In Left bastion, workers take pay cuts to help firms stay afloat

In Left bastion, workers take pay cuts to help firms stay afloat
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First Published: Sat, Jun 06 2009. 12 36 AM IST
Updated: Sat, Jun 06 2009. 12 36 AM IST
Kolkata: During the 1960s and 1970s, West Bengal was notorious for militant trade unionism. Labour unrest was widespread and almost all factory lockouts by employers ended in permanent closure because resolving industrial disputes was so difficult.
Now, workers in a state known as the cradle of Communism in India are accepting even five-year pay cuts without a fight, indicating the extent of change in Marxist-ruled West Bengal’s once intransigent trade union movement.
Says Kali Ghosh, West Bengal general secretary of the Centre of Indian Trade Unions (Citu), “We have asked Citu supporters across the state to be patient and lenient with the management until the economy recovers.”
The new flexibility in trade unions came to the aid of Nicco Corp. Ltd (NCL), the flagship company of the Kolkata-based Nicco Group and a manufacturer of power and industrial cables that also offers engineering services, which ran into trouble last year.
In December 2007, NCL concluded a deal to sell its cable business to Italy’s Prysmian Group, a Goldman Sachs-controlled cable company.
Under the deal, NCL’s cable division was to be sold for Rs130 crore and its Rs170 crore of liabilities transferred to a joint venture company in which Prysmian was to have a 60% stake and NCL 40%. The aim of the sale was to rid NCL of its debt and raise resources for its thriving projects division, which offers engineering services.
But the deal fell through as Goldman Sachs was struck by the US financial maelstrom in September last year, and on 18 November, Prysmian announced that it was pulling the plug on the joint venture.
NCL was in trouble again. It was reeling under a working capital shortage that had started affecting production from August while sales, too, started declining by around Rs5 crore a month as economic growth slowed.
What made matters worse was a Rs23 crore net loss that it posted in the quarter to December. In the full year to March, NCL posted a net loss of Rs53 crore, compared with a net profit of Rs6.45 crore in the previous year. Its revenue in the year to March fell 22% to Rs341 crore.
In February, NCL approached lenders to restructure its debt, and under the scheme that was agreed upon towards the end of March, all employees, including the chairman, are going to receive 10% of their salaries in shares for the next five years.
Told that the company wouldn’t survive unless they agreed to a 10% cut in cash pay for five years, workers readily agreed, says Rajive Kaul, NCL’s chairman.
“Giving workers equity interest in the company also meant they would be more committed to reviving the company,” adds Kaul. NCL’s employees have already agreed to work with the management to cut operating costs by up to Rs14 crore a year.
The shares that are to be allotted to NCL’s 1,270 workers would have a one-year lock-in, which means they can’t be sold until a year after they are issued. These shares would be held by a trust headed by Kaul—Nicco Restructuring Employees’ Trust Fund—and transferred to employees in instalments.
The arrangement will not only result in reduction of staff cost by Rs3-3.5 crore a year, but also help the company draw a fresh working capital loan, and secure an 18-month moratorium on repayment of principal of all its loans. “Our finances will improve dramatically in the quarter starting in July when we start deriving the benefits of the debt restructuring,” says Kaul.
“We understand that the working capital situation in Nicco is quite tight and we cannot increase productivity without working capital. So we accepted the management’s proposal for pay cut,” says Barun Das, the general secretary of Nicco Corp. Cable Division Workers’ Union, which is affiliated to Citu.
NCL isn’t the only Kolkata-based manufacturing company that has cut wages to stay afloat. In February, 2,500 workers at Hindustan Motors Ltd’s Uttarpara factory near Kolkata agreed to their wages being slashed by Rs400 a month.
“No trade union supports pay cuts, but in the case of Hindustan Motors, we didn’t have a choice—if we hadn’t agreed to the pay cut, the factory could have been closed,” says Santashri Chatterjee, president of Citu-affiliated Hindustan Motors Workers’ Union. “We appreciate that car makers across the world are in crisis because of the economic downturn, and Hindustan Motors is no exception.”
The company seems to have overcome its financial difficulties, at least for the time being, and reversed the pay cut from May.
Says Ravi Santhanam, Hindustan Motors’ managing director, “The level of education and commitment to common good that I have seen among trade union leaders in West Bengal is phenomenal. The 1960s and 1970s were indeed a different era…, but now I put trade unions in West Bengal ahead of other states in which I have worked.”
But the unions aren’t entirely happy with the way Hindustan Motors has been run so far. “When global automobile giants started arriving in India in the 1990s, we had told the management that the company should diversify and build an industrial estate using the surplus land at the Uttarpara factory,” says Chatterjee. “They are doing it now whereas they should have done it many years ago. And if they had done it, we wouldn’t have had a situation where workers’ pay had to be cut.”
Not just in manufacturing firms, even in government-owned banks, employees on their own are taking initiatives to improve productivity and profits. In at least one Kolkata-based public sector bank, the principal union recently issued a note to all its members advising them how they could offer better customer service and improve productivity.
aveek.d@livemint.com
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First Published: Sat, Jun 06 2009. 12 36 AM IST