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Global Steel owes salaries, answers

Global Steel owes salaries, answers
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First Published: Wed, Apr 02 2008. 10 30 AM IST

Global Steel chairman Pramod Mittal
Global Steel chairman Pramod Mittal
Updated: Mon, Aug 04 2008. 05 59 PM IST
At least 500 Indian workers hired in Bulgaria and Nigeria by Global Steel Holdings Ltd have not been paid by their employer, and more than 100 have returned home without settlement, according to letters exchanged between embassy officials, a government department and the workers themselves.
Global Steel’s chairman is Pramod Mittal, brother of steel tycoon Lakshmi N. Mittal, who is president and chief executive of ArcelorMittal. ArcelorMittal has expressed interest in buying the Bulgaria plant. Two of Global Steel’s Nigerian steel plants, meanwhile, are the subject of a government investigation there.
Global Steel chairman Pramod Mittal
After several recent high-profile cases of labour exploitation internationally, the Global Steel development comes as the Indian government vows to better track the treatment of its citizens venturing overseas for work.
Amid record-high demand for steel, one 35-year-old engineer believes he has been caught on the wrong side of the boom. In 2004, the electrical engineer with a decade of work experience, swapped a Rs40,000 salary at a government steel enterprise here for more than double of that at Global Steel’s mill in Nigeria.
He said troubles began soon after arriving at the Ajaokuta Steel Co. as part of a team hired to fire up a blast furnace lying cold for 25 years. When he arrived, wages were already three months late. By December last year, he was owed Rs14.5 lakh in salary and local allowances; it was then he decided to pack his bags and leave with his wife and two children.
“I left my money behind in the name of God. We had absolutely no access to the top management to secure our money,” says the engineer, who had signed a five-year contract with the company.
This person requested anonymity because he hopes to still get his due.
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Pramod Mittal, who lives in the UK, did not reply to emails or return repeated calls and faxes to his London office for comment. The Indian government also has been unable to track him down to answer questions, said overseas Indian affairs minister Vayalar Ravi. “Malpractices by big industrialists cannot go on,” Ravi said. “If people have been recruited in India, it’s the responsibility of the employer to pay them. It (not paying salaries) amounts to cheating and conspiracy.”
An email from Global Steel’s corporate communication department, received Tuesday evening, said the company pays its employees on time, but conceded, “there may be some individual cases where there could be delay because of reasons such as local taxes, policies, laws, performances linked and restructuring.”
Those who have returned were mostly hired as engineers, metallurgists as well as human resources and finance executives between 2004 and 2006. Most came back without settlement. The nearly two dozen workers Mint interviewed declined to be identified saying they still hoped to be reimbursed.
In Bulgaria, employees hired to revive the company’s Soviet-era Kremikovtzi plant, near the capital Sofia, are similarly facing two-three months’ delay in payment, down from eight months a year ago. Several of the 72-person staff submitted resignations last year, while many were asked to leave last month with a promise they would receive their dues, some of these workers said.
According to an 11 March letter circulated by India’s protector general of emigrants, a division of the ministry of overseas affairs, to government officials based on the complaints received, an estimated “500 workers employed by Global Holding Nigeria Ltd, a subsidiary of Global Steel, have not received either their payment or allowances for 10 months.” It further added: “The high commission of India in Nigeria has not been able to resolve the matter due to non-response on the part of Shri P. Mittal. There has not been any response from the company officials with regard to redressal of grievances of employees.”
Global Steel has a capacity to produce about 12 million tonnes of steel, scattered across five countries—Nigeria, Bulgaria, Libya, the Philippines and Bosnia, where it has a coke oven. The turnover of the closely held company, headquartered in tax haven Isle of Man, could not be ascertained by Mint.
In Nigeria, Indian workers earned $1,100-4,500 (Rs44,000 to Rs1.8 lakh) a month, apart from a local allowance of $400-$600. In Bulgaria, salaries were paid in a lump sum, $2,000-8,000 a month, according to employees.
In India, various promoters, including Pramod Mittal and his younger brother, Vinod Mittal, own 45.95% of the publicly traded Ispat Industries Ltd, in which Global Steel owns 2.63%. Ispat has doubled its losses to Rs12 crore in the first three quarters of fiscal 2007-08, compared with a Rs6 crore loss a year earlier.
After a prolonged steel slump in the late 1990s, Pramod Mittal expanded his steel empire between 2003 and 2005, trying to follow the global footprints by industry leaders such as the Tata group and Corus group, and by his own brother, Lakshmi Mittal.
Global Steel signed a management contract with the Nigerian government to commission the Russian-built steel plant in Ajaokuta. It signed its second concession agreement with National Iron Ore Mining Co. Ltd (Niomco) the following year to recast and mine iron ore to feed and produce liquid steel in the Ajaokuta plant. In a separate agreement in 2005, the company bought Delta Steel Co., restarting operations in 2006, but it now faces questions over receiving a favourable treatment from a previous government.
Of the 23 current and past employees in Bulgaria, Nigeria and India Mint interviewed, Global Steel owes most between Rs1 lakh and Rs14 lakh. Two said they have got full settlement. Several said they were led to believe they were going to work for Ispat.
Panchanan Chaudhury, Global Steel’s human resources director based in Mumbai, said: “I cannot talk to the press on such matters.”
Employees say that 30-odd Indians at the company’s Delta steel plant in southern Nigeria have decided not to return to that country, with only 130-140 total workers remaining. At Niomco, about a handful of the 40-50 employees are left there, while about 100 of the 270 original staff reportedly remain in Ajaokuta. Many of those who have left have not officially resigned, in the hope they still might get paid.
The predicament of the employees highlights the growing problems Indian workers on foreign shores face.
In recent weeks, Indians recruited by US-based marine fabrication firm Signal International Llc. filed a lawsuit against the company for promising permanent residency for $20,000.
But as even the Indian government finds Pramod Mittal hard to track, Global Steel workers fear if they can pursue litigation easily as contract hires of a foreign company. Besides, salaries in Nigeria and Bulgaria were paid by the company’s Dubai office through an external account in India.
“It’s almost like a no man’s land,” says one employee who has returned from Bulgaria. Workers have hung onto their recruitment letters from “Global Infrastructure Holdings Ltd” in 2004 and “Global Steel Holdings Ltd” after 2005. Notably, they were signed by an “adviser” of Ispat, after short interviews at the company’s offices in Mumbai.
B.R. Singh, an adviser to Ispat Industries actively involved in hiring between 2004 and 2005, signed many of the appointment letters. Contacted by Mint, he said: “The company is running. The people are getting paid. But I am based out of Mumbai and not looking after these affairs.”
With phone calls and emails unanswered, a former employee filed a complaint at the grievance cell of the overseas affairs ministry in February. “There is no commitment to do anything despite these assurances,” says the complainant who left Nigeria a year ago with Rs7.6 lakh owed to him.
Financial uncertainty in the Nigerian operation has also prompted local unions there to announce mass strikes. The Nigerian senate ordered an investigation into the alleged movement of equipment from the Ajaokuta plant to Delta. Last week, Indians were prevented from entering the plant, according to one person at Delta.
As the situation gets worse, Nigeria’s Iron and Steel Senior Staff Association, represented by two private and public sector unions, wrote last month on behalf of Indian workers to the Indian high commission based in the Nigerian capital of Abuja. “Global has always reneged in meeting obligation to workers, federal government and contractors. They also lack the technical knowhow and financial capability to run a sector as involving as steel,” the letter said.
The high commission, in turn, has written to several Indian ministries, expressing its inability to do much. “Unless pressure is put on him (Mittal) in India, we do not see any visible improvement in the management of Global Steel.”
The African Iron and Steel Association, which is represented by 17 African nations, also has stepped up pressure for an investigation.
“Global has been involved in shady deals, including cannibalising of equipment, asset stripping, capital flight and destruction of plants and machinery,” the association’s secretary general, Sanusi Mohammed, said in an email.
According to a former employee, several pieces of equipment have been moved to the Delta plant on a “returnable basis” because, although Ajaokuta was to produce steel, it was only engaged in rerolling wirerods until six months ago, after buying billets from the market, and did not immediately require these goods.
Pramod Mittal, who flies helicopters to inspect his plants in Nigeria and bought the debt-ridden football club CSKA Sofia in Bulgaria, is described as a man of “simple taste” but demanded complete submission from his employees, according to them. He was involved in minute details, from plant upkeep to the size of the mutton cubes in the canteen, according to several workers. Now, they wonder if he should have been more focused on the finances.
According to one person who worked at Niomco, wages to the 1,200-odd local workers were getting delayed by a fortnight or more. “When the month’s payment time arrives, they stop working until they get paid. It’s that kind of cycle going on there,” he says.
On 7 March, the local union announced a “total strike” at Niomco, “as workers can no longer bear the hardship of non-payment of salaries, arrears and poor maintenance of plant and equipment,” according to a press release.
Under a corporate directive, Global Steel expects every plant to generate its own surplus to pay salaries. This did not happen, according to some workers, because of poor management.
“It (the plant) really needed a lot of money but there was hardly any working capital coming in. It was just enough to meet essentials,” says another person who was employed at Niomco. With a high level of attrition due to its salary defaults, the company is also facing difficulties in finding suitable replacements.
Some employees who have left point to the difficulties in working in politically unstable nations such as Nigeria and Bulgaria. Besides, says a former employee in Bulgaria, “Indians are actually not used to sitting through 11 hours of review meetings. But Mittal’s tight control of running every aspect of the plant caused resentment.”
The company has initiated due diligence on its Bulgaria plant as growing debt and a recent government ruling to meet an environmental commitment of $500 million has left it short of working capital—atop its salary debts. According to a Reuters report earlier this month, the mill’s debt swelled to $1.14 billion at the end of 2007.
ArcelorMittal is among several companies considering a purchase, but its spokesman Stephen Schwarz declined to comment.
In 2005, Global Steel paid $155 million to buy a 71% stake in Fin Metals Holding Corp. to acquire the Bulgaria plant, after raising $120 million through European investors with interests in junk assets. The promoters contributed about $35 million.
In 2006, it raised another $400 million through bond, to fund the acquisition. According to a person close to the development who did not wish to be identified, around $128 million of that was spent to pay the first bondholders and $176 million went towards meeting past liabilities such as to the railways and the gas and power suppliers. About $30 million went towards fund-raising cost, while $76 million was set aside as working capital.
On top of all these liabilities, the Bulgarian plant is currently witnessing erratic power supply and problems with the state-controlled railway network due to late payments, according to an employee.
Those who stayed behind say they are waiting for action.
Some wrote letters to the government, collectively signing them as “All India Expats.”
In a letter from Nigeria to the government in February, M. Irulappan appealed for help: “I am from a poor family. I have to take care of my elders, my wife, child and my younger brother. It’s my hard-earned money and I am badly in need of the money.”
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First Published: Wed, Apr 02 2008. 10 30 AM IST