MEMORANDUM OF UNDERSTANDING

BETWEEN

HINDUSTAN NEWSPRINT LIMITED (SUBSIDIARY)

AND

HINDUSTAN PAPER CORPORATION LTD ( HOLDING COMPANY)

UNDER THE ADMINISTRATIVE CONTROL OF

DEPARTMENT OF HEAVY INDUSTRY

MINISTRY OF HEAVY INDUSTRIES & PUBLIC ENTERPRISES GOVERNMENT OF INDIA

FOR

FY 2012-2013

HINDUSTAN NEWSPRINT LIMITED

MOU FOR FY : 2012 – 2013

SL.NO. C O N T E N T S PAGE NO.

PART I A. VISION B. MISSION C. OBJECTIVES

1

PART II EXERCISE OF ENHANCED AUTONOMY & DELEGATION OF FINANCIAL POWERS

2

PART III PERFORMANCE EVALUATION PARAMETERS & TARGETS

2

PART IV ASSISTANCE FROM HPC / GoI 2

PART V ACTION PLAN FOR IMPLEMENTATION & MONITORING OF THE MOU

3

APPENDIX I SELF DECLARATION/CERTIFICATION BY HINDUSTAN NEWSPRINT LIMITED

15

APPENDIX IA PERFORMANCE FOR PAST 5 YEARS 16-17

PAGE – 1

PART – I A. VISION

To continue to be the preferred manufacturer of quality newsprint in India.

B. MISSION

• To install, enhance and operate large capacity newsprint on sound commercial principles.

• To continuously upgrade and upscale production output to enhance market share.

C. OBJECTIVES

i) To ensure optimum utilization of existing assets for maximizing generation of internal resources for funding modernization and expansion of installed capacity.

ii) To implement technological upgradation of the existing plant and equipment

for deriving the maximum possible benefits in terms of improved quality for achieving overall cost effectiveness.

iii) To ascend the value chain by manufacturing value - added varieties like lower gsm newsprint , copier , coated paper etc. so as to enhance profitability and market share both in domestic and export segments particularly through development of niche markets. (Production of such value added paper envisaged in the Expansion-cum-Diversification Project)

iv) To preserve the ecological balance in the vicinity of the mills.

v) To continuously invest in the capacity building of personnel for improving their knowledge, skills and attitude.

vi) To spearhead applied research for adoption of state-of-art technology to enhance operational efficiency.

vii) To explore utilization of locally available renewable raw materials to eventually reduce dependence on forest based resources.

PAGE - 2

PART – II EXERCISE OF ENHANCED AUTONOMY AND DELEGATION OF FINANCIAL POWERS

Hindustan Newsprint Limited (HNL) will be empowered with all such delegated powers as are

given to Miniratna – I Companies from time to time.

PART – III

PERFORMANCE EVALUATION PARAMETERS AND TARGETS

Separate Statement at Page 4 - 14

PART – IV

ASSISTANCE FROM HPC

• Hindustan Paper Corporation Limited (HPC) will strive to get GoI (DHI) assistance in

pursuing the following matters with Government of Kerala and appropriate

authorities of the Government of India for smooth operations of the mills on a

sustained basis : -

a) Availability of forest raw materials in terms of long-term agreement executed with

the Government of Kerala.

b) Allocation of additional land for captive plantation by the Government of Kerala to

ensure sustained supply of raw materials to the mills including that for expanded

capacity.

• HPC will take up with GoI (DHI) for pursuing with Government of Kerala for removal

of entry tax on capital goods procured from outside Kerala .

Page-4 PART - III

PERFORMANCE EVALUATION PARAMETERS AND TARGETS FOR 2012-13

Sl. No

P A R T I C U L A R S Weigh-tage

2011-12 MOU

2012-13 MOU

CRITERION VALUE

Excellent (1)

Very Good

(2)

Good (3)

Fair (4)

Poor (5)

PART ‘A’ I. STATIC FINANCIAL PARAMETERS a) Financial Performance Indicators i) Gross Margin/Gross Block - %ge 2 6.54 7.43 7.88 7.43 7.06 6.71 6.37 ii) Net Profit/Net Worth - %ge 10 5.06 6.64 7.04 6.64 6.31 5.99 5.69 iii) Gross Profit/Capital Employed - %ge 10 7.10 8.39 8.89 8.39 7.97 7.57 7.19 b) Financial Indicators - Size i) Gross Margin – Rs. Cr. 8 28.00 31.68 33.58 31.68 30.10 28.59 27.16 ii) Gross Sales – Rs. Cr. 4 370.00 364.00 385.84 364.00 345.80 328.51 312.08 c) Financial Returns – Labour Productivity & Total

Factor Productivity

i) PBDIT/Total Employment –Rs. in Lakh 7 3.43 3.82 4.05 3.82 3.63 3.45 3.28 ii) Added Value/Gross Sales - %ge 9 1.59 2.60 2.76 2.60 2.47 2.35 2.23 II. DYNAMIC PARAMETERS i) Quality-Surveillance Audit for

ISO- 9001 : 2000 certification ii) Certification under Occupational Health & Safety Assessment System ( OHSAS) 18001:1999 iii) ISO certification EMS 14001

1

1

1

15-11-11

27-07-11 -

26-11-12

27-07-12

27-12-12

26-10-12

26-06-12

27-11-12

26-11-12

27-07-12

27-12-12

26-12-12

27-08-12

27-01-13

26-01-13

27-09-12

27-02-13

After 28-02-13

27-10-12

27-03-13 Customer Satisfaction – Customer Orientation

Quality Rating by large Customers consuming 30000 tonnes in respect of HNL Newsprint (Rating Scale 1 to 10) assessed by an independent agency

1 8 & above

8 & above

6 & above

5 & above

4 & above

Below 3

Project Implementation: % of critical path milestones scheduled for completion in the year as per original project schedule achieved within timje (Details of the project is in Annexure II)

2

-

80%

100%

80%

75%

65%

60%

HRD (Training & Motivation) 5 Annexure – I Corporate Social Responsibility 5 Annexure - III Research & Development 4 Annexure – IV

Page-5 PART- III ( CONTD)

PERFORMANCE EVALUATION PARAMETERS AND TARGETS FOR 2012-13

Sl. No.

P A R T I C U L A R S Weigh-

tage

2011-12 MOU

2012-13 MOU

CRITERION VALUE

Excellen

t (1)

Very Good

(2)

Good (3)

Fair (4)

Poor (5)

PART ‘B’ I. SECTOR-SPECIFIC PARAMETERS Consumption of Coal ( Average Calorific Value 4200 kcal/ kg) per tonne

of paper -t 2 1.45 1.45 1.42 1.45 1.48 1.51 1.54

Consumption of Grid Power per tonne of paper (kwh) 3 560 560 525 560 590 620 645 Pulp Furnish per tonne of Paper (%age) 3 88 88 83 88 92 96 100

Sustainable Development:- i) Captive plantation (Hectares per annum) – Fresh Plantation ii) Captive plantation ( Hectare per annum) - Coppice

0.5

1

-

450

104

258

115

275

104

258

95

245

85

235

75

225

II. ENTERPRISE-SPECIFIC PARAMETERS Product Diversification -

Production of 45 gsm and lower GSM newsprint as a %ge of total Production in (t)

3.5

50

50

53

50

45

40

35

Raw materials procured through Gate Purchase ( % of total purchase) - Pulp Wood

5

5

5

6 5

4 3 2

Formulation of Strategic Business Plan for HNL for 2012-13 aiming Expansion-cum-Diversification

1 - 31-05-12 30-04-12 31-05-12 30-06-12 31-07-12 31-08-12

Consumption of Coal(Calorific Value Kcal/Kg) per tonne of paper HNL : 1.4 (4200 Kcal/Kg)

1 - 1.47 1.40 1.47 1.54 1.62 1.70

Corporate Governance : 5 Parameters & Targets will be taken as per DPE Guidelines/Format and annual award and grading on compliance of Corporate Governance to be forwarded by concerned administrative Ministry and Department.

Compliance with DPE Guidelines 5 Annexure - V T O T A L : 100 NOTE :

Gross Profit (` Cr.) Net Profit (` Cr.) Capital Employed (` Cr.) (Year end) Net Worth (` Cr.) (Year end)

15.70 10.50

221.11 207.49

18.63 14.09

221.98 212.17

19.64 14.90

222.99 213.18

18.63 14.09 221.98 212.17

17.05 12.82

213.86 203.28

15.54 11.62

205.25 193.88

14.11 10.47 196.18 184.00

Page-6 ANNEXURE - I

Template for HRM Performance Evaluation under Memorandum of Understanding

Sl. HRM – Performance Indicators Measurement Unit Weightage Target value under

five point scale – Basic Target – Very

Good

Actual Performance

Self-Evaluation

Score

Measurement Unit Weightage A Competency & Leadership Development A1 Compulsory

1 % actualization of Training Plan & Training Days per employee per year

% fulfillment & Days/per employee per year

5 5%

2 Developing critical mass of leaders through a system of career planning & development

% fulfillment of planned leadership development programmes

5 5%

3.

Training budget as % of employee cost

% of employees cost

5 0.05%

4 % fulfillment of training plan for Multi-skilling / Skill Upgradation of non-executives

% 5 5%

A2 - Optional (Out of below file, one is to be taken in the MOU)

5

5 % of executives covered in 360 degree feedback system against plan

%

Page-7 6. % of Senior level executives (HoDs &

GMs and above) covered in Assessment & Development Centre

%

1%

7. Training interventions in new/advanced technology - % fulfillment of training plan in new technology

%

8 Interventions towards Industry – Academia Interface

Yes/No; details

9 % fulfillment of Plan for carrying out Competency Mapping of employees

%

Total : 25

B Performance Management

10 To ensure implementation of Bell Curve Approach in PMS rating

Yes / No 4 Yes

11 Linkage of Development Plan of Executives with Performance Management System

Yes / No 3 Yes

12 Implementation of PRP linked to PMS Yes / No; details 3 Yes C Recruitment, Retention & Talent

Management

13 Manpower Rationalization through % 5 - Voluntary retirements - Redeployment 5% - Any other

14 Attrition as % of total employees % 5 Less than 2% 15 Presence of Mentorship Development

Programme – Nos. of Mentors & Mentees

Yes / No ; Numbers 5

Page-8 16 Formulation / Implementation of

systems for management of Talent such as – job rotation system, reward system, sponsoring Sr.executives for Advanced Management Programme, growth opportunities etc.

Schemes / Initiatives & their

details

5 Based on the needs, Management is sponsoring Executives for Advanced Management Programme

Total : 30 D Enabling Creativity & Innovation 17 Nos. of Nominations / entries

submitted for National Awards ( PM Shram Awards, Vishwakarma Rashtriya Puraskar)

Nos. of nominations /

entries submitted for national

awardes

5

18 Number of suggestions generated per employee per year

Nos. per employee 5 1 No.

19 % of Quality Circle projects completed against total Quality circle projects undertaken in a year

% fulfillment 5

Total : 15 E Employee Relations & Welfare 20 Effectiveness of Grievance Redressal

system - % of grievances settled vis-à-vis received during the year

% settlement 4 40%

21 Pension, medicare, Yoga classes to reduce stress where the job is stressful, setting up of wellness centre such as Gym etc.

Number of programs/date of implementation of

scheme

4

22 Employee satisfaction survey – ESI measure in %

% 4 40% through Company Managed Schemes

Page-9 23 Formulation & Implementation of

social security scheme Yes / No 4 Yes

24 Number of structured meetings with employees’ representatives

Number of meetings

4 5

Total : 20 F HR Branding & Excellence –

Indicate achievement in this field for initiatives such as :

25 Participation in survey conducted by external agencies (Employer of choice, Best employer, Best Place to Work etc.)

Details regarding the initiatives to be given alongwith achievements

-

Review / Revisit / Re-engineer HR Policy for meeting changing business priorities.

-

Benchmarking projects undertaken in area of HR

-

Organization Culture Building initiatives

-

Total : 10 Grand Total : 100

NB : Total score out of 100 awarded on HRM to CPSE will be converted into score out of 5 in MoU on pro-rata basis

Page-10 ANNEXURE – II

ANNEXURE – III

CORPORATE SOCIAL RESPONSIBILITIES (CSR) TARGETS FOR MOU 2012-13

ANNEXURE –IV

RESEARCH AND DEVELOPMENT TARGET FOR MoU 2012-13

PROJECT IMPLEMENTATION AND CAPITAL EXPENDITURE PROGRAMME MOU 2012-13

Sl.No PROJECT Wt. MOU 2012-13 Excellent Very Good Good Fair Poor Capital Expenditure Programme 1 Installation of static exciter for 15 MW Sch. No. R950 1 31-01-13 15-01-13 31-01-13 15-02-13 28-02-13 15-03-13

2

Procurement of Calender bottom swimming role shell (760 mm diameter with two end seals -1 no.) 1 31-01-13 15-01-13 31-01-13 15-02-13 28-02-13 15-03-13

Total : 2

Sl PROJECT Wt. MOU2012-13 Excellent Very Good Good Fair Poor

1 Supply of Drinking Water to nearby Panchayet (`) 1.0 1,25,000 1,50,000 1,25,000 1,00,000 75,000 50,000

2 Free Medical Camp (`.) 1.0 50,000 60,000 50,000 40,000 30,000 20,000

3 Street light for certain important location of Velloor Panchayat (`) 1.0 15,000 20,000 15,000 10,000 5,000 Below 5,000

4 New drinking water pipeline to Velloor Panchayat (`) 2.0 2,42,000 2,50,000 2,42,000 2,30,000 2,20,000 2,10,000

Total : 5.0

Sl. PROJECT Wt. MOU 2012-13 Excellent Very Good Good Fair Poor

1 Development of Pilot Plant for making Calcium Chloride from Lime Sludge 1.0 31-12-12 15-12-12 31-12-12 31-01-13 28-02-13 31-03-13

2 Study of effect of emulsification of furnace oil on reduction of fuel consumption in limekiln 1.0 31-12-12 15-12-12 31-12-12 31-01-13 28-02-13 31-03-13

3 Chemi Mechanical pulping characteristics of wood under weather protected storage in comparison to normal open storage 2.0 31-01-13 15-01-13 31-01-13 15-02-13 28-02-13 15-03-13

Total : 4.0

Page-11 Annexure – V

Compliance with DPE Guidelines

A. DPE’s OM No.3(11)/2011 – DPE (MoU) Dated 20th Jan,2012 assigning points to various targets on compliance to DPE’s Guidelines were discussed and accordingly relevant targets takes as shown below in tabular form:

Sl. Targets as per DP OM No.3(11)/2011 – DPE (MoU) Weightage Excellent i. Compliance to Reservation directives on SC,ST and OBC

appointments 1 Yes

ii. Appointment of Deputationists (other than with the approval of DPE)

0.5 Nil

iii. Implementation of 2007 Pay Revision (Proforma – I) 1 Yes iv. Switching over from CDA to IDA pattern of pay scales 1 Yes

v.

Timely submission of reports on compliance of DPE Guidelines

0.5

30-06-12 for Excellent 31-08-12 for VG

30-09-12 for Good 31-10-12 for Fair

After 31-10-12 Poor Total : 4

B. Submission of PE Survey to DPE

Parameter Unit Weightage Excellent V.Good Good Fair Poor Submission of completed data sheet for PE Survey to DPE

Date 1 15-09-12 01-10-12 15-10-12 31-10-12 After 31-10-12

Appendix Page-13

(Rs.Crore)

TREND OF CPSE,S PERFORMANCE OF FINANCIAL PARAMETERS FOR LAST 5 YEARS HNL

Particulars 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 MoU Actual MoU Actual MoU Actual MoU Actual MoU RE Projected Production 333.00 298.50 315.00 340.51 344.84 241.98 341.00 301.83 370.00 318.40 364.00 Gross Sales 333.00 298.61 315.00 297.67 355.95 284.39 341.00 301.66 370.00 318.40 364.00 Gross Margin 70.00 30.49 32.71 34.46 42.00 -40.45 23.18 17.20 28.00 19.42 31.68 Profit before Tax 53.25 18.10 18.13 21.10 28.90 -53.00 9.68 5.42 15.55 6.37 17.61 Gross Block 405.04 395.96 406.33 403.53 410.96 406.32 419.20 419.60 428.32 422.60 426.60 Less Depreciation 238.73 236.73 250.66 248.73 261.75 261.02 273.33 272.73 285.61 285.03 298.08 Net Block 166.31 159.23 155.67 154.80 149.21 145.30 145.87 146.87 142.71 137.57 128.52 Share Capital 82.54 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Reserves & Surplus 176.72 138.84 135.18 139.77 178.73 91.75 146.68 92.14 107.49 98.08 112.17 Less Deferred Rev.Exp 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Less Profit & Loss A/c. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Net Worth 259.26 238.84 235.18 239.77 278.73 191.75 246.68 192.14 207.49 198.08 212.17 Investment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sundry Debtors/Sales(days sales) 10.00 10.00 15.00 47.00 30.00 18.00 39.00 15.00 32.00 37.00 34.00 Inventory 63.26 70.24 69.91 144.15 93.65 61.06 88.56 69.09 76.20 65.87 66.78 Total Current Assets 120.01 161.77 117.39 219.13 138.75 142.28 169.76 145.91 169.89 155.50 173.41 Total Current Liabilities & Provn. 30.72 52.43 54.53 86.18 43.94 84.19 52.18 78.40 91.49 78.85 79.95 Net Current Assets 89.29 109.34 62.86 132.95 94.81 58.09 117.58 67.51 78.40 76.65 93.46 Capital Employed 255.60 268.57 218.53 287.75 244.02 203.39 263.45 214.38 221.11 214.22 221.98 Total Debt (Loan Funds) 0.55 7.88 0.00 9.35 9.35 0.00 0.00 0.00 0.00 0.00 0.00 Total Assets 409.47 281.34 366.79 304.88 322.70 222.00 279.13 235.98 232.74 231.00 237.42 No. of Employees 1100.00 1012.00 1040.00 1036.00 1050.00 978.00 920.00 910.00 817.00 844.00 830.00 Dividend Paid Added Value 44.44 3.63 10.86 5.69 17.60 -60.79 -3.17 -4.24 5.89 -2.00 9.48 Ratio Debt/Equity 0.01 0.08 0.00 0.09 0.09 0.00 0.00 0.00 0.00 0.00 0.00 Return on Net Worth (%ge) 13.50 4.83 4.46 5.27 6.85 -25.05 2.59 2.62 5.06 3.00 6.64

Page-14

Particulars 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 MoU Actual MoU Actual MoU Actual MoU Actual MoU RE Projected PBDIT/Total Employment(Rs.) 6.36 3.01 3.15 3.33 4.00 -4.14 2.52 1.89 3.43 2.30 3.82 Gross Profit/Capital Employed(%) 22.30 6.96 9.19 7.80 11.99 -25.93 4.05 2.54 7.10 3.32 8.39 Net Profit/Net Worth (%) 13.50 4.83 4.46 5.27 6.85 -25.05 2.59 2.62 5.06 3.00 6.64 Working of Gross Margin Net Profit 35.00 11.54 10.48 12.64 19.08 -48.03 6.38 5.04 10.50 5.94 14.09 Add : Tax 18.25 6.56 7.65 8.46 9.82 -4.97 3.30 0.38 5.05 0.43 3.52 Net Profit before Tax 53.25 18.10 18.13 21.10 28.90 -53.00 9.68 5.42 15.55 6.37 17.61 Add : Prior Period 0.00 0.00 0.00 0.00 0.00 -0.41 0.00 -0.59 0.00 0.00 0.00 Add : Extra Ordinary Items 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Profit before Prior Period 53.25 18.10 18.13 21.10 28.90 -53.41 9.68 4.83 15.55 6.37 17.61 Add : Interest 3.75 0.59 1.95 1.34 0.35 0.67 1.00 0.61 0.15 0.75 1.02 Gross Profit 57.00 18.69 20.08 22.44 29.25 -52.74 10.68 5.44 15.70 7.12 18.63 Add : Depreciation 13.00 11.80 12.63 12.02 12.75 12.29 12.50 11.76 12.30 12.30 13.05 Add : Misc. Expenditure W/O 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Gross Margin before Interest, 70.00 30.49 32.71 34.46 42.00 -40.45 23.18 17.20 28.00 19.42 31.68 Deprn. & Misc. Expenditure W/O