Business Ethics Submission on Grasim Industries Case

Submitted ByAnirban Kundu

Reg No. : 0057/52
The Grasim closure has left 4,231 people jobless, and indirectly affected another 1.2 lakh
people. Most factory workers have been reduced to working in nearby stone quarries and
brick-making units. Others earn their keep as agricultural labour, loaders and fishermen.
Some 2,500 people have since been compelled to migrate, and Mavoor has come to look
like a ghost town.
Says K.V. Shamsuddin, secretary of the local merchants' association: "Atone time, I had
nearly 1,000 customers with credit facilities who worked in Gwalior Rayon. From three
loads of provisions a week, I now get a supply only twice a week." Other traders have
closed shops as they cannot recover debts. In the circumstances, as Shamsuddin says,
shopkeepers can hardly pressure buyers to pay up. After all, where will the money come
from?
The bankruptcy is also reflected in the figures of the three cooperative banks in Mavoor.
In the last two years, they have loaned more than Rs 1.5 crore against gold deposits, a
figure considerably higher than in the past. The banks are in a quandary: borrowers have
failed to repay loans and pick up their ornaments, but local leaders won't let the banks
auction the security on the ground that the gold belongs to the people of Mavoor.
No enterprise, it would seem, has been unaffected. Of Mavoor's 17 hotels, nine have
since gone under and one has been converted into an arrack shop. But even that isn't
doing well as residents prefer to brew their own cheap liquor. The local bus stand too is
deserted. With private bus operators losing interest in Mavoor now that its main source
of income has disappeared, their daily trips to the town have dropped from 62 to 35. The
ferry service across the Chaliyar river to Vazhkadu tells the same story. Three years ago,
the right to operate the ferry was bought for Rs 14,500 in the annual auction conducted
by the Mavoor panchayat. Today, the going rate is Rs 8,050 and the ferry contractor.
Abdul Rahman, says:''If the factory does not reopen, there will be no takers at the next
auction."
The hard times have even affected people's dietary habits. Kamaluddin, a wholesale fish
dealer, laments that sales have declined to a fifth of the earlier level. Since they cannot
afford most meat or vegetables, residents now consume the easily available jackfruit and
tapioca. In textile shops, the average of daily sales has sunk from Rs 4,000 to a pitiful Rs
250.
The Gwalior Rayon Multipurpose Society, a cooperative providing cheap provisions to
workers, closed eight months ago. Says Secretary Abubacker: "We owe Rs 40 lakh to
merchants in Calicut, and they have started proceedings against us. Even if the factory is
reopened, it will take years to clear the debts."
Agricultural labour has also been hit by the silent machines. Mohammed Ali, a rigger in
the factory's engineering division, regularly employed four people for his banana

plantation nearby. But now that he has nothing else to do, he handles most of the work
himself. Says Ali: "Many workers like me who had bought land near Mavoor have got rid
of their agricultural labourers, creating tension."
The frustration of the town's residents was evident recently when panchayat officials,
doing their rounds to collect local taxes, were roughed up by an irate mob. In the last two
years, five factory workers have committed suicide. Among them was Moosa Koya, a
rigger, whose case illustrates the present social tensions. Ayesha Kutty, his wife, says the
problem arose as their oldest daughter, married six months before the strike, had to take
her in-laws four gold coins in addition to what had already been given. When the factory
closed and Koya failed to deliver, her in laws sen t her home in disgrace. Her father
looked for alternative work, and finding no way out, took his own life.
The Grasim management has, however, continued to provide electricity and water to its
workers' quarters. It has also kept open a higher secondary school rated as one of the
best in the district. Says employee N.P. Narayanan: "Some of us are forced to continue
living in Mavoor for the sake of our children's education." But while the school is open,
medical facilities to workers have been withdrawn.
Most Mavoor citizens blame the local union leaders for the current stalemate. From the
early '80s onwards, the factory has been beset by innumerable strikes, organised by
dozens of trade unions of varying political hues. Whenever a strike was settled, workers
alleged that union leaders had sold out to the management.
Eventually, a new union became dominant - the Gwalior Rayon Organisation of Workers
(GROW) - which was formed in 1984, and headed by A. Vasu, a former Naxalite leader.
The last strike was instigated by GROW, and quickly turned violent, forcing the
management to close the gates. Says Vasu: "All the unions have formed a united front,
and this time we are determined to get all our demands fulfilled." The demands include
the immediate payment of bonus at a higher rate from 1982 to 1985, permanent
employment to nearly 600 workers, and a long-term agreement on the wage structure.
The management refuses to concede these, arguing their stand is linked to government
policy on raw material supplies. The factory, which has a production capacity of 200
tonnes per day, needs 3.6 lakh tonnes of raw material - mainly eucalyptus and bamboo annually, to work at full capacity. When production began in 1963, the company bought
30,000 acres of forest land from a former prince. But in 1971, the Kerala Government
nationalised private forest land. R.N. Saboo, executive president of the Mavoor unit, says:
"When we initially started in 1959, we had an agreement with the Government which
said that forest land would not be nationalised for 60 years. We won our case against
nationalisation in the high court, but lost in the Supreme Court."
The unit then had to depend on raw materials from neighbouring states. But later, these
states banned the inter-state movement of bamboo and eucalyptus to protect their own
industries. To top it, say management sources, the state Government started diverting
raw materials from Grasim to the newly set up Hindustan Paper Corporation (HPC) at
Veloor. With the Government supplying only a third of the raw material required, say
factory officials, capacity utilisation slumped.

As Saboo says: "Over the last five years, our Kerala operations have resulted in a loss of
Rs 21.39 crore." He also bitterly criticises the government policy of providing HPC raw
material at Rs 12 per tonne, while he pays Rs 550 per tonne, adding that in Tamil Nadu,
the rate is Rs 150 per tonne. But, he says the company's request for the supply of raw
material at Rs 220 per tonne has had "some positive response" from the state
Government.
In the last assembly elections, Chief Minister E.K. Nayanar promised that a victory for his
Left Democratic Front would lead to the Mavoor unit's reopening. That hasn't yet
happened, but Industry Minister K.R. Gowri says: "We are doing our best," and the
workers' demands as also the raw materials issue are being sorted out. Till that happens,
Mavoor stands as a sorry symbol of strident unionisation and warped government policy.
Reference:
1. http://indiatoday.intoday.in/story/following-grasim-industries-closure-once-richmavoor-turns-slowly-into-a-ghost-town/1/337405.html
2. http://www.thehindu.com/2001/07/08/stories/0408404z.htm