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June 9, 2000
The Rediff Business Special/George Iype
Trade unions, politicians flay Grasim's bid to sell Mavoor plant
A combination of fiscal problems, economic downturn, depressed markets and lacklustre bourses is potent enough to spell doom for many a company. However, when this concoction of business woes falls short of subjugating a tough cookie, there is yet another set of obstacles designed to kill the corporate.
When all else fails, brew up labour trouble, mixed with environmental campaigns, lack of raw material and heavy political interference and you can bet your bottom dollar that no firm or factory could survive: it will either be closed down or sold.
Aditya Birla Group's one of the biggest pulp and fibre units, the 40-year-old Grasim Industries Limited at Mavoor near Kozhikode in industry-starved Kerala, has been shut for nearly a year now. And mostly because of labour trouble, pressure from green groups, and political meddling.
Last week, the Birlas put up a sale notice on the Bombay Stock Exchange, informing that the company is seeking shareholders' approval to dispose of the beleaguered Mavoor Grasim units.
The annual general meeting of the company scheduled for July 15 is expected to ratify the sale decision.
But trade union leaders, environmental experts and the Communist Party of India Marxist-led state government allege that the latest Birla move is prompted neither by lack of raw materials nor by labour troubles.
Kumaramangalam Birla does not want to hold on to the 40-year-old, obsolescence-ridden, 3000-employee strong Grasim plants and premises in Kerala any longer, contend the unionists and the leftists.
As negotiations between Birla and Kerala Chief Minister E K Nayanar to revive the state's largest private sector enterprise continue, Mavoor Grasim has emerged as the prime example of how environmental campaign, trade unionism, lack of modernisation and political interference can sound the death knell for large corporates.
It was, in fact, India's first Communist chief minister E M S Namboothiripad who invited the Birlas to set up the Grasim plant in Mavoor in 1956. The government then entered into an agreement with the Birlas that it would supply Mavoor Grasim with the requisite quantity and quality of raw materials that include bamboo, eucalyptus and softwood.
The industrial agreement went on smooth for nearly three decades as the state government cut its virgin forest stocks to supply raw materials to Grasim. But given the volatility of trade unions in Kerala's industrial units and political life, labour unrest led to the closure of the company for the first time in 1985.
Also, for the first time, Kerala saw some of the out-of-job, heavily-in-debt Grasim workers committing suicide in desperation. Political pressure forced the state government to talk peace with the company and labour unions. It led to the re-opening of the factory in 1988.
But since then the Grasim management has been accusing that the government failed miserably in providing it with the right quantity and quality of wood stocks. "We closed down the factory last year because the government failed to meet its obligation of supplying the contracted quantity and quality of raw materials. We could not simply run the factory," Mavoor Grasim president R N Saboo told rediff.com.
He said the Mavoor Grasim pulp and fibre units cannot be viably sustained on wood and bamboo trucked in to supplement allocation from across the border-from other states.
However, government officials and trade union leaders differ with the Grasim management. The state government concedes that it could not supply the huge quantity of raw materials - 200,000 tonne a year -- demanded by the Birlas. Official records say that the government supply was just 10,000 tonne short of the annual contractual obligation.
"That, nonetheless, was no reason for the factory to be shut down and now put up for sale. The company has been making profits while using raw materials brought from other states from 1993 to 1998. These are pressure tactics by Birla to cut the labour force," points out C V Gopalapillai, secretary of the prominent All India Trade Union Congress.
"If sufficient quantity of raw materials is unavailable in Kerala, the company can transport from nearby states. The unions have not opposed it," Gopalapillai told rediff.com.
Recently, the state forest department made it clear that supplying such a huge quantity of raw materials like eucalyptus was impossible as the total annual yield of the same from Kerala Forests was only around 100,000 tonne.
In its sale application before the BSE, Grasim has also contended that surplus labour is another main reason for the non-viability of the unit.
But trade unions reel out statistics to point out that 3000-labourers strong Mavoor Grasim is understaffed.
According to Indian National Trade Union Congress general secretary K T Alikutty, as per the agreement between the government and the management, the pulp division should have 1,832 workers and the fibre unit should have 955 labourers.
"However, there are only 1,253 and 822 workers in the pulp and fibre units, respectively," Alikkutty told rediff.com.
"Poor workers have been made the scapegoats for the Birlas to carry out hard negotiations with the government," the INTUC general secretary alleged.
But nine months into the crucial assembly poll, it is imperative that the Nayanar government negotiate hard with Kumaramangalam Birla to re-open the factory, probably on latter's terms and conditions. "If the factory remains shut, it will affect the image of the government before the working class, our biggest vote bank," a CPI-M senior leader said.
Therefore, the Kerala government has made it very clear that it is not opposed to the proposal to sell the Mavoor Grasim plant so long as the prospective buyer does not waver from its commitment to continue to run the plant on an "as is where is" conditions.
"The government has also rejected an application from Grasim seeking permission to close down the factory permanently," K Mohan Das, principal secretary in the Industries Department told rediff.com.
But Grasim, apart from pointing out the state government's failure to honour its commitment to supply the right quantity and quality of raw materials, argues that the availability of quality pulp and fibre at lower prices brought about by globalisation has rendered the plant non-viable.
"We have been unable to modernise the factory. In fact, globalisation has made the plant outmoded and irrelevant," said a Grasim official.
Meanwhile, the Birlas, the government and the trade unions dish out statements and counter-statements on the issue. Yet, it is for the controversy over the air, water and solid waste pollution the Grasim plant has caused over the last four decades that the plant is best known.
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