Workers bear the brunt of manufacturing slowdown

Even as industry laments the reduction in its rates of profit, the brunt of the slowdown is being borne by the blue-collar workforce, mainly the temporary and casual workers.

Workers of Shivam Auto Tech Limited at Binola in Gurgaon, Haryana, who were suspended for demanding increment. For many companies, the slowdown is an excuse to deny workers their due.

The apparent calm in the industrial units of Gurgaon and Manesar in Haryana belies the turmoil within. Recently, workers in the automobile industry were out on the streets demanding their right to associate and form unions. The struggle for implementation of tripartite agreements between the management, workers and the State government is still on, but a crisis of a different kind threatens the very survival of the workforce today. The economic slowdown in the country has hit the automobile industry particularly hard.

A depression in general consumer demand over the past year owing to a range of factors is seen as triggering the crisis. Despite the “Make in India” rhetoric by the Narendra Modi government, industry and workers’ representatives feel that not much has been done to either boost industry or generate employment. Labour-intensive manufacturing has not really taken off and the depressed consumer demand has only made it worse. Everyone is concerned about the auto industry and its falling rate of profits, but not much empathy is shown for the workforce that is engaged in real production.

On August 16, while responding to queries from a section of the electronic media, Maruti Suzuki (India) chairperson R.C. Bhargava did not mince words when he said that contracts of temporary workers were not renewed because of the slowdown in the automobile sector. Agency reports on the press interaction cited him as saying that it was part of business that more contract workers were hired when demand soared and reduced in case of low demand. He added that permanent workers were not affected.

Bhargava’s comments are indicative of what is in store for the industry and the workforce in the wake of the slowdown, which was kept under wraps during the election. Frontline spoke to a cross section of people—workers, workers’ representatives and industry representatives—who were affected by the situation.

‘It took us by surprise’

Sunil Bohra, executive director and group CFO of Minda Industries, a leading auto component manufacturing company that has been in business for over 60 years, told Frontline that no one had envisaged the sharp slump, which was the worst in two decades. “There is definitely a huge impact because of the market slowdown. It has taken people by surprise,” he said.

Bohra said making safety measures like air bags mandatory was done in a short period of time and it caused the cost of vehicles to escalate. Another reason he lists is the funds crunch because of the IL&FS crisis. “Funding lines to NBFCs [non-banking financial companies] have dried up. Earlier, if one went to any showroom and showed documents, funding by an NBFC was easily done. Now it has become complicated. When things are uncertain, people defer purchases,” he said, adding that government intervention this time was slow perhaps because of the election.

However, he likes to believe it is a short-term crisis and that demand will pick up. “Rural demand could surge because of a good monsoon. We correlate with original equipment manufacturers. If the sale of vehicles goes down, it affects us as well. Markets are down by nearly 20-25 per cent, but we have been able to withstand the storm. We have done some cost-cutting and are cautious in continuing expansion,” he said, adding that there had not been a single lay-off of the company’s permanent workforce consisting of some 24,000 people spread over 65 plants in India and abroad.

‘GST rates pushed up vehicle costs’

Deepak Maini, general secretary of the Gurgaon Industry Association (GIA), said the main reason for the depression in consumer demand was the high rate of goods and services tax (GST) on the finished product and the pressure to shift to Bharat Stage (BS) VI emission norms. “At 28 per cent GST, a consumer has to shell out close to Rs.3 lakh more for a vehicle priced at Rs.10 lakh. A person wanting to buy a bike for Rs.50,000 will not pay Rs.14,000 extra as tax,” he told Frontline .

To buttress his point, Maini cites the example of a Ford Endeavour he bought six years ago. “Its cost was Rs.21 lakh. Now a slightly modified version of the same is priced at Rs.35 lakh. The rates have gone up because of the non-refundable tax rates. It used to be 16 per cent; now it is 28 per cent. Registration has also become expensive. Kisi cheez ki limit honi chahiye. Muqabla kartein hain Amrika se. Pehle Amrika jaisa to bano . [There has to be a limit to everything. The government wants to compete with America. First they should try to become like America],” he said.

An auto parts manufacturer, Maini feels the government has no clarity with regard to the introduction of electric vehicles either. “Sometimes they say it is 2020, sometimes 2025. They are putting a lot of pressure on us. Where is the infrastructure for PNG [piped natural gas] distribution? Today outside the National Capital Region, you can count on your fingertips the number of PNG and CNG [compressed natural gas] fuelling stations. There are long lines everywhere. How will people recharge their electric vehicles then? Has that infrastructure been provided? The conversion is very expensive. Industry ko danda maarna hai; wahi ho raha hai . Saara pollution ka theka kya industry ne le rakha hai ? [They are bearing down on us. Why does the industry have to bear the entire responsibility of pollution control?],” he said.

A senior sales manager at a Tata Motors showroom said there were many reasons for the slowdown. “It is quite possible that people are waiting for the prices of BS IV models to come down as cars with BS VI compliance will be out by 2020 and BS IV models will not be sold anymore. Compared with the same time last year, the slump in demand is around 30-40 per cent. Bookings are not coming. There doesn’t seem to be too much excitement even about the launch of new models,” he said.

According to Bohra, the cost of operating electric vehicles may be lower and they may be less polluting, but it is immature to put a tight deadline for its implementation. “Even a country like the United States is still building infrastructure. It is not easy for a consumer to make the shift. The government should leave it to consumers to decide. As far as lay-offs are concerned, if job stability is there, demand will go up. We are hopeful that sustained job creation will revive demand. We thought that because of the global trade wars between the U.S. and China, manufacturing would shift here. But that did not happen,” he said.

Maini said dealers were told to stock up for the festival season. Vehicles were now piled up at showrooms as well as in factory premises. The worst casualty is contract and temporary workers who are being laid off. Maini narrated an incident where he found no security guard in the premises of a small auto component manufacturer he had gone visiting. The owner told the GIA office-bearer that he could not afford to keep his four security guards any more. “In his opinion, he had saved Rs.72,000 by sacking them. His reason was simple: Jab kaam nahi hai, chowkidaari karke kya karega? [When there is no work, what will you do with security guards?],” Maini said.

He warned that when the circumstances for dismissal extended to white-collar employees, suicide rates would go up. “It is an alarming situation. No company wants to show losses in their books for fear of being denied a bank loan. If the government tells banks to lend, it can help the situation,” he said, adding that Maruti was not the only one to suffer a slowdown. Many companies had laid off their workforce to the extent of 30 per cent or more.

Maini also said that the situation could spell the ruin of micro, small & medium enterprises (MSMEs). “No company makes parts. It is all outsourced to vendors. There are vendors along the entire chain. The majority of them are very small scale in the MSME sector. Nearly 60 per cent of the products even for brands like Maruti are made by MSMEs. Ease of doing business will happen only if there are business opportunities,” he told Frontline .

Demand notices being ignored

In such a situation, Satbir Singh, president of the Haryana unit of the Centre of Indian Trade Unions (CITU), said managements were not talking about demand notices at all. “Workers at every level of the transport system have been affected though the figures are not apparent right now. We know that apprentices are being sent back and sales have taken a hit at showrooms. The shutdown period of machines for maintenance has gone up. We also know that companies are not paying severance packages to workers after laying them off and are instead paying them against any leave they might have accumulated,” he said.

The managements of several auto majors have sent off their workers to their States of origin, fearing an unrest if they stayed on. “The government says this is temporary, but it doesn’t look like it. Every segment seems to be in crisis. Textile, steel, automobile and the latest are ordnance factories, where workers have gone on an indefinite strike protesting against privatisation,” Satbir Singh said.

In July 2012, workers of the Manesar unit of Maruti Suzuki (India) went on a strike protesting against the management. One of their main demands was the recognition of their union. A senior executive died in mysterious circumstances following which the management sacked more than 500 workers in a single stroke. The then Haryana government, led by the Congress, slapped cases, including that of murder, against almost 150 workers. Thirteen workers were imprisoned for life. Five workers were sentenced to prison for five years. The court acquitted 117 workers of criminal charges, but the current Bharatiya Janata Party government has challenged the verdict.

On August 21, Frontline met with the permanent workers of Shivam Auto Tech Limited who were protesting against their suspension apparently for demanding the implementation of a demand notice submitted by them about the rate of increment for the next three years. The company is into manufacturing auto components for several big auto majors. They were huddled under a makeshift tent some 200 metres from the factory gate. One of them, Ram Niranjan, who underwent an angioplasty recently, lay down on a plank at the protest site. He has put in 16 years of service in the company.

The suspended workers were not allowed to enter the premises and punch their attendance. Satbir Singh said this came under the category of “unfair labour practice”, especially as the demand notice was under consideration and negotiations were on with the Deputy Labour Commissioner.

For many companies, the slowdown is an excuse to deny workers their due. “We are all permanent workers. The management is delaying implementation of our settlement following the submission of our demand notice on May 2018. Wages need to keep up with inflation. They implemented the last settlement, but they are not accepting the latest demand notice,” said Mukesh Yadav, general secretary of the union. He said the company could not say that its profits had gone down or that the slowdown had affected it as it had given incentives to the managerial staff. There were more than a thousand workers on contract in the company while the number of permanent workers was only 416. The maximum monthly salary that a skilled worker drew was Rs.30,000.

Starting with a single plant in Gurgaon in 1999, the company has added five more plants. Nearly 250 auto components are manufactured here. It is learnt that the company hired workers under the National Employability Enhancement Mission, or NEEM, launched by the Modi government last year to provide on-the-job training. A lump sum was given to workers with no social security coverage such as Provident Fund or Employees’ State Insurance. Under this scheme, the industry hiring the worker from underprivileged backgrounds was not obliged to offer full-time employment. The scheme made it clear that an offer of apprenticeship did not mean an offer of employment.

“Companies make NEEM trainees do production work while paying them a pittance. They are not even given safety gear,” said Mukesh Yadav. According to the scheme, an intermediary, a NEEM agent, was responsible for taking care of the human resource formalities of the industry.

Reducing number of ‘shifts’

At another auto ancillary unit, Mark Exhaust System Limited in the Binola industrial area on National Highway No. 8, which manufactured silencers or “mufflers” for cars and bikes, workers told Frontline that the number of shifts had been reduced as there were not as many orders as before. The management had decided to diversify by manufacturing parts for the Railways. “We are all welders. We have 10 to 15 years of experience. Earlier we used to put in eight hours of production. Now it is only two hours,” said Pawan Yadav, general secretary of the union.

“The service ‘shutdowns’ have also become longer and frequent. Earlier it used to be in September or October, now it is almost three times a year. For the whole of February and March, the demand from Maruti and Honda was very low so we did not supply. From manufacturing 650 mufflers a day per shift, only 200-250 were being made because of the reduced demand. In every vendor plant, workers were on single shifts only,” he said.

In Binola industrial area alone, there were nearly 10,000 workers employed in auto vendor units. “The worst affected will be the workshops. The owners are mostly local people. I hold the Modi government responsible. Getting car loans has become difficult. Even transporters are feeling the pinch. The rates that were spent at the RTO [Regional Transport Office] have gone up three times but income hasn’t,” said Pawan Yadav, who was also in the business of transporting goods. His company was one of the rare ones that had not laid off any workers but he knows that this is only a matter of time.

‘Excuse to lay off workers’

The general secretary of the Maruti Suzuki Workers Union, Ajmer Yadav, said that while the plant in Manesar had not seen any lay-offs, temporary and contract workers had been laid off in the older plant in Gurgaon. The shifts have also been reduced. In the Manesar plant, car production has come down from 2,500 a day to 800. He said that floods in parts of the country had reduced spending on the purchase of new cars though the phasing out of BS IV vehicles and the probability of getting a discount on them before the introduction of BS VI vehicles were among the reasons for consumers holding on to their spending. He said the slowdown was being used as an excuse to lay off workers. “ Mandee hai. Darane ke liye bada chadha ke boltein hain (There is a slowdown. But it is being used to scare workers),” he said.

The slowdown has been hard on the economy but more so on workers. Even as industry laments the reduction in its rates of profit, the brunt of the slowdown is being borne by the blue-collar workforce, mainly the temporary and casual workers.

The amalgamation of labour laws and the simplification of labour compliance procedures have been welcomed by industry for good reason. Union Finance Minister Nirmala Sitharaman’s recent selective assurances to industry that reforms, including labour reforms like that of fixed-term employment, would continue might enthuse the corporate sector, but for the actual producers of wealth, there has been nothing by way of guaranteeing job security. They seem to be the only visible casualty of the slowdown.