MEMORANDUM OF SETTLEMENT

                            OVER THE REVISION OF PAY

                                       AND

                               CERTAIN ALLOWANCES

                                  DATED 2nd DECEMBER, 2000

                                     BETWEEN

                                  MANAGEMENT OF

                          VIDESH SANCHAR NIGAM LIMITED

                                       AND

                          THEIR WORKMEN REPRESENTED BY

                     THE FEDERATION OF VIDESH SANCHAR NIGAM

                            EMPLOYEES' UNION, MUMBAI





Under Section 12(3) read with Section 18(3) of the Industrial Disputes Act, 1947
and Under Section 20(p) and 18(1) of the Act.



<PAGE>



                                     PART-A

SHORT RECITAL

      The  last  revision  of the  sale of pay of VSNL  non-executives  was made
      effective from 1.1.1992 for a period of five years and after the expiry of
      five years the next pay revision fell due from 1.1.1997. The Federation of
      VSN  Employees'  Unions  had  submitted  a Charter  of  .Demands  (COD) on
      20.10.1997  requesting  VSNL  Management  for  the  revision  of  pay  and
      allowance and other related benefits to the non-executives  effective from
      1.1.1997.  Federation  subsequently vide its letter  No.FED/F-4/99/2000/96
      dated 21st  September  1999 requested for deferment of negotiation on wage
      revision until finalisation of pay revision in respect of executives.

1.2   DPE  vide its OM No. 2  (11)/96-DPE  (WC)  dated  14.1.1999  conveyed  the
      decision  of  the  Govt.  in  connection  with  the  next  round  of  wage
      negotiations   which   fell   due   from   1.1.1997   with   the   workers
      (non-executives)  of Central PSEs to be commenced by the Management of the
      Enterprises  with  the  Trade  Unions/Associations,   subject  to  certain
      conditions like revision  should be within the approved  parameters and to
      ensure that also such negotiated wages would not come in conflict with the
      wage revision of executives.

1.3   Pursuant to Govt. of India Office Memorandum  NO.2(1l)/96-DPE(WC)-GL XXVII
      dated 26th July; 2000 notifying that unionized  employees  governed by IDA
      pattern, would have option to opt for either:

         (1)      a  10  year   periodicity   on   wage   revision   with   100%
                  neutralization  of DA as  set  out in  the  guidelines  ~5d on
                  14.1.99, OR

         (2)      a five year periodicity on the basis of graded  neutralization
                  as did exist previously i.e. from 1.1.92 to 31.12.96.

      Federation indicated its preference for 10 year periodicity.

1.4   The issues arising out of the COD have been negotiated with the Employees'
      Federation  initially  on  19th & 20th  October  2000 & from  8th to  10th
      November  2000 & finally  from 23 November  to 1st  December  2000.  After
      exhaustive process of negotiation the Memorandum of Settlement was arrived
      on 2nd Dec. 2000.

1.5   In the context of fast changing technologies,  competitive environment and
      tremendous growth potential in the field of Te1ecommunications  around the
      globe, both Employees'  Federation and the Management commit themselves to
      work together for attaining the objectives and increase  productivity  and
      profitability.

1.6   It is also realized that  re-training,  re-deployment and re-adjustment of
      manpower,  changes in the work culture  with  commitment  to  productivity
      would have to be achieved in the context of changing  requirements  of the
      Company.  Towards this end, employees and the representatives  assure full
      co-operation to the Management for implementing charges as may be required
      periodically.
                                     PART-B


                              TERMS OF SETTLEMENT

This settlement will be applicable to all the categories of  non.executives  who
were on the rolls of VSNL as on l.l.1997or have subsequently joined the Company.

This  settlement  shall be effective from 1st January 1997 till  31.12.2006 (ten
years) and will continue to be operative till next settlement is signed.

WAGE STRUCTURE

2.1   Scale of-pay

      The following shall be the pay scales applicable to the  non-executives of
      the company from 1st January 1997:

--------------------------------------------------------------------------------
               Pre-Revised Scales                Revised Pay Scales w.e.f.
                                                 1.1.1997
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Level     Scale of Pay                   Span          Scale of Pay       Span
(grade)                                  (years)                         (years)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-1      2300-40-2620-50-3220           20      4825 - 125 - 6700        15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-2      2375-50-2775-60-3495           20      5100 - 140 - 7200        15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-3      2475-60-2955-70-3795           20      5450 - 175 - 8075        15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-4      2600-70-3160-80-4120           20      6000 - 200 - 9000        15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-5      2780-80-3420-90-4500           20      6700 - 225 - 10075       15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-6      2985-90-3705-100-4905          20      7150 - 240 - 10750       15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-7      3210-100-4010-110-5330         20      7700 - 250 - 11450       15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-8      3450-110-4330-120-5770         20      8400 - 265 - 12375       15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-9      3700-120-4660-130-6220         20      8590 - 300 - 13990       18
--------------------------------------------------------------------------------

2.2.  Dearness Allowance

      100 percent Dearness  Allowance (DA)  neutralization  shall be adopted for
      all the Non-Executives w.e.f.  1.1.1997. On 1.1.1997 at 1708 AICPI the IDA
      in the revised  scale of pay would be nil.  The change in DA shall be paid
      as notified by DPE from time to time.

2.3.  Fitment Method

      Fitment  in the  revised  scales  shall  be  made  applicable  as per  DPE
      Guidelines as per following method.

      a)    Basic Pay in the Pre Revised pay scales as on 31.12.1996
                                               Plus
      b)    Corresponding Dearness Allowances at AICPI at 1708 (Base 1960--100)
            as on 1.1.1997
                                               Plus
      c)    FDA component as on 1.1.97.
                                               Plus
      d)    Fitment amount up to 20% of (a) above.

      The new basic will be determined by placing the aggregate  amount  arrived
      by adding  (a) to (d) in the  revised  scale of pay.  Where the  aggregate
      amount (a to d) thus  arrived  does not fit into the stage in the  revised
      scale of pay, the new basic pay will be determined by fixing the aggregate
      amount at the next higher stage in the revised scale of pay.

2.4.  Bunching Increments

      One  increment  in the  revised  scale  will be  granted  for every  three
      increments  drawn  in the pre  revised  scale  held as on  31.12:1996,  as
      bunching increment. The amount so arrived will be added to the pay arrived
      as in para 2.3 above.

2.5.  Special Increments

      One special  increment  in the  revised  scale shall be granted to the Non
      Executives  who were  on-the  rolls of the  Company as on  31.12.1996.  In
      addition to this, employees who were in the grade of NE-9 as on 31.12.1996
      shall be granted two additional  increments in the revised  scales.  These
      increments shall be payable from 1.1.1997.

2.6   Stagnation increments

      15Non-executives  who  reach  the  maximum  of the  revised  scale of .pay
      (stagnation)  would  be  granted  up  to a  maximum  of  three  stagnation
      increments.

2.7   Fixed Dearness Allowance

      The payment of Fixed Dearness Allowance (FDA) shall be discontinued in the
      revised pay scale with effect from l.l.l997.

2.8   City Compensatory Allowance -

      City  Compensatory  Allowance shall be paid with effect from 19th November
      1999 as per the  classification  notified by the  government  from time to
      time & quantum as per DPE notification.

2.9   House Rent Allowance

      House Rent Allowance  shall be paid with effect from 19th November 1999 as
      per the  classification  notified by the  government  from time to- time &
      quantum as per DPE notification.

2.10  PERKS & ALLOWANCES - - -

      It has been agreed to negotiate perks & allowances  separately,  for which
      the process will be initiated as-early as possible.  For implementation of
      this pay revision, perks & allowances and other entitlements linked to the
      basic pay will remain unchanged until revised.



<PAGE>



PART-C

It has been further agreed by and between the parties as follows:-

1.    Improvement of overall efficiency.

      i)    Federation and its members must strive for improving overall
            services and productivity.

      ii)   Federation will cooperate with the Management in matters relating to
            restructuring of various wings/sections within the organisation.

      iii)  Federation will cooperate with the Management in ensuring industrial
            peace  by  discussing  disputes,  if any  with  the  Management  for
            arriving at mutually acceptable settlement

      iv)   Federation agrees that its member employees would accept diversified
            jobs in order to ensure higher  productivity  in Internet  Services,
            Marketing, Customer Relations etc.

      v)    Federation  agrees that its member  employees would cooperate in the
            matter of  bringing  out  improvement  in all areas of working  like
            office automation, etc.

      vi)   Due to rapid change in  technology,  the  employees  are expected to
            keep  themselves  updated in their  respective  area of working  and
            Management will be providing  necessary training,  assistance,  etc.
            for the same.

      vii)  Federation  must  realise  the bottom  line in  providing  efficient
            services  both  for  domestic  and  international  norms  to  remain
            competitive.

      viii) Keeping in view the competitiveness of. telecom sector in which VSNL
            is operating,  Federation  and its members agree to-  strengthen the
            hands of the  Management  by rendering all possible  cooperation  to
            remain competitive.

2.    Management also  appeals.the  Federation of Employees  Unions and Regional
      Unions  themselves  to lead  the  employees  to  work  together  with  the
      Management  in attaining the  following  goals  emphasized in our targeted
      plan for the coming years:

      i)    Efficient handling of the various telecommunications services
            provided by VSNL.

      ii)   Services to the customers to their better satisfaction.

      iii)  Improvement in productivity and reduction in operational costs.

      iv)   Improving quality in all operations.

      v)    Necessary improvement in working conditions.

      vi)   Continuously adopt better working practices.

      vii)  Punctuality/reduction of unauthorized absenteeism.

      viii) Effective utilization of all available resources.

      ix)   Improvement in housekeeping.  -

3.    Employees'   Federation  and  unions  acknowledge  that  redeployment  and
      retraining  consistent  with  skills,  dignity and earning of employees is
      necessary in the context of modernization and changing advanced technology
      in our organization.

4.    Employees'  Federation  and unions agree that  discipline at all levels is
      essential for smooth and efficient  functioning  of the  organization  and
      will ensure compliance by all its members.

5.    Employees'  Federation  assure  to work  shoulder  to  shoulder  with  the
      Management  towards  attaining  the customer  satisfaction  because of the
      changed scenario in the telecommunications field.

6.    Management  expect the  characteristics  of the  workmen  with  respect to
      degree  of  skill,  punctuality,   adaptability,   willingness  to  accept
      innovation, attitudinal changes etc. for higher work responsibility.

7.    GENERAL

      1)    No  individual  or collective  representation  of whatsoever  nature
            arising  out  of  this  settlement   shall  be  entertained  by  the
            Management.

      2)    There will be no change in the dates of drawal of annual increment.

      3)    Increment/promotion falling after -1.l.1997 will be granted in the
            revised pay scales.

      4)    Anomalies,  if any,  arising out of this revision should be referred
            to HQ for resolution within the administrative rules and guidelines.

8.    The above agreement will be applicable subject to the approval of the VSNL
      Board.

SIGNED AT VSNL, VSB, MUMBAI ON 2~ DAY OF DECEMBER 2000.

                            PARTIES TO THE SETTLEMENT

                                    On behalf of Workmen (Non Executives)
On behalf of VSNL Management              represented by Federation of VSN
                                                Employees' Unions
                                    1     S.M.Pimpale, President
                                    2     Syed Altaf Hussain, V.President
      Amitabh Kumar, Director (0)         3     S.D. Shukla, Secretary General
                                    4     G.E. Gosavi, Jt. Secy General -
                                    5     M.B.More, Treasurer
                                    6     J.C. Parashar, Liaison Officer
      M.G. Wasnikar, CGM (0)        7     M.M.Solanki, ASG Gioup D
                                    8     K. Balan, Advisor_ - -
                                    9     P.Y. Patil, President, Mumbai
                                    10    TS.-Shivkumar, Gen. Secy, Mumbai -
      Arun Gupta, CGM (F)                 11    A.B.Gamre, ASG, Mumbai
                                    12    P.V. Mohite, Councillor
                                    13    J.S.Dhaliwal, President, New Delhi
                                    14    Pyrelal Bhatt, Gen. Secy, N~' Delhi
      G.R. Shaikh, SGM (HR)         15    S.K. Sharma, ASG, New Delhi
                                    16    R.Vasu, President Chennai
                                    17    Joshep Manoharan, G. Secy. Chennai
                                    18    V. Srinivasan, Councillor, Chennai
      V. Natarajan, SGM (FIR)       19    A.K~Mitra, President, Calcutta
                                    20    R. Gangopadhyay, Gen.Secy, Calcutta
                                    20    P:R. Gaikwad, President, Pune
                                    22    S.G.Sinnarkar, Gen. Secy. Pune
      K.S.B.Nair, DGM(HR)           23    R.S. Inamke, President, Arvi
                                    24    N.T.Sarwade, Gen Secy. Arvi
                                    25    A.D.Bhosle, ASG, Arvi
                                    26    C.P.Kala, Gen. Secy, Dehradun
                                    27    Dinesh Sharma, ASG, Debradun


<PAGE>



                                  OFFICE ORDER

Sub:  Revision of Pay and certain  A1lowances of  Non-executives  of VSNL w.e.f.
1.1.1997 - Implementation of.

1.  The  last  revision  of the  scale  of pay of VSNL  non-executives  was made
effective  from  1.1.1992  for a period of five years and after the expiry  five
years  the next pay  revision  fell due from  1.1.1997.  The  Federation  of VSN
Employees' Unions had submitted-a  Charter of Demands requesting VSNL Management
for  the  revision  of  pay &  allowances  and  other  related  benefits  to the
non-executives effective from 1.1.1997.  Subsequently, the issues arising out of
the COD was  negotiated  with the  Employees'  Federation  by the  Management on
several occasions.  After prolonged negotiation,  Settlement has been arrived at
between the Management and- the Employees'  Federation of VSNL on 2.12.2000 over
the issue of revision of pay scales  effective  from 1.1.1997 as well as certain
other relatedallowances.

2. Particulars of the revised pay structure of  non-executives  w.e.f.  1.1.1997
and the guidelines for implementation, etc. are enclosed herewith at Annex l. In
the enclosed  annexure  sequence of events for fixation in the revised  scale is
clearly  set  out and  all  concerned  are  advised  to  comply  with  the  same
diligently.  In the  guidelines,  precautions  have been taken to ensure that no
ambiguity prevails while-fixing the pay in the revised scales. A format has been
prepared  by HQ office  which is  enclosed  at Annex II..  It is  expected  that
uniformity is maintained in utilising same.

3. It is not open for the  Regions/Centres  to draw  their  own  inferences  and
conclusions  in  interpreting  the fixation and other related  benefits.  A back
reference  has to be made to the HQ office with  specific  terms of reference so
that the matter could be examined and suitable instructions be given as early as
possible.

4.  The  Interim  Ad-hoc   advances  paid  on  two  occasions  to  the  eligible
non-executives in terms of Office Orders No.  HQ-A/01-10/97-PE.1 dated 24.4.1998
& 23.l0.2000 and also the monthly Interim Relief paid w.e.f.  1.10.1998 in terms
of Office Orders No. HQ-A/01 - 10.98-PE.1 dated 15.10.1998 & 6.10.1999, shall be
adjusted in full against the payment-of  arrears arising out of the pay revision
to be made as per this order.  In cases where there is no scope for  adjustment.
it should be adjusted suitably.

5. No individual or collective  representation arising out of the fixation sahll
be entertained by the HQ office and the Regions/Centres are requested to dispose
of the same in light of the  instructions  issued herewith.  Anomalies,  it any,
arising out of the fixation on revision, shall be considered for resolution as a
one time measure after the process of auditing is completed.

6. It should be noted that  implementation  of the revised pay scales is subject
to Board's  approval  and pending  Boards  approval,  it is  necessary to obtain
individual undertaking in the prescribed format (format enclosed.Annex-III) from
each  non-executive  to the effect that in the event of any  modification to the
pay  scales by the VSNL.  Board,  the  excess  amount  drawn,  if any,  shall be
refunded by him/her.

7. Heads of Regions/Centres  are advised to take necessary steps to complete the
implementation  of pay revision in the shortest  time  possible in order to draw
salary  payable for the month of December 2000 and onwards in the revised scales
to the  non-executives.  Arrears  arising out of this pay  revision  under these
orders may be disbursed by the Centres/Units expeditiously.

8. Subsequent to implementation of revised pay scales by the Regions/Centres, HQ
will constitute an audit committee for carrying out inspection for ensuring that
the pay scales  implementation  like  fixation,  etc. has been done  strictly in
accordance with the guidelines issued with this order.

9. All issues arising out of the provisions  contained in this  order/guidelines
which may require  interpretation/clarification are to be referred to HR Wing of
HQ for-decision.

                        for VIDESH SANCHAR NIGAM -LIMITED

                                 1 (G.R. Shaikh)
                        SENIOR GENERAL MANAGER (HR)

Encl:  Annex.I, II, III, IV & V

Copy for information & necessary action:

1.    CGM(ER)/Calcutta  2. CGM(NR)/New Delhi    3. CGM(WR)/Mumbai

4.    SGM(SR)/Chennai   5. SGM(EK)/Ernakulam    6. SGM(H'D/Hyderabad

7.    SGM(AU)/Arvi      8. SGM( BG)/Bangalore   9. GM(DU)/Dehradun

10.   GM(J'D)/Jullandhar      11. DGM(PC)/Pune        12. DGM(KP)/Kanpur

13.   DGM(GN)/Gandhingar 14. DGM(C&B)/HQ/LVSB    I5. SM (ID )/Indore


16.   CMD's Office/Dir.(NW)/Dir.(D)/Dir.(Fin.)/Dir.(O)/C.V.O./CS/CGM(Planning)/
      CGM(lnternet)/CGM(O/HR)/CGM (Mktg.)/CGM (F&A)-B/CGM
      (PR)/CGM (F&A)-S.

17.   CGM(VIG)/SGM(HR)-S/SGM(Estate)/SGM(Coml.)/SGM(TP)-A/SGM     (HR)-    N/SGM
      (HR)-D/SGM (TA)/ SGM (NW)-CSS/GM (TO) - B/ GM (TO) - R / GM (NW)/ GM (RD)/
      GM (TP)/GM (Systems )-AKS/ GM (Systems) BC/ GM (Comm.) HQ Office. - -

18.   TP Wing/TO Wing/ Traffic Wing/ R&D Wing/ Estate/  Coml./ SWP/ EDP/ Satcom/
      Markg. Section of HQ Office.


19.-  Per-II/ Advance/ Admn. /  Legal/Recruitment/  Training/ Logistic/ Welfare/
      CR Section of VSNL, HQ Office, Mumbai.

20.   Cash & Bill/ Budget/ Finance/ Public Relations Sections/ CPF Trust.

21.   SC/ST CeII.

22.   The Secretary General, Federation of VSNL Employees' Unions, Mumbai.

23.   The  Secretary  General,  Federation  of Telecom  Officers'  Associations,
      Mumbai

24.   The Secretary General, Federation of VSNL. Officers' Associations, Mumbai.

25.   Hindi Section for the needful.

26.   Copy to Notice Board/Guard File.

                                      *****

                                     ANNEX-1

GUIDELINES FOR REVISION OF PAY AND CERTAIN  ALLOWANCES OF NON~EXECUTIVES OF VSNL
WITH EFFECT FROM 1st of .JANUARY 1997:



I.    REVISED SCALES OF PAY


1.1   The following shall be the pay scales applicable to the  non-executives of
      the company from 1ST January 1997:

--------------------------------------------------------------------------------
               Pre-Revised Scales                Revised Pay Scales w.e.f.
                                                 1.1.1997
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Level     Scale of Pay                   Span          Scale of Pay       Span
(grade)                                  (years)                         (years)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-1      2300-40-2620-50-3220           20      4825 - 125 - 6700        15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-2      2375-50-2775-60-3495           20      5100 - 140 - 7200        15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-3      2475-60-2955-70-3795           20      5450 - 175 - 8075        15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-4      2600-70-3160-80-4120           20      6000 - 200 - 9000        15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-5      2780-80-3420-90-4500           20      6700 - 225 - 10075       15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-6      2985-90-3705-100-4905          20      7150 - 240 - 10750       15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-7      3210-100-4010-110-5330         20      7700 - 250 - 11450       15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-8      3450-110-4330-120-5770         20      8400 - 265 - 12375       15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NE-9      3700-120-4660-130-6220         20      8590 - 300 - 13990       18
--------------------------------------------------------------------------------

2.    DURATION


2.1   The revised Pay Sca1es  will be  effective  for a period of 10 (Ten) years
      from 1st January l997.

DEARNESS ALLOWANCE

The  Industrial  Dearness  Allowance  (IDA) at All India  Consumer  Price  Index
(AICPI) 1708 admissible to Non-Executives in the revised Scales of Pay as on 1st
January  I997 will be "Nil" as the  applicable  amount of IDA as on 1st  January
1997 in the 1992 Salary  Structure has been merged in the revised Basic Pay. The
first  installment of DA in the 1997 Salary  Structure would become due from 1st
April  1997.  The DA  payable  from 1st  April  1997  would be as per the new DA
Scheme. The details of the Scheme are as follows:

(i)   All India  Consumer  Price Index  (AICPI)  Number for  Industrial  Workers
      (general)  based on 1960 = 100  would  continue  to be used  for  grant of
      compensation to non-executives of VSNL against price rise.

(ii) DA would be paid for the increase in AICPI above quarterly index average of
1708 to which the revised Scales of Pay (1997) are related.

(iii) DA  installments  would  continue  to be revised 4 times a Calendar  year,
i.e., w.e.f. 1st January, 1st April, 1st July and 1st October.

(iv) The  quaterly  average  of  AICPI  would  continue  to be  computed  in the
following manner:

      Quarterly Average                         Payable from

      September, October and November of
      previous year                                   1st January

      December of the previous year and
      January and February of the current year        1st April

      March, April and May of the current year        1st July


      June, July and August of the current year       1st October

(v)   The percentage  increase in the quarterly  average of AICPI for the period
      ending  February,  May,  August and  November  over AICPI 1708 would be as
      notified by DPE.

(vi)  The rate of  compensation  to  Non-executives  over the Basic Pay at AICPI
      1708 will be in whole numbers.  Fractions, if any, will be carried forward
      to the next quarters.

(vii) Calculating the quantum of DA payable on this basis,  fraction of 50 paise
      and above will be rounded off to the next higher rupee and fraction  below
      50 paise will be ignored.

(viii) The percentage DA neutralisation to all Non-executives in the 1997 Salary
Structure will be 100%.

3.2 The revised rates of DA payable to Non-executives during the period from 1st
April 1997 to 31st December 2000, would be as follows:

--------------------------------------------------------------------------------
  DA payable for Quarter        Quarterly average      Rate of DA payable (% of
      commencing from            AICPI applicable             Basic Pay)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           35433                       1726                        1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           35436                       1737                       1.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           35439                       1762                       3.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           35795                       1794                        5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           35798                       1870                       9.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           35801                       1893                      10.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           35804                       2010                      17.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           36160                       2122                      24.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           36163                       2077                      21.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           36166                       2051                      20.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           36169                       2087                      22.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
        01.01.2000                     2143                      25.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
        01.04/2000                     2123                      24.3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
        01.07.2000                     2156                      26.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
        01.10.2000                     2186                       28
--------------------------------------------------------------------------------

3.3   Rate of DA payable during each Quarter  commencing from 1st January,  2001
      would be notified by the HQ Office from time to time.

3.4   Dearness  Allowance already paid from January 1997 to November 2001, based
      on the 1992 salary  structure would be fully adjusted  against the arrears
      payable under this order.

4.    FIXATION OF PAY IN THE REVISED SCALES OF PAY
      --------------------------------------------


4.1   The pay of  Non-Executives  who were on the rolls of the  Company  on 31st
      December  l996 and  continue to be in the service of the Company as on the
      date of issue of this Order will be  brought on to the  revised  Scales in
      the following manner:

(a)   Basic Pay in the existing Scale of Pay (1992) as on 31st December 1996

                                      Plus

(b)   Corresponding Dearness Allowance at AICPI of 1708 (base 1960) = 100 as on
      1.1.1997.

                                               Plus

(c)   Fitment  amount up to 20% of (a) above  i.e.  20% at Basic Pay drawn as on
      31st December 1996)

                                      Plus

(d)   FDA component as on 31.12.1996

      The total or(a) / (b) / (c) + (d) would be the :aggregate amount.


4.2   The new basic pay will be  determined  by  placing  the  aggregate  amount
      arrived  by adding  (a) to (d) in the  revised  scale of pay:  - Where the
      aggregate  amount (a) to (d) thus  arrived  does not fit into the stage in
      the revised scale of pay,.  the new basic pay will be determined by fixing
      the aggregate amount at the next higher stage in the revised scale of pay.

4.3   BUNCHING INCREMENT

4     3 1 One  increment  in the  revised  scale will be granted for every three
      increments drawn in the pre-revised 1992 scale of pay and this amount will
      be added to the pay arrived at as in para 4.2 above.


4     SPECIAL INCREMENT

4.4.1 One  special   increment  in  the  revised   scale  shall  be  granted  to
      Non-executives who were on the rolls of the Company, as on 31.12.1996-. In
      addition  to  this,  non-executives  who were  in-the  grade on NE-9 as on
      31.12.1996  shall be granted  two  additional  increments  in the  revised
      scales. These increments shall be payable from 1.1.1997.


4.5   - STAGNATION INCREMENT

4.5.1 Non_executives  who  reach  the  maximum  of  the  revised  scale  of  pay
      (stagnation)  would  be  granted  upto,  a  maximum  of  three  stagnation
      increments.

4.6   FIXED DEARNESS ALLOWANCE (FDA)
      ------------------------------


4.6.1 The payment of Fixed Dearness Allowance (FDA) shall be discontinued in the
      revised pay scale with effect from 1.1.1997.

4.7   APPOINTMENT ON OR AFTER AFTER 1.1.1997
      --------------------------------------

4.7.  1 Non-executives appointed on or after 1st January 1997, at the minimum of
      the 1992  scales  will be deemed to have been  directly  appointed  in the
      revised scales of pay effective from 1.1.1997 and no fitment  benefit will
      be  admissible to them.  Pay of  Non-executives  whowere  appointed at the
      minimum of the  pre-revised  scales of pay will be fixed at the minimum of
      the corresponding revised scales of pay w.e.f. the date of appointment.

4.7.2 Non.executives  appointed  on or after 1"  January  1997 and who have been
      granted  advance  increments,  if any, on appointment  in the  pre-revised
      scales,  their pay.in the revised scale will provisionally be fixed at the
      minimum of the corresponding revised scale of pay.

4.7.3 In cases where pay fixation had been done in the pre-revised  scale (1992)
      taking  into  account  pay  &  allowances   last  drawn  in  the  previous
      Organization  (1992 scale), pay protection would be granted in the revised
      scale (1997) on the basis of last pay drawn in the previous  Organization,
      provided  the scales of pay in the  previous  Organization  have also been
      revised and a revised Last pay Certificate is produced.  In the absence of
      such a revision in the  previous  Organisation,  the pay shall be fixed at
      the minimum of the concerned revised scale of pay.

4.7.4 Pay  fixation  in  respect  of  Non-executives,  if any.  who  have,  been
      appointed in the Cornpany  between 1st January 1996 and 31st December 1996
      -  from  the  Central   Government,   State   Government,   Public  Sector
      Undertakings following the CDA pattern etc. will be dealt with separately,
      keeping  in~view  the  revision of pay scales  effected in the  Government
      w.e.f.' 1st January'.l996.  Such  Non-executives  will not be eligible for
      fixation  benefits  as  envisaged  in paras 4:1 to 4.4  above.  Pay in the
      revised scales in such cases will provisionally be fixed at the minimum of
      the corresponding revised scale of pay.

4.7.5 In respect of  Non-executives  (including  cases of immediate  absorption,
      re-employed    pensioners,    ex-servicemen,    etc.)    who   have   been
      appointed/re-employed in the Company on or after 1st January 1997 from the
      Central Government, State Government, Public Sector Undertakings following
      the CDA pattern etc.,  their pay will be re-fixed in the revised scale, as
      per the extant rules applicable in such cases.

4.7.6 Cases of  Non-executives,  if'any,  falling under the above  categories at
paras 4.7.2 to -

4.7.5 above should be referred to the HR Wing of HQ. with necessary details, for
final fixatiori of pay.

HOUSE RENT / LICENCE FEE RECOVERY

Separate Orders will be issued in this regard in due course of time. Till -then.
recovery of House Rent / Licence Fee from those  employees who are provided with
Company  Quarters/leased  accommodation  would  continue  to be  effected  as at
present.

CITY COMPENSATORY ALLOWANCES (CCA)

City  Compensatory  Allowances  (CCA) would be  computed  and paid based on- the
reclassified  list of  cities as  notified  by the  Government  of India for the
purposes of payment of CCA to Government employees, which is as under:

 ----------------------------------------------------------------
 Basic Pay per   A-I -       A                B-i          B-2
 month           Population> Population>Population>  Population
                 SD-Iakhs    20         10 lakhs and >
                 -           laklis    -~ 20 lakhs  5 lakhs
                             and                and <
                             < 50                    10 Iakhs
      lakhs  -  ----------------------------------------------------------------
----------------------------------------------------------------  Below  Rs.4000
90 65 - 45 [ 25 ----------------------------------------------------------------
----------------------------------------------------------------  Rs,4000-5250 1
125         -         95          65          .,          35         J         -
----------------------------------------------------------------
---------------------------------------------------------------- - 200 - 150 - -
[00               -               65                Rs.5251-6499               -
----------------------------------------------------------------
----------------------------------------------------------------  Rs.650() & 300
-.          240          iS))          I          l2()          -          above
----------------------------------------------------------------   The   revised
classified  list  otciies  as  nocilied  b~ the Urn  erottient  otlndiu t~r the
purpose  otdra~va1  otC,\ is appended  hereto  (Annex-Vt.  Fur the purposeI
classiIicatjoz-~  of cities for pa~-mcnt of CCA. the  classification as notified
h~ the ~ ~ t. 1India from time S.

9.
      to time shall he t~ilowed, - - -
      FAMILY PLANNINc INCREMENT -   -     -

Non-executives  who  have  been  drawing  the  special  incrememit  in the  Ibrm
atPersomial  Pa~(PP) for undergoing Family Planning / Scerilisatioti C )peration
prior to I  Januamv  1997 would be  allowed to draw the PP  equivalent  to the
)o~~est rate oineremnemu in the revised scale corresponding to the pre-rcvised
pay scale against .~ hich the  individual  had earned the PP. w.e.tl I" January
1997. Employees who ~ hose spouse ha. e ttnder~otte the sterilisacion operation
on or  afier  I  January  1997  would be a!  to..  ed the  )I  based on the
incremenc  rate in the  revised  scale  ofpav.  as per the extant  rules.  Ihe
special  increment  would riot be reckoned as basic pay for computing  t)earnes~
Allowance and any other consequential benefits. - - -, - - -


J~QYIDENTFUND/VSNL E~lPLQYEE SELF CONTRIBUTORY PENSION -
      SCHEME -          - - - -

Consequent upon revision of- pay scales and DA. emplovers as \velI as employees
-contribution  to the Provident Fund will be  recalculated  and recovered at the
applicabLe -rate viz. ~ tO percent ott the revised-basic pay and-DA .v.e.f.  I~
Jaiiuarv  1997 to 21st  September,  1997 and @ 12  percent  effective  from 22nd
September.  1997 onwards.  Emplove&s  contribution,  towards the VSNL Emee
Self Contributory  PensIon - -Scheine shall be recalculated and recovered at the
applicable rate. - 10. - -  PAYMENtOF A-R~EARS - - - - - - -- - - - - - - -




10.1 - Payment  qf~ears  arising out of revision of pay scales from I ~Januar~:
1997 d~war~_ - - to  Non-executives  who were on the rolls of the Compartv on I
January 1997 and who -have joined thereafter. .vill comprise of amounts arising
out of the following: -

1. Revised Basic Pay. - 2. Revised DA~ - - - .3. -  Increments.  - 4.- HRA & CCA
at  revised  rates  w.e.f  l9t~Nember  1999.  wherever  applicable.  - - 5.~-
Fixation of Pay on promotion.  - 6. Family Planning  Increment.  7. Earned Leave
encashrnent.   3.  Terminal   benefits  of-  Provident   Fund  &  Gratuity.   9.
EX-gratia/PLJ  ~1 / Provisional  payment may he made to  non-execuu\  es
ha. e moved ott transfer aller 1 January 1997.  along with others.  hasec~ on
the available data..  ftan~  int~irmatiofl  liLe attendance.  date of promotion.
date of increment etc.. is requited in res)~eCt of ~u~h nonexecutives. these can
be obtained trom otlice .heretrotu the nomm~e\eeutt es .aS transferred -
-

10.3  Non_exectxtiCS  who have ceased to be in the services ol the Louipai1~
~dter l~  January  1997 due to  superaflflUati0t~.  termination  of  service on
account of cunimnued ill-health.  resignation with permission and death (payment
to the nominee in ease oldeath) .ill be  --eligible  for arrears in terms of
this order on a pro-rata basis.  .here er due. Payment oarrears to such
non~exeCUties   /  nominees  is  to  he  effected  omiI~  at~er  receipt  ofzt
 .rittefl request from the non_executi\c I nominee concerned.

 .t().4 \Vith regard to Non_executieS.  transferred from one Station Office to
another  atier V  January  1997.  payt~lcnt  of  arrears is to be made (by the
trunsferec  office) only. after obtainin~  necessary details.  if any. from the
transferors uttice. -

io.s Recoveries like Notice pay. if any. to be efte~ted from ex.eniployecs is ma
he recalculated and recovered.  Similarly,  wherever amounts are due and payable
h~ ex-employces. the same will -be recovered fron~tl~e arrears payable. - - -

10.6  Benefits of revised  Basic Pay and  Allowances  in terms of this order and
consequent  payment of arrears  shall not be applicable  to  Non-executives  who
ceased to be in the  services  of the Company on  the,toUowiflg  grounds on. or
after l~January 1997: 1. Dismissal; - - 2. - Absconding:

3. Resigned and left where  disciplinary  actiOn  against  him/her riaci already
been - - initiated and-was in progress: -- - -.

4. Resigned and left ~ithdut d~ notice add where bond liability had not been -
discharged at the time of leavi~ig the Company:

5. In cases where the alleged misconductagaiflst the employee is prejudicial to
the  interest of VSNL and an et:lquiry is  contemplated  or is in progress.  11.
RE~QV~IES OF 1NcO~iEJrAWc- - - -

Recoveries towards Income Tax. Professional Tax. etc.. are to be effected as per
Rules.  Finance Wing may take up the matter of extending relief under Section 8~
of the Income Tax Act~ with the concerned Income Tax  Authorities.  12. INTERL\1
RELIEF / ONE T1~1E ADIIOC AI)VANCE

The  Interim   Ad-hoc   advances   paid  on  two   occasions   to  the  eli~ible
110F1-CNCCULiVCS   in  ~crms  olOtlice  Orders   No.!-IQA/Ol-10197-1E.l   dated
24.4.1~)9~  & 23.  li).201)()  and also the monthly  Interim  Relief paid w.e.f.
1.10.1998 in ternis oiOliic~ Ord~rs No.1-IQA/0 I -1 0/98PE. 1 dated 15.10.1998
& 6. 10.1999.  shall be adjusted in lull. a~ainsL the payment of arrears arising
out of the pay revision to be made as per this order. In cases where there is no
scope for adjustment.  it should be adjusted suitably by appropriate instalments
from their salary.


13.   PAY RELATEI) MATTERS

13.1 Merely because  otrevision of Basic Pay / Scales of Pay. there will not he
any upward  revision in the enUtlement to various  Allowances / Benefits  (other
than those  mentioned  in the ~rder~,  related to Basic Pay.  Such  allowances /
b~netits will continue io be paid based on the pre-revised  basic pay I scale of
pay (I 99~ scales).

13.2 All other allowances (not related to basic pay and not revised as mentioned
above),  benefits,  perquisites and performance related incentives will continue
to be paid at the, existing rates / quantum.

13.3 Revision of other allowances / benefitsi  perquisites / performance related
payments,  etc.  will be  considered  separately  and  de~isions  taken  will be
intimated in due course of time.


14.  INTERPRETATIONS I CLARIFICATIONS

All issues  arising out of~the  provisions  contained  in [his  ~derwhich  thay
require  -interptetation  klarification  are t6 be  referred  to the HR Wing I.
Finance Wing of Headquarters for decision.