsoft Corporation (India) Pvt. Ltd. The objectives of the conference were mainly sharing the experiences of ICT initiatives, promoting best practices in good governance, creating a friendly relation between the participating IT industry and Government for future collaboration and cooperation on developing better good governance projects, greater use of user-friendly technologies and innovative technologies that meet the specific requirements to support the government professional services and effective use of proven technologies suitable to Government. The main focus of this symposium was to promote the concept of professional project management to help the governments taking public service transformation forward. The symposium contributed immensely towards the on-going dialogue among the participants especially, Central, State and Local Governments for greater usage of technology to strengthen delivery of public services. In addition, the symposium provided hands-on experiences for the participants to engage and debate upon best practices and services that directly tackle the public-funded service system and its knowledge. The symposium was inaugurated by Dr. A. Ravindra, IAS (Retd.) Deputy Chairman, Karnataka State Planning Board, Government of Karnataka. Sri. R. Sri Kumar, IPS, DGP and former CMD, Karnataka State Police Housing Corporation Ltd. presided over the meeting. Smt. Vatsala Watsa, IAS, Additional Chief Secretary and the then Principal Secretary, Home Department, GOK and Mrs. Jija Madhavan Harisingh, IPS, DGP and commandant General Home Guards Ex-Officio Director Civil Defence and Director Karnataka Fire and Emergency Services were the guests of Honour. Prof. B.K. Chandrashekar, Chairman, Legislative Council, released VISION-2020 document for the Corporation during the concluding ceremony. The other guests during the closing ceremony were Sri K.R. Srinivasan, IPS, DG& IGP, Sri R. Sri Kumar, IPS, DGP and former CMD, Karnataka State Police Housing Corporation and Sri Jai Prakash, IPS (Retd). Speaking on the occasion, Prof. B.K. Chandrashekar commended KSPHC for its one-of-its kind initiative and urged other departments and organizations to take steps to introduce Project Management for better performance, The symposium was a great success with more than 150 participants representing many Police Housing Corporations, public sector undertakings and corporate sector. Many chief executives, public servants and senior officers from the Government and Police Department took active part in the deliberations and discussions during this conference. A similar one day conference was also held in Belgaum on 7th December 2007 to bring e-Governance awareness among all concerned. VI. Human Resource Development: Capacity Building has been a major thrust area of the Corporation. We have been continuously encouraging our employees to acquire and update knowledge and skill in their respective areas of work. We believe that the continual improvements can only be achieved when the employees enhance their knowledge, capacity and skill. KSPHC organized some in-house training programmes and deputed employees for external trainings also. The Corporation, at present, has a sanctioned strength of 321 in various cadres. There are 79 permanent employees of KSPHC and there are 83 officers and officials on deputation from various departments. In addition, there are 73 employees working on contract basis. KSPHC has already submitted draft Cadre & Recruitment Rules for the Corporation to the Government for consideration and approval. In order to evolve an organization based on meritocracy, to attract better talents and also to provide a better career progression, KSPHC engaged Ernst& Young, a well known Management consultant, to evolve a Metrics Management System so that performance in the relevant work areas can be objectively assessed and there is a performance based pay structure. Their report was discussed in several staff meetings and a consensus has emerged that the proposed system is good for the growth of both the organization and the individuals. The Board has also approved the same at 1201 Board Meeting held on 24th March 2008. Once Government approval is received this unique performance related pay package called Metrics Management System can be implemented in the KSPHC. VII. Employees Welfare Schemes: i. KSPHC provides for gratuity to all its permanent employees as per the Gratuity Act. The Corporation has opted for the Group Gratuity Scheme of LIC. ii. Medical Facilities: Reimbursement of Medical expenses for minor as well as major illness to the employees is being considered by the Corporation. Nearly 80 hospitals including major Hospitals, like HOSMAT, Mallya Hospital are included for providing medical facilities to the employees of the Corporation. iii. Provident Fund: The benefit under the Employees Provident Fund is being extended to the employees of KSPHC with matching contribution of the employer. From the financial year 2008-09, Contract employees are also covered under this scheme. iv. The corporation has granted bonus / ex-gratia equal to one month basic pay and dearness allowances to all the employees of the corporation during 2007-08. v. Other facilities like Leave Travel Concession, Festival Advance, and Computer Advance etc. are some of the benefits provided to the employees. VIII. Corporate Social Responsibility: KSPHC firmly believes in its obligations towards Corporate Social Responsibility. It strictly forbids engagement of child labour in the construction activity awarded to the contractors. All the construction workers have been asked, through our contractors, to get themselves registered with the Labour Dept. to avail the benefits of Construction Workers Welfare Cess Act 1996. The Corporation has been regularly paying its share towards the Cess. The Corporation insists upon payment of fair and reasonable wages to the workers by the contractors as required under the law. The Corporation established a Skill Training Centre in 2004 primarily to train unemployed youths in basic construction skills such as masonry, bar bending, plumbing, carpentry, electrical works etc. The focus was on wards of Police personnel as well as unemployed youths from disadvantaged segments of society so that they can get gainful employment. This training was imparted at Bangalore Head Office of KSPHC as well as at Agumbe (6th Batch) and Sringeri (8th Batch) that covered youths from Naxal affected areas in order to bring them into the mainstream society. So far, the Skill Training Centre has trained 339 youths in 11 batches. Off late, training in basic computer operation and disaster management has also been included in its curriculum. IX. Future Perspective: As informed, the Government of Karnataka has allowed the Corporation to revise its accounting policy from no profit no loss to commercial accounting. As per the new policy the corporation has prepared profit and loss account for the financial year 2007-08 and it has posted a net profit of Rs.13.16 Crores. The Board of Directors of the Corporation has also recommended for declaration of 100% dividend to the state Government. The change in accounting policy has emboldened the corporation to enter into the market at large. On another hand, it has posed a challenge before the Corporation as it has to earn enough every year to survive because the Government will no longer meet its administrative expenditure. Obviously, now there is no scope for complacency any more, as the Corporation has to meet its own expenses and has to earn enough income and post profit for its future growth. The Corporation, with the cooperation and concerted effort of all its stakeholders, is geared to meet this challenge and is poised to take off on an exciting journey in future. This commitment is already documented in Corporations VISION 2020 that envisages its future strategy to become a market leader by the year 2020. As we all are witnessing a boom in the construction industry and its growth rate is expected to be very high in India due to the forces of globalization, the corporation wishes to carve a niche for itself in the areas of construction, consultancy, training, e-Commerce and labour supply contracts. VISION 2020 projects a profit of Rs. 3 Crores in phase 0 i.e. the base-year 2008. By 2012 (phase- 1), the Corporation projects a profit of Rs. 26 Crores, by 2016 (phase-2) a profit of Rs. 215 Crores and finally by 2020 (phase-3), the Corporation foresees a profit of Rs. 960 Crores. To meet this, the Corporation has also projected the required manpower i.e. consultants and skilled workforce. The inclusion of five new objects in our MOA has facilitated the Corporation to expand its activities in the area of consultancy services, e-Commerce portal, training etc. In addition to the work entrusted by the Government departments, the Corporation is willing to take up private work. Moreover, the Corporation is also keen to expand its area of operation in states other than Karnataka. The Corporation has started its e-Commerce portal (http://mystore.ksphc.org) from July 2007 and it has achieved a turnover of Rs.215.61 lakhs and has earned revenue of around Rs.15.00 lakhs thus achieving a break even in the first year of its operation. KSPHC is targeting to get substantial e-tendering and consultancy services of other Government Departments. The Corporation, in addition to e- tendering its own work, has successfully executed e-tendering for Forest Department, Mysore Paper Mills, Mysore Minerals Ltd., Computer Wing of the Police Dept. and Rural Development & Panchayat Raj Dept.. For Pradhan Mantri Gram SadakYojana, all the e-tendering has been undertaken by the Corporation for Karnataka Road Development Agency. During the year, the Corporation has earned revenue of Rs.1.49 Crores by providing e-tendering services to other departments. Few other Departments and organizations have approached the Corporation to provide e-tendering services like Bruhat Bangalore Mahanagara Palike (BBMP). Delhi Police Housing Corporation and Karnataka State Health Systems Development & Reforms Project have shown keen interest in availing Web Based Project Monitoring services and the Corporation is going to enter into a MOU with Punjab Police Housing Corporation shortly. Since e-tendering and e-procurement of goods and services have been made mandatory in all departments, the Corporation has bright prospect of providing its expertise in e-tendering, e-procurement and WBPMS. C. Projects on the Drawing Board: Some of the Govt. works proposed to be taken up in 2008-09 and later years are: * AHS III: To reduce the gap between the housing requirement and availability of Police quarters, another Accelerated Housing Scheme i.e. AHS-III has been sanctioned by the GOK in February 2008. This scheme proposes to construct 6000 quarters for the police personnel at a cost of Rs.440 Crores during a period of 3 years starting from 2008-09. The proposal is part of the States share of Police Modernisation and when executed, the satisfaction level of housing is expected to cross 50%. GOK has provided Rs.45 crores in its Budget for the year2008-09. KSPHC has requested the Government to release Rs.105 Crores as additionality this year to complete the project as per schedule. * NRB II: To meet the requirement of police stations and other offices at various places in the State of Karnataka, another scheme for construction of non- residential police buildings at an estimated cost of Rs. 170 crores has been submitted to the Government. The proposal is under active consideration by the government for sanction. * As a part of Jawaharlal Nehru National Urban Renewal Mission (JNNURM) Phase-I, Bruhat Bangalore Mahanagara Palike (BBMP) has entered into a MOU with our corporation to construct 1443 houses each measuring about 290 sq. ft. for rehabilitation of the slum dwellers. These houses will be located in 13 slum areas in Bangalore Urban District. Other infrastructural facilities such as compound wall, drainage etc., are also included in the project. The total cost of the project is estimated at Rs.69 Crores and BBMP has already released Rs.15.62 crores to the corporation to start the work. A separate division headed by an Executive Engineer has been set up in the Head office to execute and monitor this project without any time and cost overrun. * The Corporation has entered into a MOU with Woman & Child Development Dept., GOK for construction of Mahila Bhawan, an administrative cum commercial complex at Bangalore for a total cost of Rs. 14.4 Crores. The corporation is also in the process of finalizing MOU with Karnataka Slum Clearance Board for in-situ rehabilitation of six slums in Bangalore. * KSPHC is going to construct a modern Police Station at Bangalore International Airport at Devanahalli at a cost of Rs. 2 Crores in the first phase. * GOK has approved implementation of Video Surveillance System at Vidhan Soudha, Raj Bhawan, High Court and Legislatures Home. So far, Rs. 4.5 Crores has been released by the Govt. to KSPHC. The Corporation has started the work at Vidhan Soudha. Environment Management System (EMS): Ecology protection for a better world: As an integral part of Karnataka State Police Housing Corporation Limiteds (KSPHC) endeavour towards environmental protection, the International Standards for Environment Management System (ISO 14001:2004) has been successfully awarded to the Corporation on 12th May 2008. We, at all levels, will attach greatest importance to the protection of the environment and prevention of pollution. We will facilitate our client organisations for adoption of economically viable Green Building concepts in their projects. We will provide necessary technical guidance/ assistance to our contractors to ensure efficient usage of construction materials and effective waste management of construction wastes. We will comply with all applicable environmental laws and regulations. We will encourage, promote, facilitate and train all the employees and contractors for observing good environmental work practices. We will strive constantly towards minimizing all forms of pollution including air, water, noise and solid waste by installing necessary controls and providing good work-conditions. We will commit adequate resources to institute management programs to support all the above commitments and continually improve the environmental performance of the organization. Quality Management System (QMS): Organising the present in the light of future: Quality initiatives at Karnataka State Police Housing Corporation Limited (KSPHC), through concerted effort, got a boost during October 2004 when the Corporation successfully adopted management standards of the International Organisation for Standardisation (ISO). To begin with, KSPHC implemented ISO 9001:2000 Quality Management Systems in the beginning of 2005 and successfully got it certified in May 2005. Due to Corporations continued and sustained effort to comply with these standards, KSPHC got recertification for ISO 9001:200 during June 2008. Benefits of complying with ISO 9001:2000 standards at the Corporation: * Reduction in process time. * Less nonconformity due to systematic checks at every process. * Consistency in performance. * Improvement in personnel competence. * Remarkable savings in overall project cost. * Overall transparency in work execution. As a future mission, KSPHC has envisioned to become the first Government organisation to establish an integrated management system, encompassing the following management system standards: * ISO 9001:2000 Quality Management System (Existing). * ISO 14001:2004 Environmental Management System (Existing). * OHSAS 18001:2007 Occupational Health #r Safety Management System. * SA8000:2001 Social Accountability Management System. * ISO/IEC 27001:2005 Information Security Management System. * IS15700:2005 Quality Management System-Requirements for service quality by public service organisations. Showcasing Good Governance Through Professional Project Management: Implementing world-class professionalism in work: Good Governance workshops conducted by Karnataka State Police Housing Corporation Limited (KSPHC) served as a forum for decision makers, policy- developers, technology innovators and project managers to share their visions, policies, strategies, technologies, practices and experience on Professional Project Management. Objectives of the workshop: * Sharing experiences of I&CT initiatives on a common platform * Promoting best practices in good governance * Creating a friendly relation between the participating IT industry and Government for future collaboration and cooperation on developing better good governance projects * To promote user-friendly and innovative technologies that meet the specific requirements to support the government in rendering services to citizens. * Effective use of proven technologies suitable to Government The workshop also focussed on the following allied subjects: * State Police Housing Corporations in India * State Governments in South Central Government (Ministry of ACT) Metrics Management System (MMS) for performance-based pay packages: A boon to KSPHC employees: Metrics Management System (MMS) is a landmark initiative of Karnataka State Police Housing Corporation Limited (KSPHC), which provides a scope for its employees to showcase better performance in work and get a pay Ft perks- package related to their performance. The system seeks to align all its employees to the vision of the Corporation and help achieve goals faster. To put into effect this new performance-related pay package at KSPHC, a robust performance management framework was developed, with objective and clearly measurable metrics, for all target roles. Drawing from the findings in diagnostic and benchmark inputs, KSPHC and Ernst & Young initially evolved design principles. These principles served as a guide for development of the MMS and will serve as a reference for interpretation, implementation and subsequent modifications of the system. The design principles which the KSPHC MMS is expected to satisfy are as follows: * Provide an objective basis for measuring performance. * Provide balance between efforts and results. * Balance enablers and outputs. * Reward discipline and innovation. * Recognise differences across technical and non-technical job departments. * Enable identification of development areas. * Facilitate establishment of linkage between performance and rewards. Benefits to the Corporation: * Facilitates emphasis on improved coordination across departments. * Generates better performance in work culture of KSPHC. * Provides for transparent grievance red ressal mechanism. Illustration of MMS for Assistant Executive Engineer (AEE): PERFORMANCE REPORT: 1. BUSINESS METRICS: Category Points Indicative Metrics A B C D Process 75 Number of monthly Management progress reports for the subdivision, submitted on time 12 11 0.92 Number of monthly progress reports for the sub- division, submitted error-free 12 11 0.92 43.75 % of all instances of project implementation delays, where notices have been sent to the contractor within 7 days 100 90 0.90 Number of Non- <5 7 -0.40 Compliances (Ncs), as per external audits Operating Results 25 Project/operating 1000000 700000 1.30 32.50 costs (for the Sub-Division) Consolidated Score 76.25 Rating - Business metrics (out of 5) 3 Category Points Indicative Metrics E Process 75 Number of monthly progress Ensure that all data Management reports for the subdivision, for preparation of submitted on time monthly progress report is available by 25th of each month Number of monthly progress Review and verify reports for the sub-division, all data in progress submitted error-free report before submission to Head Office % of all instances of project Maintain register of implementation delays, where activities where we notices have been sent to the have delay and contractor within 7 days formally notify contractor for all such activities Number of Non-Compliances Follow up to track (Ncs), as per external and close NCs audits Operating 25 Project/operating costs Cost saving through Results (for the Sub-Division) improved monitoring Consolidated Score Rating - Business Metrics (out of 5) A = Target B = Actual C = Achievement D = Net Score E = Action Plans/Key Initiatives 2. CAPACITY BUILDING: Capacity Building Parameters Rating Rating Score Assessment of capability in present job by superior Excellent 5 (through observation of work, discussions and tests) Completion of target third party certifications/ Very Good 4 gaining relevant qualifications Average Score 4.5 3. BEHAVIORAL METRICS: Key Behaviors Rating Rating Score Personal Effectiveness and Integrity Excellent 5 Leadership and Capability Development Very Good 4 Customer Orientation Good 3 Innovation Orientation Average 2 Average Score 3.5 4 INTERIM INDIVIDUAL PERFORMANCE SCORE: Weightage - Business Metrics 65% Weightage - Capacity Building 20% Weightage - Behavioral Metrics 15% INTERIM PERFORMANCE SCORE 3.38 5. CALCULATION OF INDIVIDUAL PERFORMANCE-LINKED PAY (PLP): PLP Corpus (in Rs) - (For example) 100000 PLP Entitlement (in Rs) 67500 KSPHC Accounting Policy redefined with a new zeal: A turning point in KSPHCs history: Karnataka State Police Housing Corporation Limited (KSPHC) was established in 1985 as a Special Purpose Vehicle by the Government of Karnataka to build residential and non-residential buildings for police and other allied departments. Theoperational guidelines permitted to workonlyon No Profit, No Loss. basis. Amendments to its object clause in Memorandum of Association (MOA) in January 2007, enlarged its scope of functioning to undertake five new activities, namely consultancy, IT services, e-commerce activities, training and internet facilities. Government of Karnataka, in its Order No. HD 20 PBL 2008 Bangalore Dated 19.5.2008, revised the operational guidelines for KSPHC, thus providing the corporation a new basis to perform better. This redefined accounting policy of KSPHC came into effect from the 1 st of April 2007. Highlights of the revised accounting policy enforced at KSPHC: * KSPHC will work as a commercial organization recognising profit or loss as its performance parameter. * The corporation will charge fixed rate of ETP (Establishment, Tool and Plants) charges fixed by its Board of Directors for Government works and variable ETP for private works. * KSPHC will make income tax payments and declare dividend when it makes profit and builds reserves for future contingencies. * It will take up maintenance of police buildings on deposit contribution basis. * The Corporation will transfer all completed buildings which are part of its inventory to police/user departments before 31.3.2009. Our e-Commerce Initiative: The one-stop shop for construction materials: Karnataka State Police Housing Corporation Limited (KSPHC) has always been on the forefront of technological innovation. The latest being the e- Commerce portal of KSPHC, http://mystore.ksphc.org which was launched on the 19th of July, 2007. The key role of this techno-innovative portal is to simplify the complexity of KSPHCs material procurement process. It facilitates the Corporation in procurement of construction materials through internet and also get those materials transported to the work site directly from the production centre. With no involvement of middle-men, this e-transaction portal is completely transparent & cost-effective and envisages a system wherein material requirement for each stage of a project are made known through the portal. Registered vendors can publish their quotes for the materials directly through an online auction, contractors can place supply orders and finally quality materials are dispatched to the designated work site. When purchases are made for projects other than KSPHC projects, down payments have to be made at the time of placing orders. To begin with, supplies of cement, steel, tiles, paints, sanitary and electrical fittings are arranged through this portal. Other goods including consumers goods required by the police personnel and their families are being added shortly. ADVANTAGES TO KSPHC: * Indirect advance in form of material * Time overrun avoided by faster delivery * Source of income (commission earned) ADVANTAGES TO CONTRACTORS: * Avail benefits of bulk quantity discounts * On-time delivery of goods at specified project site * Hassle-free purchase of materials * Better management of materials * Effective cost-saving facilities ADVANTAGES TO VENDORS: * Reap more benefits by booking bulk orders * No dependency on middlemen * Reduction in marketing expenses MONTH-WISE TRANSACTION: Since Inception: July 2007 - March 2008 (Re in lakh) Month Steel Cement FMCG Total Income July 07 21.80 - - 21.80 0.37 Aug 07 15.37 - - 15.37 0.26 Sep 07 09.40 - - 09.40 0.20 Oct 07 22.78 03.48 - 26.24 0.59 Nov 07 13.58 - - 13.58 0.38 Dec 07 05.33 05.18 - 10.51 0.65 Jon 08 42.07 18.24 - 80.31 3.10 Feb 08 22.88 12.73 - 35.61 2.30 Mar 08 08.79 21.00 13.00 42.79 3.38 Total 235.81 11.21 Note: FMCG -Fast Moving Consumer Goods QMS TARGETS & PERFORMANCE: 1. Cost & Time Over-Run in Projects: Completion of projects without Time and Cost overrun is a great challenge in the construction industry due to scarcity of skilled labour and rising prices of construction materials especially for cement and steel. Due to strict adherence to quality parameters and time schedule, KSPHC has been able to minimize cost and time over run to the minimum level and it is committed to bring it further down in the years to come. The performance of the company is also measured on these parameters. Customers satisfaction is the litmus test of our overall performance. The construction industry is basically labour oriented. The pace of construction activity can be accelerated and timely completion of projects can be achieved only if skilled labour resources are provided. The corporation is organizing training programmes for unemployed youth in the construction activity to supply labour force to the contractors to enable them to complete the projects as per the schedule. The Corporation is also very particular about discharging its Corporate Social Responsibilities by its strict insistence upon adoption of fair labour practices and elimination of child labour in all its projects. We have also instructed all our contractors to get all the construction workers registered under the Workers Welfare Cess Act 1996 and to see that the workers get the Welfare benefits as provided under the said Act. The prices of the two major raw materials, namely, cement and steel, are subject to frequent escalations over the last few years. These factors have rendered the process of civil construction unpredictable. The price movement of these raw materials in the past years is given in the following table. Period A B 2000/Apr 2002 136 18,000 2003/Apr 2003 160 22,000 2006/Apr 2006 220 28,000 2007/Apr 2007 240 31,000 2008/Apr 2008 250 51,000 A = Price in Rs./50 kg bag cement B = Price in Rs /ton of steel The corporation has developed an in-house etendering system which has enabled the corporation to fix up agencies to execute the work at the most competitive rates through on-line reverse auction. The corporation also conducts on-line forward auction for Fixed Deposits of funds to get the maximum interest rates. The Corporation has instituted a system of continuous monitoring of cost and time over-run of all its projects since 2003-2004 and included an analysis of these factors in its Annual Report of that year. During 2004- 2005, it continued its efforts and subsequent to the ISO 9001-2000 certification in 2005, it chose to set time and cost related objectives as the QMS targets to be achieved. For the year 2007-08, the following QMS targets were set in respect of cost over-run of its construction projects: * In 90% of completed projects, cost over-run shall be ZERO. * In 95% of projects with cost over-run, the extent of cost over-run will be limited to a maximum of 15%. * Given below is a summary of the year-wise performance of the Corporation in respect of cost over-run. Figures given under each year are in terms of percentages of completed projects: 2005-2006: TARGET Achievement No cost over- No cost over-run run in 80% of in 83% of total total projects projects In 95% of total In 97% of projects, projects cost cost over-run was over-run will be below 15% limited to less than 15% 2006-2007: TARGET Achievement No cost over-run No cost over-run in 80% of total in 87% of total projects projects In 95% of total In 98.14% of total projects cost projects cost over over-run will be -run was limited limited to less to less than 15% than 15% 2007-2008: TARGET Achievement No cost over No cost -run in 90% of over run in total projects 83.48% of total projects In 95% of total In 94.94% of projects cost total projects, over-run will be cost over-run limited to less was limited to than 15% 15%. The QMS targets required to be achieved in respect of time over-run during 2007-08 are as below: * No time over-run in 50% of total projects. * Not to exceed 9 months in the 10% of the projects completed. In respect of time over-run, the year-wise performance data for the Corporation is provided below. The figures given are in terms of percentages of the total projects completed during the year. Extent of time 2005-2006 2006-2007 2007-08 over-run (%) (%) (%) Zero time over-run 25.57 20.66 23.08 Between 1-6 months 56.71 45.07 26.28 Between 7-9 months 7.41 17.37 17.31 Between 10-12 months 7.70 5.63 5.77 Between 13-24 months 2.05 8.45 25.00 Beyond 24 months 0.56 2.82 2.56 Measures of mitigation instituted by the Corporation: In order to provide quality materials to the contractor, the Corporation has started an e-commerce portal http://mystore.ksphc.org. The contractor is encouraged to register and indent construction material requirements through this portal. Suppliers of construction materials are invited to register and provide specifications and offer attractive prices for their goods. The supplier offers very attractive prices as the consolidated requirements of all contractors are huge and payment is guaranteed by the Corporation. The portal brings the sellers (vendors) and buyers (Contractors) together and charges a small service fee. In addition to removing supply chain related deficiencies and cost-margin, the e-commerce activity of the Corporation has proved profitable and a catalyst in its construction activity. Further, the Corporation has also taken up imparting intensive training in various skills required by the construction industry. A Skill Training Centre has been set up to impart training in the areas of construction (civil & electrical). It would ensure a constant supply of skilled work force for employment by the contractors. The infrastructure for Web Based Project Management System (WBPMS) has been further improved and expanded. The WBPMS has migrated to MS Project 2003 which is more versatile than MS Project 2002 which we were using earlier. All the Project Managers are updating data relating to their projects timely so that status of the projects can be monitored effectively. Uploading of projects status from remote sites has become easier with the superior server infrastructure and improved wide area network connectivity (WAN). The training imparted to the officers and field functionaries has improved compliance levels. Tally, the accounting software used by the Corporation, has been successfully integrated with PMS for e-billing. All these recent developments have strengthened the project monitoring system in KSPHC in the areas of project as well as financial management. 2. Other QMS Targets: The Corporation has always believed that it is necessary to institute a system for faster processing and payment of work bills so that it can attract more and more contractors to ensure greater competition. KSPHC has set timeframe for payment of bills in a transparent manner so that even the contractor can track and trace his bill. By ensuring timely clearance of running bills, the Corporation facilitates continued fund-flow so that work can be executed without any interruption. Therefore, Corporation has set targets for contractors payment as a quality parameter. The performances in this respect for 2007-08 are tabulated here below: ITEM: Running bills: TARGET SET: Running bills shall be cleared within 15 days of receipt. Performance details: Number of running bills handled 715 Number of running bills paid within 15 days of receipt at HO 430 of bills cleared within 15 days of receipt at HO 60% ITEM: Final bills TARGET SET: Final bills shall be cleared within 90 days of receipt Performance details: Number of completed project bills handled 174 Number of bills for which payment was made in 90 days 126 % of bills payment made within 90 days 72% Facilitating youngsters to dream big: KSPHCs Construction Skills Training Centre (CSTC) started its operations on 2nd April 2004 with an aim to provide quality first-hand training in construction trades for those wards of police personnel who are school dropouts or those who could not pursue their higher studies due to various reasons. Trained professionals impart skills in trades such as masonry, bar bending, plumbing, electrical, civil engineering, skills in disaster management etc. CSTC provides the trainees a chance to learn-and-earn. Successful trainees are awarded certificates and pass out as Skilled Construction Workers ready to take on challenging careers in construction field, such as supervisors, managers, asst. managers and instructors among many others. To help them look for better careers, CSTC also provides them placement opportunities. Successful trainees also have the added advantage to enroll as Home Guards in addition to Skilled Construction Workers (conditions apply). The CSTC has successfully completed training of 10 batches at its Bangalore Centre till January 2008. Over 80% of the candidates trained at KSPHCs CSTC are today gainfully employed at various construction sites of KSPHC and other private builders. Features of CSTC: * Food and accommodation provided during training period * Skill up-gradation classes to already trained candidates of CSTC * Personalised attention until employment * ID card for placement provided * Can enroll in Data Bank for more benefits Admissions to the Training Centre have now been extended to anyone interested from any part of the State especially from the economically weaker sections.