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April 24, 2000


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The Rediff Business Special/Nikhil Faleiro

Corporate India's pursuit of competitiveness sparks labour unrest

Workers at a metal mill in India: facing tough times On March 28, Tata Engineering workers in Lucknow ransacked the offices in a violent protest against 'low wages' and allegedly attacked senior management executives. On the same day in New Delhi, Tata group chairman Ratan Tata was conferred the Padma Vibhushan, India's second highest civilian award, for corporate excellence.

The irony did not end there. For decades, the Tata industrial empire has been recognised for its exemplary management practices and labour relations. But the Lucknow plant workers raised slogans against TELCO's 'anti-labour management' and threatened 'direct action', leading to police intervention, firing and, eventually, a lock-out.

A stunned Corporate India sat up and took notice. Arson and violence in a blue chip Tata company seemed unreal; it also brought into sharp focus the issue of the future of millions of workers in a newly resurgent Third World economy. (Read an economy that is desperate to shed old machines, workforce and mindsets in order to integrate itself into the slim-cost-fat-profits global league.)

It also brought to the fore an aspect of developing India: workers largely perceive modernisation as an evil that brings about job-cuts. That means, double trouble: when wage-hikes are on their mind, a spectre of joblessness looms over workers.

India's manufacturing sector is making a paradigm shift TELCO is India's largest commercial vehicle maker. Its market-shares are 66 per cent in the medium and heavy commercial vehicles segment, 67 per cent in the light commercial segment and 26 per cent in the utility vehicles segment. TELCO reported a turnover of Rs 64 billion in 1999.

At its Lucknow unit in northern India, 12,500 units of Sumo and other light commercial vehicles are assembled annually though the total capacity is 30,000. Workers were irked that their counterparts at Pune in western India were being paid higher wages.

So they demanded wage parity. Workers wanted Rs 4,000 (about $ 90) more per month. TELCO was willing to concede only Rs 2,000 more per month. The Lucknow unit has some 1,000 workers. Had TELCO accepted the workers' demand, it would have raised the company's wage bill by 0.3 per cent. But cost-conscious TELCO rejected the demand and pointed out that it would like to link wages to productivity.

Like TELCO, India's leading corporates are seriously adopting cost-cutting measures. Increasingly, these measures have become synonymous with modernisation. TELCO's Lucknow plant had undertaken a Rs 3 billion capital expenditure, and followed it up with downsizing of its staff by five per cent in spite of its entry into the passenger car market. V K Verma, senior deputy general manager, human resources development or HRD, TELCO, says, ``New plants do not require the same level of manning.''

In other words, old plants call for manning and spell trouble for managements. TELCO's losses rose to Rs 603.6 million for the third quarter ended December 1999 even as it struggled to absorb the full commissioning costs of its Rs 17 billion passenger car project. Losses for the corresponding period the previous year were Rs 216 million. And with talk of plans to hive off divisions for heavy duty transmission, axles, machine tools, there is a general fear among the workers that they might be retrenched.

Fears of this kind are leading to trade union activities reminiscent of the restless 1970s and early '80s (that is, the pre-liberalisation era). Workers' representatives say companies have little control over the cost of other inputs, so they find in either job-cuts or wage-cuts, or both together, a convenient route to lower costs.

P N Dada Samant, president, Kamgah Agadhi, a leading labour union, says, ``Today's workers do not mind foregoing a given like Diwali-time bonus. The situation has become so bleak that the managements are calling the shots.''

One reason for that is that during 1991-96, India received Rs 40 billion of foreign direct investment; but the estimated employment in the public and private sectors rose by just 12.08 per cent. Professor C S Venkata Raman, faculty member, International Management Institute, Bombay, says, ``Permanent jobs are becoming scarce as companies cuts jobs and wages and depend more and more on contract labour to stay competitive.''

Trade unions are no longer finding it easy to confront employers: industrial unrest can drive a company out of business in a competitive market. So whenever workers threaten strike, managements are quick to reiterate their motto: "Shore up the company's bottomline at any cost."

S Krishnan, director-general, training and employment in the ministry of labour, admits, ``There is a hardening of stance by the employers. They want their costs to be reduced at any cost.''

R N Srivastava, advisor, HRD, JK Industries, traces the present turmoil to the previous decade. "In the '90s, there was a hiring binge; companies did not mind huge workforces. The cost of production was not high on their agenda; today, it is, hiring is not.''

A manufacturing facility in India: modernisation is in Sagging bottomlines are leading to the significant job-cuts in the steel, mining and automobile sectors. With the adoption of new technologies, the dependence on manpower is gradually declining rapidly.

The steel industry, for instance, has drastically altered technologies over the past 15 years. Mini plants have pushed integrated steel plants to the boundaries. Big steel companies have to keep their overheads extremely low, automating and economising wherever possible. With the slump in the demand for steel, profit margins got squeezed. As a result, the Steel Authority of India and the Tata Iron and Steel Company had to reduce staff by 7 per cent and 15 per cent respectively.

J S Khandpur, group vice-president, people development and communications, Ballapur Industries Limited, says, ``The cost of production is now being benchmarked against the best in the world. You have to cut costs wherever possible.''

Other staff-heavy companies such as Bharat Coking and Eastern Coalfields have not increased their manpower since 1994. When faced with unmet productivity targets, big companies retrench workers, and install machinery that can do more work.

However, Crompton Greaves's roster swelled in 1995 and 1996 because it merged some loss-making subsidaries with itself. It had to offer voluntary retirement packages to cut 200 jobs. The National Thermal Power Corporation had to take over a power unit in Talcher in 1995 and Indian Airlines had to absorb the loss-making Vayudoot. These moves entailed absorption of existing workers which meant considerable strain on the corporates' financial health.

There was a time when workers in India invariably evoked support and sympathy from people at large. However, things are a-changing. Ashok Chandra, director of the Institute of Applied Manpower Research, Delhi, says, ``Employment may be reduced in a particular sector because of technology. If that results in better productivity and higher profits, then so be it.''

Agrees Vineet Kaul, senior general manager, HRD, Philips India. ``Employment is not going up in the manufacturing sector. The services sector seems to be offering lots of jobs. In the manufacturing sector, technology and new practices are definitely taking over.''

One of the 'new practices' is outsourcing. Arun Daur, research officer with the Hind Mazdoor Sangh, a labour union, says, ``The concept of core jobs has become outdated. Manufacturing companies are keeping few functions in-house.''

The National Sample Survey Organisation figures show that the share of the organised sector in total employment has slipped from 7.9 per cent in 1983 to 7.7 per cent in 1991 to 7.38 per cent in 1997. Gautam Mody, economist at the Centre for Workers' Management, says, ``Much of the displacement is an attempt to displace labour with loose arrangements.''

Daur of the HMS elaborates, ``The employer-employee relationship is being replaced by a client-supplier relationship. This paradigm shift is reshaping Corporate India."

Not everyone is impressed. Trade union leader Dada Samant says sarcastically, ``The customer comes first, not the worker. But they forget it is the worker who makes the things for the customer. Today, the machine is taking over the worker. If they are not careful, tomorrow's CEO may be a machine.''



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