Telco announced its separation scheme during the second week of May 2000. The company's target was to reduce the number of workers by 2,500 in its plant in Pune and Jamshedpur through either the early retirement route or by placing them in hived off companies or new joint ventures. The company selected 1,350 workers from both its Pimpri and Chinchwad plants for extending benefits under the separation scheme. The company is close to its target with more workers from Jamshedpur likely to join this list.

Unlike payment of a lumpsum under the VRS, the Telco scheme was designed to give beneficiaries a monthly basic salary, dearness allowance along with medical benefits for the worker and his or her spouse. According to office bearers of the Tata engineering Employees Union (TEU), the union is under pressure from the remaining seven hundred odd workers to include them under the scheme which closed on July 31, 2000 This scheme was not extended to workers working in the Indica car project as this is a young workforce.