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India's Honda row
snowballs
By Siddharth Srivastava
NEW DELHI - The small satellite township
of Gurgaon, adjoining the capital New Delhi, has
long been a metaphor for change in India. In the
last five years, the suburb has tuned into a hub
of corporate offices, information technology and
business process outsourcing, glitzy malls and
luxury condos. But this week Gurgaon's famous
march to modernity was jolted by an ugly
confrontation between unhappy workers of the
Japanese firm Honda Motorcycles and Scooters India
Ltd (HMSI) and the local police, an incident that
threatened to hurt the flow of foreign direct
investment (FDI) into India and has triggered a
raging debate on the course of economic
liberalization pursued by the government.
HMSI, a wholly owned subsidiary of Honda,
accounts for 25% of Honda's global motorcycle
output. Apart from its ubiquitous two-wheelers,
Honda hopes to sell 100,000 cars annually in India
in the next five years. The problems at HMSI began
in December, when the workers demanded a raise and
tried to form a union. Honda responded by firing
four union leaders, who had established links with
national trade union organizations. The company
also suspended 50 workers, who, according to them,
were the troublemakers. The differences spilled
out on the streets recently, with workers
demanding the reinstatement of their suspended
colleagues and HMSI insisting that the 1,600
employees on strike should sign a "good conduct"
undertaking and return to work.
Trouble
erupted when some of the striking workers beat up
the few policemen guarding the factory premises.
The police regrouped in a few hours and brutally
cracked down on the 2,000-odd workers and their
families, most of whom were protesting peacefully.
As a result of this unprecedented police action,
over 700 workers were injured, several with head
injuries, which in the age of satellite TV did not
make for a pretty picture, especially when India
is actively seeking FDI.
Japanese
ambassador Y Enoki promptly issued a statement
that FDI flows to India will be affected by such
cases of industrial unrest. The incident was "a
disadvantage for India's image as a [foreign
investment] destination and also [gave a] negative
image of Japanese management," said Enoki in a
thinly veiled threat. The fourth biggest source of
foreign investment in India, Japan's FDI
investment in the country is pegged at around $2
billion. There are roughly 250 Japanese companies
in India, in addition to a large number of
Indo-Japanese joint ventures. In a firefighting
exercise, Indian Commerce Minister Kamal Nath said
the country's time-tested dispute settlement
mechanism would help resolve the "isolated
incident", and that it should not be blown out of
proportion.
What should have been handled
as a law and order problem and a human resources
issue within Honda soon evolved into a debate on
India's economic reforms - of Marx versus the
market, economic freedoms of entrepreneurs, firms
and workers, communist posturing, the role of
multinationals and the state. Inflexible labor
laws and inadequate infrastructure are cited as
two main reasons hindering FDI flows into the
country, and India is actively seeking to wean FDI
away from China, a country that gets 10 times more
FDI than India.
What tilted public support
in favor of the workers was the sheer ferocity of
the police force, in full view in prime-time
television. The opposition quickly likened the
police action to the Jallianwala Bagh massacre, in
which British soldiers fired and killed over 400
peaceful protestors in Punjab in 1919. That
massacre fueled the movement which ended in
India's 1947 independence.
Worker's
rights
Questions have been raised about the
rights of workers as India shifts from a socialist
to a capitalistic paradigm. Most corporate leaders
have said Honda should have handled the issue in a
more sensitive manner. Unlike other Japanese
companies such as Sony, Daikin and Hitachi, which
have shut or trimmed their operations in India,
the HMSI factory in Gurgaon - a hub for auto
companies - has been running at full capacity. But
its output has been considerably hindered in the
last few months as a result of the tussle between
management and the workers.
The
labor-management relationship in India has always
been a tenuous one. But there has been a sharp
decline in labor disputes of late. According to
Labor Ministry data, the number of strikes has
declined from 808 in 1994 (India began its
economic reforms in early 1990s) to 257 in 2004.
After a peak of close to 12 million man-days lost
to strikes in 2000, only 4.2 million man-days were
lost due to strikes in 2004. While on the one hand
the numbers could indicate better labor
management, on the other it could be a result of
the dilution of workers' rights, with firms
armtwisting their employees to restrain from
organizing themselves - as happened at Honda.
Prior to 1992, economic freedom in India
was crushed under a maze of complicated rules.
Most policy changes in the post-liberalization era
have eradicated them. But some of them, especially
the ones pertaining to labor, are not so easy to
get rid of, given the support they enjoy among the
political classes. The Industrial Disputes Act of
1947 (IDA) is one such law, considered archaic by
industry but necessary by political parties. This
law lays down that firms which employ more than
100 workers cannot retrench any of them without
government permission, which is rarely given.
Arguably, the inflexibility rooted in the IDA has
harmed both labor and management, because it
pushed Indian firms to opt for capital-intensive
production even when cheap labor was readily
available. Firms have also been reluctant to take
on employees on a regular basis because of the
implicit liability, and look for ways to source
labor on a contract basis, making it easier to lay
them off when necessary. As a result of this, most
of the Honda workers are daily wagers or sourced
on sub-contracts from third parties, with cash
doles that do not appear on company records.
The inflexibility, say many, has
engendered the growth of radical trade unionism in
the country that has crippled many firms,
especially in the eastern belt, from Kanpur (Uttar
Pradesh) to Kolkata (West Bengal). Faridabad, an
industrial town adjoining Delhi, is in ruins now
because of perennial industrial unrest. The IDA
thus remains a political hot potato. The Manmohan
Singh government has labor reforms on its agenda,
but has not been able to get anywhere near the
contentious issue, struggling as it is with less
controversial issues such as disinvestment.
The leftist parties, whose support the
Congress-led government needs to remain in power,
have been screaming bloody murder since the Honda
incident and are going hammer and tongs at the
liberalization drive. But some point to a
contradiction in leftist politics: while they
oppose every move of the government on economic
reforms at the federal level, they promote
structural changes in their bastions like West
Bengal - and the Japanese happen to be the largest
investors in West Bengal.
The worst victim
of this politicizing of labor-management issues
has been business. A Gurgaon bandh (general
strike) was called on Thursday and a "national
protest day" on August 1 by the communist parties.
It is estimated that the business generated from
Gurgaon is over $12 billion annually, with the IT
and BPO segments contributing over $3 billion.
IBM, Daksh, GE, Coca Cola, Convergys, Evalueserve,
Microsoft, and Nokia are some of the big names
that have offices in Gurgaon, located in the state
of Haryana, a stranger to labor unrest. The BPO
industry in Gurgaon itself is expected to lose
$1.6 million from Thursday's strike.
Siddharth Srivastava is a New
Delhi-based journalist.
(Copyright
2005 Asia Times Online Ltd. All rights reserved.
Please contact us for information on sales, syndication and republishing.) |
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