Deadly Labor Wars Hinder India's Rise

[kds1980]

By PETER WONACOTT

COIMBATORE, India -- This ancient city has turned itself in recent years into a manufacturing dynamo emblematic of India's economic rebirth. But a homicide case playing out in an auto-parts factory here is raising concerns about whether the Indian industrial miracle is hitting a wall of industrial unrest.

Pricol Ltd., which makes instrument panels for the likes of Toyota Motor Corp. and General Motors Co., was rocked in late September when workers burst into the office of Roy George, its 46-year-old human-resources boss. Angry over a wage freeze, they carried iron rods, witnesses say, and left Mr. George in a pool of blood. Police arrested 50 union members in connection with his death, their lawyer says. Charges haven't been filed.

Battle lines are being drawn in labor actions across India. Factory managers, amid the global economic downturn, want to pare labor costs and remove defiant workers. Unions are attempting to stop them, with slowdowns and strikes that have led at times to bloodshed.
India's Labor Pains

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The disputes are fueled by the discontent of workers, many of whom say they haven't partaken of the past decade's prosperity. Their passions are being whipped up, companies say, by labor leaders who want to add members to their unions and win votes for left-leaning political parties. Adding to the tensions are the country's decades-old labor codes, which workers and companies alike say require an overhaul.

"We can't be a capitalist country that has socialist labor laws," says Jayant Davar, president of the Automotive Component Manufacturers Association of India.

The unrest serves as a reminder that India has far to go before it stands alongside the world's other economic powerhouses. With its widening middle class and growing base of rural consumers, India has averaged more than 8% growth for the last half-decade. It is seen as a country that can help lead a global economic recovery.

But first, it must show it can ride out booms and slowdowns alike. The country's manufacturing sector, after growing about 7% annually for the past 16 years, logged 2.4% growth in the 12 months that ended in March. That has pressed manufacturers to make some unpopular cutbacks -- spurring labor actions that have slowed production further and suppressed growth.

Strikes at India's manufacturing and service companies rose 48% in 2008 from the year before, India's Ministry of Labor says. This year, labor actions have hit manufacturers from Indian automaker Mahindra & Mahindra Ltd. to Finland's Nokia Corp. and Swiss food giant Nestle SA.

Workers at a unit of Korea's Hyundai Motor Co. staged sit-ins in April and July, demanding recognition of an outside union and reinstatement of suspended workers.

In September, workers at a unit of Japan's Honda Motor Co. tried to prevent a trial of a new assembly line by threatening engineers and executives with shock-absorbers and motorcycle pieces, according to a court documents.
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“
India needs to create laws that have teeth and then enforce those laws rigorously. We need a larger police force and we definitely need to fix the Indian Penal Code. ”

— Shantanu Shekhar


Some confrontations have turned vicious. Last year, the chief executive of Graziano Trasmissioni India Pvt. Ltd., a manufacturing unit of Swiss high-tech group OC Oerlikon Corp., was beaten to death by workers who had been suspended at a plant outside New Delhi.

The impact has been global. A strike that started in late September at Indian supplier Rico Auto Industries Ltd. left Ford Motor Co. without transmission parts, forcing it to halt production temporarily at an Ontario plant that makes Edge sport-utility vehicles and at a Chicago plant that builds Taurus sedans.

The six-week Rico strike spurred GM to idle an SUV-production facility in Delta Township, Mich., for a week and cut one shift for a second week. GM also cut a shift at a transmission factory in Warren, Mich., said a person familiar with the matter.

At Pricol, the standoff that led to Mr. George's killing continues. The company says its pay is generous for the market. It accuses S. Kumarasami, a labor lawyer who organized the Pricol union, of inciting violence and trying to bring the company to a standstill to advance his broader leftwing political agenda.

Mr. Kumarasami, who wasn't among those arrested and represents 20 Pricol workers who remain in custody in the matter, says he doesn't advocate violence. The company risked workers' lives, he says, by choosing to suppress wages. "Economic violence is also violence," he says.

 

[kds1980]

An Asian Manchester

Coimbatore, a colonial-era textile hub in the southern state of Tamil Nadu, expanded in recent decades into a manufacturing center for machine parts and small motors. Dubbed the Manchester of South India, its streets are lined with shops that sell pumps, coils and bearings.

Pricol was founded here in the 1970s by Vijay Mohan, the son of a textile-factory owner, as a maker of moped speedometers. Now its seven plants around India export 50 products -- from fuel gauges and clocks to cigarette lighters -- to some 40 countries.



As its work force grew, so did its problems.

Pricol, like other Indian manufacturers, is guided by two old labor laws. The country's Industrial Disputes Act of 1947 requires companies to gain government permission before dismissing workers. The Contract Labor Law of 1970, meanwhile, prohibits employers from using temporary workers for long-term jobs. Both aim to encourage companies to protect workers by making them permanent.

Manufacturers have long complained that it can take years to dismiss their permanent employees, leading to bloated work forces and hampering companies' ability to respond quickly to changing business conditions. Executives and industry groups say relaxing the labor laws would allow companies to hire more workers and would attract more manufacturers to India, ultimately underpinning a rise in wages.

"Some of the hardships faced by labor will be lessened if there is greater demand for workers, as would happen in a more flexible market," says Cornell University economics professor Kaushik Basu, who was recently appointed chief economist for India's Ministry of Finance. There are no current efforts to change the laws, officials say.

Union leaders complain that companies are hiring contract workers for longer than the law intends. They say that by using these workers -- who are generally paid less and don't draw company pensions -- employers undercut permanent employees' leverage in wage negotiations.

"Companies are doing well in India, even during a global recession," says D.L. Sachdev, national secretary for the All India Trade Union Congress, which is backed by the Communist Party of India. "The way they keep their margins safe is to increase the exploitation of the workers."

Peter Wonacott/The Wall Street Journal

Workers at Indian auto-parts maker Pricol. Its head of human resources was killed in September following more than two years of labor unrest.


Mr. Mohan, now 62 years old, says Pricol tried to do right by workers from the beginning -- offering employees one cafeteria instead of separate facilities for workers and executives, and adopting equal wages for male and female workers before most other local manufacturers did so. And for 25 years, Mr. Mohan says, it avoided hiring cheaper contract workers.

"People said I was a ****** fool," he says. "I was, in fact, an idealist."

But in 2000, fearful of building a costly permanent work force, Mr. Mohan changed course. Factory contract workers now account for about one-third of the 2,200 people employed at Pricol's three Coimbatore plants, the company says.

By 2007, Pricol's sales had nearly tripled from 2000, to 4.81 billion rupees ($104 million).

Workers grew upset that their wages hadn't seemed to rise along with company sales, says machine operator C. Murali Manoharan. Then a 16-year Pricol veteran, he made about $170 a month at current exchange rates. He says supporting his school-age daughter grew harder as food and education prices rose, and he seethed as executives saved enough from their salaries and bonuses to buy new cars and houses.

"The company's growth was huge," Mr. Manoharan says. "But our wages were still low."

Workers began demanding bigger pay increases. Mr. Mohan resisted, telling workers that raises had already been negotiated by Pricol's existing unions.
Doused With Kerosene

In early 2007, workers turned to Mr. Kumarasami. The head of the All India Central Council of Trade Unions in Tamil Nadu's capital, Chennai, Mr. Kumarasami promised Pricol workers he would help secure higher wages for permanent and contract workers alike.

Mr. Kumarasami immediately led a strike at Pricol's three Coimbatore plants. At one point, striking female factory workers doused themselves with kerosene and threatened to light themselves on fire. Mr. Mohan says the threat was a union stunt to wring concessions from the company, which Mr. Kumarasami denies.

With production slumping, Mr. Mohan replaced the striking contract workers with other contract workers, and braced for a battle with Mr. Kumarasami. "He'd thought we'd buckle in a day," says Mr. Mohan. Permanent employees returned to work in June, after striking for 100 days.

In July -- when Pricol traditionally announced its wage increases -- Mr. Mohan said there would be no raises, citing the work stoppages' impact on production and sales. Soon after, several contract laborers who had been hired during the strike were rounded up by workers and tied to trees outside the factory, say executives and workers.

These disruptions stung. In 2008, as India's automobile market boomed, Pricol's sales remained essentially flat. Net profit fell to half of 2007 levels.

In July 2008, Mr. Mohan again said he couldn't raise wages. The next month, engineers and Pricol executives touring the factory floor were beaten by a group of workers with iron rods, says V. Balaji Chinnappan, a general manager of manufacturing. Several were hospitalized. Mr. Kumarasami said his union discourages violence and blames the flaring tempers on "the intransigence of the management."

Splits developed in Mr. Kumarasami's union. Machinist Mr. Manoharan, then serving as a union leader, said he began to believe a labor settlement wasn't possible with Mr. Kumarasami in the picture. Toward the end of 2008, he says, he started meeting privately with Pricol executives to explore a settlement.

Soon, he recalls, came a telephone call from another worker, who told him: "Join with management and I will beat you."

In March 2009, two men on motorcycles he couldn't identify came to his house and thrashed him with iron rods, breaking his hand. In May, he says, another Pricol worker slashed him from behind with a machete as he waited at a bus station, leaving him unable lift his arm.

"That union achieved nothing," says Mr. Manoharan, who is paid by Pricol though his limp arm has kept him off the job.

Such feelings led some Pricol managers to believe they could work around Mr. Kumarasami. One executive who spearheaded this approach was human-resources manager Mr. George, a native of the southern Kerala state educated at one of India's top management universities.

Hired into a volatile situation in March 2009, the new HR boss tried to bond with workers, executives say, particularly those who had protested wage freezes with work slowdowns, including cardplaying or sleeping during their shifts. He asked to hear grievances and maintained an open-door policy. Attempting to cool tensions among co-workers, the balding father of two organized "bring your kids to work" days.

In the summer, citing flat sales and a rare net loss stemming from the unrest, Mr. Mohan declined to raise pay.

On Saturday, Sept. 19, Pricol handed dismissal notices to more than 40 workers that Mr. Mohan calls "militant" union members.

Pricol calls the dismissals legal and says it warned workers verbally and in writing. Mr. Kumarasami maintains the dismissals are "illegal" and says he is challenging them through the government's Labor Bureau.
Shattering Glass

The next Monday during lunch break, Pricol's Soundarya Rammurthi says she heard shattering glass and screams. The 30-year-old human-resources executive says she saw two workers with iron rods and "burning eyes" heading into Mr. George's office. She fled the building and called security guards.

Pricol executives say two video cameras -- one that would show people entering the building, another near Mr. George's office -- were intentionally disabled. A third camera recorded about eight workers fleeing the human-resources building, says Mr. Chinnappan.

Mr. Kumarasami declined to comment about the 20 workers still detained in the matter before charges have been filed. He calls Mr. George "an unfortunate victim," but accuses Pricol of using the murder to destroy his union. He says more than 1,200 Pricol workers remain members.

Mr. Mohan says he's ready to make peace. He has enlisted outside mediators and agreed to their suggestion to unfreeze factory wages. Mr. Kumarasami said this has helped create "a mood to consult" with management on labor issues.

Pricol's output has rebounded. Between shifts, workers amble around a cordoned-off murder site. In Mr. George's vacant office, gashes remain in the walls.

"I don't say that everything is hunky-dory," says Mr. Mohan. "There's an artificial calm."
—Krishna Pokharel in New Delhi and Sharon Terlep in Detroit contributed to this article.

 

[kds1980]

Rankings - Doing Business - The World Bank Group

No wonder India's ranking is 133

 

[harbansj24]

Things are not that simple.

How is it that Tata group of companies very rarely have labour problems. Talk to any Tata worker or executive and they have nothing but praise for their top bosses and mind you they are not the highest paid in India. A Tata employee rarely contemplates shifting job.

Tata company as a policy does not bribe government funtionaries. Its products and services are in demand not just in India but also abroad and their bottom line is also healthy.

So what is that makes them tick. It is their excellent and fair labour practices that not only do not transgress law but also maintains its spirit. There are politically affiliated unions but there is never any need for even trumped up agitations.

Even Public Sector Undertakings do not have major agitational shutdowns as all wage related and working conditions issues are negotiated and bilaterally settled as mandated by the law. And these companies also are doing reasonably well inspite of proceedural bottlenecks that invariably crop up in Govt companies.

So the moral is quite clear. In India where labour unemployment levels are high and wages are very low, a fair deal given to the workforce will win their loyalty as they do realise the value of the job in hand.

For that we need a enlightened, mature and non manipulative managements which are sadly lacking here.

 

[kds1980]

Harbans ji

One cannot show example of single company.The truth is that China employs 80-100 millions Manufactoring workers directly ,While India roughly employ 1 million and that too is declining.You can pick any article and and many people you will find saying that labour laws in India are too strict.We can call Low wage as labour exploitation but the choice is between low wage or no wage.

 

[kds1980]

http://www.nytimes.com/2006/02/09/business/worldbusiness/09iht-toyota.html

Labor rigidity in India keeps firms on edge
By Saritha Rai
Published: Thursday, February 9, 2006
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BANGALORE, India — A recent strike at the Indian unit of Toyota Motor is officially over, but the carmaker's problems with labor are still simmering behind the scenes, providing a cautionary tale to the wave of foreign companies setting up shop in one of Asia's fastest-growing economies.

A two-week strike at the 2,350-employee plant here in January cost Toyota 900 Corolla and Innova cars. The carmaker is now trying to make up for lost time by running double shifts. An ensuing court battle could last two years, and some employees this week began taking turns fasting at the factory gates in protest.

Toyota's problems have underscored the difficulty of liberalizing the economy in India, where political parties are tugging the coalition government in different directions over the issue of labor market freedom. The result has been gridlock.

The strike has also led to doubts about the country's allure as a destination for foreign manufacturers. Foreign direct investment in India rose to $6 billion in 2005 from $5.3 billion in 2004. Many experts say India, already attractive for its cheap labor and its engineering skills, could bring in even more foreign companies if it could free its labor market of red tape.

"India can be a manufacturing force to reckon with," said Ravi Uppal, managing director of the Indian unit of the Swedish manufacturing giant ABB, "if only the government can bring about improvements such as upgrading infrastructure and changing archaic labor laws."

India's labor laws date to a time when socialistic ideas dominated and the government ran its own factories. Labor market changes have not kept pace with the country's economic liberalization program begun in 1991.

A labor lawyer and consultant, Atul Joshi, said: "Ever since the present government came into power with the support of the Communists, labor unions try to dictate terms to management. Laws tend to be protective of workers, and unions tend to use it to their advantage."

Current laws still say that any company employing more than 100 workers cannot fire people without government permission, and the labor commissioner in the government has to be notified of every single person working on the night shift.In addition, no worker can be made to work beyond 75 hours of overtime a quarter.

India has benefited from the global trend of manufacturing products in low-cost countries, and that is expected to continue over the next 10 years. But a report by McKinsey, the consulting firm, estimated that if India overhauled its labor laws, its manufacturing exports could grow from $40 billion in 2002 to $300 billion by 2015.

Even as things are, major multinationals have not shown any signs of slowing their push into India. In the past few weeks, Dell, the world's biggest maker of personal computers, announced plans to set up a manufacturing unit.Nokia recently announced a $2 billion manufacturing plant in the country.

"A few isolated incidents doesn't mean that India has a labor problem," said Subrata Niyogi, deputy director general of the Confederation of Indian Industry.

But executives on the ground beg to differ. Dinesh Hinduja faces hurdles as executive director for marketing and production at Gokaldas Exports, one of India's largest exporters of garments.

Hinduja's customers include Nike, Gap, Banana Republic, Liz Claiborne and Abercrombie & Fitch, but the apparel industry is seasonal, and order books can become thin.

"You can hire, but you cannot fire," Hinduja said.

Hinduja and others in the apparel industry are lobbying the government to relax labor contract laws, but so far in vain.

The problem is becoming even more pressing as India competes with China. In China, employees often work 12 hours a day; in India, just eight.

Chinese workers get two days of vacation a month, compared with four in India.

Many specialists agree that the economic future of India is at stake.

"India just cannot afford to build resentment against multinationals and foreign investors," said Raghavendra Rao, director of process consulting practice at the consulting firm Frost & Sullivan.

The Toyota strike is not an isolated incident. In the middle of last year, in the Gurgaon suburbs of New Delhi, there was a violent confrontation between the police and disgruntled workers of Honda Motorcycles & Scooters India, owned by Honda of Japan. Workers demanding a raise tried to form a labor union, but management fired four union leaders and suspended 50 workers.When the workers went on strike to demand that their colleagues be reinstated, a clash with the police led to 700 injured workers, and the episode was broadcast worldwide.

After the Honda strike, Japan's ambassador to India, Yasukuni Enoki, said such incidents were a "disadvantage" to India's image as a destination for foreign investment. The strike cost an estimated $21 million, according to Honda.

In the past few years, worker-management problems have declined, including those at the Toyota unit, which faced a series of strikes several years ago.

"Compared with even five years ago, our labor problems are minimal," said A.R. Shankar, the unit's general manager for corporate planning.

But problems are lurking around the corner.

Several rounds of talks have failed between Toyota management and the workers' union over the dismissal and suspension of workers on disciplinary grounds, which initially set off the strike. A local labor court is examining whether the dismissal, the strike and the lockout at the unit were legal.

Tensions erupted once again this week. The workers' union began a relay hunger strike demanding the reinstatement of the three dismissed and three dozen suspended employees.

Shankar said that production had resumed to normal levels and that the hunger strike was just a way for labor unions to keep the issue alive.

Paul Nolasco, a spokesman in Tokyo, said last week, "Toyota is fully committed to India."

Yasuko Kamiizumi contributed reporting from Tokyo.

 

[harbansj24]

Kanwardeep ji,

One cannot show example of single company

I have not just given the example of Tatas. I have also mentioned the entire Public Sector.

The truth is that China employs 80-100 millions Manufactoring workers directly ,While India roughly employ 1 million and that too is declining.

There is something wrong with this figure of 1 million. Public Sector in India itself employs 25 lakhs which is 2.5 million.

We can call Low wage as labour exploitation but the choice is between low wage or no wage.

I had not meant that low wage as a disadvantage. Yes it is a advantage provided there is no further manipulation by managements. That is what I had meant. Tatas do not pay excessive wage nor does Public Sector. But still they have loyal and productive work force. That is because both their policies and implementation are transparent.

Most of the articles and "consultants" are sponsored. So they give one sided picture. Pick any article by non commercial credible organisation such as ILO and you will get a completely opposite picture. They will tell you how GOI needs to do more in matter of worker's rights.

 

[kds1980]

I have not just given the example of Tatas. I have also mentioned the entire Public Sector.

One cannot say that Public sector offer lower wages.Then there are other benefits like pension ,no firing policy.Private sector cannot do that .INfact even a rumour of slight disinvestment could cause strike E.g. Nevile lignite.Private sector need policy of Hire and fire.

There is something wrong with this figure of 1 million. Public Sector in India itself employs 25 lakhs which is 2.5 million.

I read that on another site may be it is higher but still it is nowhere close to china,while our population is almost equal to china.

Most of the articles and "consultants" are sponsored. So they give one sided picture. Pick any article by non commercial credible organisation such as ILO and you will get a completely opposite picture. They will tell you how GOI needs to do more in matter of worker

I agree that many articles are sponsered but one cannot deny the fact that China is the favourate destination of manufactoring sector.Look at the IT sector where there are no unions and today it is the first choice of every educated youth in India,but again they
provide direct employment to 1-2 million people,while manufactoring sector could provide employment to millions

 

[harbansj24]

One cannot say that Public sector offer lower wages.Then there are other benefits like pension ,no firing policy.Private sector cannot do that .INfact even a rumour of slight disinvestment could cause strike E.g. Nevile lignite.Private sector need policy of Hire and fire.

There is no pension for PSU employees as yet. It has been proposed by the Pay Committee for executives. So it may only now also be implemented for workers.

If you carefully read the reasons for protests against disinvestment, it is against sell off of public assets at throw away price by the Govt in power without proper costing and assessments. These PSUs are having real estates valued at thousands of crores which are just handed over at book value. And only profit making PSUs are looked to be privatised not loss making. Look at what happenned to Centaur Hotel. It was sold to a private party and that party promptly sold it to another party at a neat profit of 150 crores overnight! Complete BALCO with all its assets was sold to Sterilite just for 450 crores! A few years back Supreme court had to step in to stop total selloff of HPCL. IPCL a highly professional and profit making PSU was sold for with all its assets and that included the best cricket stadium in Baroda for a song to Reliance.

So what are the safe gaurds to prevent such fraudulant sell offs of Public assets?

 

[kds1980]

There is no pension for PSU employees as yet. It has been proposed by the Pay Committee for executives. So it may only now also be implemented for workers.

My father was semi govt employee and he always told me that there is pension in PSU's.May be he was wrong

If you carefully read the reasons for protests against disinvestment, it is against sell off of public assets at throw away price by the Govt in power without proper costing and assessments. These PSUs are having real estates valued at thousands of crores which are just handed over at book value. And only profit making PSUs are looked to be privatised not loss making. Look at what happenned to Centaur Hotel. It was sold to a private party and that party promptly sold it to another party at a neat profit of 150 crores overnight! Complete BALCO with all its assets was sold to Sterilite just for 450 crores! A few years back Supreme court had to step in to stop total selloff of HPCL. IPCL a highly professional and profit making PSU was sold for with all its assets and that included the best cricket stadium in Baroda for a song to Reliance.

So what are the safe gaurds to prevent such fraudulant sell offs of Public assets?

Well we all know that Corruption is very much is in India but still subsidies to loss making Psu's just for the sake of employment is not economically viable.Even today we all Know that there is corruption in NREGA and it is total wastage as there is hardly any productive work is done under NREGA so can in long term there should be no unemployment,but because of corruption we cannot say that employment gurantee scheme's are bad.

Anyway this discussion is about manufacturing jobs which hardly grew in India and there must be some reason behind it.India desperately needs to create jobs for lower midle class o/w there is going to be big social unrest in India in future