The Balco struggle

The Chattisgarh government and the striking workers of Balco have effectively stopped Sterlite from taking control of the company.

MORE than a month after the privatisation of Bharat Aluminium Company (Balco), Sterlite, its new owner, is still unable to establish control decisively over the affairs of the company. The Balco privatisation exercise, welcomed by votaries of disinvestment as the unrolling of the "privatisation juggernaut in India", has effectively been stopped dead on its track by the month-long peaceful struggle by Balco workers at Korba in Chattisgarh State.

The struggle over Balco is far from over. While protagonists of economic reform have called for the "game to proceed" after the sting operation by the Tehelka team, critics aver that l'affaire Balco and tehelka.com's revelations are similar happenings in the same permissive environment that the reforms have created in the last decade.

Although the Union government sold 51 per cent of its stake in Balco to Sterlite for Rs.551.50 crores on March 2, Chief Minister Ajit Jogi's firm support to the striking Balco workers has effectively prevented Sterlite from taking control of the company (Frontline, March 30, 2001). Meanwhile, the Balco sale, entangled in several vital legal issues raised by the Chattisgarh government, is before the Supreme Court. In a significant development on March 12, the State government told the Supreme Court that it was willing to purchase Sterlite's stake in Balco for Rs.552 crores; it followed this up by filing an affidavit in early April. Jogi's contention, both in the court and outside, is that the sale violates important safeguards accorded to tribal people. He has alleged that the sale is an affront to the self-respect of the predominantly tribal State.

On March 12, the Supreme Court vacated its March 7 interim order to the State government asking it to provide water, electricity and food to the employees and to ensure security at the Balco plant so that those who wished to attend work could do so without fear. The court vacated the order on the submission of Kapil Sibal, counsel for the State and Congress(I) Member of Parliament, that the interim order had damaged the new State's reputation. He argued that the order resulted from the Centre's "false averments", based on presumptuous reasoning and contrary to facts. Sibal drew attention to the peaceful situation prevailing in Balco Nagar and the sense of responsibility with which the workers had conducted the agitation. He particularly referred to the pains the workers took to engage in maintenance work, without accepting any wages, even as they continued with their agitation.

The State government alleged that the Disinvestment Ministry sent a fax message to the State's Chief Secretary on March 6, a holiday, at 9 p.m., seeking the government's cooperation in maintaining law and order at Korba.

Outside the court, Congress(I) spokesperson S. Jaipal Reddy alleged that although the Chief Secretary did send a response the following day, Disinvestment Minister Arun Shourie indulged in subterfuge so as to go to the Supreme Court with a grievance where none existed.

The apex court, however, declined to stay the notices dated March 2 and 3 issued by Emil Lakra, the Sub-Divisional Officer (Revenue), Korba, calling upon the Secretary, Department of Disinvestment, to show cause why the lease of the land on which the Korba plant was set up should not be cancelled. Similar notices were also issued to Anil Agarwal, Sterlite chairman, and S.C. Krishnan, Sterlite's managing director.

The notices mentioned that the land occupied by Balco was acquired from tribal people and Dalits in Rishda, Padimar and other villages against Balco's application of July 24, 1971, bearing the number Pers/Estate/ LA/71/c25. The notice pointed out that Balco's application mentioned that the land was required by the government for specific "public purposes". It drew attention to the fact that since the management of Sterlite comprised private and not tribal entities, the land held by the erstwhile public sector undertaking could not be transferred to the new management, in violation of the Madhya Pradesh Land Revenue Code, 1959.

ONE of the main grounds for Jogi's opposition to the Balco deal rests on the premise that the sale violates constitutional safeguards under Schedule V of the Constitution. The provisions prohibit the use of land acquired from tribal people for private gain. The government argues that since Balco's public character has changed with its sale to Sterlite, the acquisition violates multiple legal provisions that guarantee protection to tribal people.

Arun Shourie, in an interview to Businessline newspaper on March 13, claimed that Balco enjoyed immunity from these provisions because the State government had not notified these areas as tribal land. However, a senior government official in Raipur told Frontline that the relevant area, the Kotgara tehsil, had been notified under Schedule V in 1950. He said that Shourie was "blissfully unaware of reality". Sources in Delhi and Raipur said that both the Union Ministry of Mines and Minerals as well as Jardine Fleming, the global adviser to the government on the Balco disinvestment, had in the run-up to the privatisation exercise cautioned the Ministry about the "legal problems" that were likely to arise as a result of the move.

Informed legal sources said that a "secret memo" was in circulation in government circles to amend the Constitution in order to remove the provisions that offer protection to tribal people. Rajeev Dhavan, who is representing the Balco workers in the Supreme Court, told Frontline that Schedule V was governed by a regime of prohibition and permission. He said that in the Balco case, at the time of acquisition of land more than 25 years ago, "no permission was sought or granted to Balco to conduct its activity in land which belonged to the local tribal people." Dhavan said that the government was unwilling to state openly that it was working against the interests of the tribal people. He said that although technically these constitutional safeguards could be removed through amendments, "the government does not have the courage to do so in an open manner".

The reaction of Arun Shourie to Ajit Jogi's offer to buy Sterlite's stake was dismissive. "There is no question of going back on a settled commercial transaction," he said.

Law Minister Arun Jaitley joined in, claiming that the Balco disinvestment had been "most transparent" and that "the government does not react to what is said in frivolity". Jaitley also said that the Centre did not wish to overturn a "settled commercial decision". He alleged that Jogi's actions had harmed the interests of Chattisgarh, particularly the investment climate in the State.

However, the Chief Minister claimed that investor confidence in the State had not been affected, pointing to expressions of interest shown by several Indian and foreign industrial houses, including the Jindals, Daewoo and some Japanese companies. "Everybody knows we are not against private investment, we are only against the shady deal which has put us in a vulnerable position," he said.

The Sterlite management, which tried to maintain a conciliatory posture with respect to the Chattisgarh government, reacted strongly to the State government's offer, describing it as "wild", and rejected any review of its deal.

As the Centre's actions came under media scrutiny following the disclosures, Shourie adopted a more defensive posture. He took pains to point to the technical details in the shareholder agreement with Sterlite under which the company was committed to a three-year lock-in period. Shourie pointed to the "tag-along right clause" in the shareholder agreement, which stipulated that Sterlite would have to sell the shares at a discount of 25 per cent to the government if it wanted to exit within the three-year lock-in period. The Minister also claimed that another "protective clause" stipulated that if the strategic partner wished to exit within the lock-in period, the new purchasing entity would be obliged to buy the remaining 49 per cent held by the Centre. Shourie's comments, effectively aimed at upping the ante, implied that Chattisgarh may have to incur an expense in excess of Rs.1,000 crores, in one bullet payment, if it wanted to take over the company. He quoted the Rs.664 crores fiscal deficit of the State to argue that it did not have the resources to make an investment in Balco.

On March 12, Central Vigilance Commissioner (CVC) N. Vittal added another dimension to the Balco affair when he wrote to Ajit Jogi and the Central Bureau of Investigation (CBI) regarding the allegations of kickbacks in the deal. He based his action on "a complaint that money had been paid to officials in the Disinvestment Ministry". He wrote to Ajit Jogi and CBI Director R.K. Raghavan for their comments. Jogi has alleged a Rs.100-crore payoff, a charge denied by Arun Shourie. Jogi has said that since the CVC's jurisdiction would cover only government servants, and since the alleged payoffs were made to extra-constitutional authorities, a veiled reference to the Prime Minister's Office, no worthwhile gain would be served by a CVC probe.

The Sterlite management suffered a setback on March 26 when the Labour Court at Bilaspur refused to pass any order on its petition seeking to declare the workers' strike illegal. First-class magistrate A.K. Sanothia observed that he would give a ruling on the petition only if the Supreme Court ordered the Labour Court to proceed on the matter. The employees union had argued that since the Supreme Court had ruled that all cases pertaining to the Balco affair in the Chattisgarh and Delhi High Courts be kept pending till the matter was heard in the apex court, the petition in the Labour Court should be treated similarly.

The seven trade unions in Balco remain united in their struggle. Although the Sangh Parivar-related trade union, the Bharatiya Mazdoor Sangh (BMS) has broken ranks with other unions at national level on joint protests against the proposed changes in labour legislation, it does not wish to incur the wrath of the workers at Balco Nagar.

On March 26, the Korba district administration refused permission to Balco to move stocks out of the plant. District Collector K.D.P. Rao prohibited the company from removing Rs.75 crores worth of stocks out. The Jogi administration's move to increase the entry tax on bauxite from 10 per cent of the landed cost to 50 per cent is also likely to impact on Balco's bottomline. (The Sterlite management entered into an agreement with the Orissa government to source bauxite from mines in Orissa on the day the Centre transferred its stake in Balco.) Jogi says that the move to increase the entry tax is aimed to ensure that industries source bauxite from within the State.

V.C. Shukla, former Union Minister and the prime Congress dissident in Chattisgarh, told Frontline that the entry tax should be hiked to 100 per cent. He also said that the government should direct the State Electricity Board to rescind the permission to Balco to generate power from its 270 megawatt captive power plant.

A SENIOR officer in Balco said that the stalemate continued because "Jogi is with the workers and the management is maintaining a low profile". Krishnan has been away in Delhi. The workers are not ready for talks with the new management. According to Brahma Singh, general secretary of the Balco Employees' Union, the workers are determined to participate only in tripartite talks involving both the Union and State governments.

The strike has been remarkably peaceful so far. Despite the month-long strike and the loss of income, the workers have managed to sustain their enthusiasm. Food is served twice a day at the langar near the main plant at Balco Nagar. The Nijikaran Virodhi Samyukt Samiti, a broader anti-privatisation platform in Korba, has managed to collect donations to sustain the workers, particularly the 1,000-odd contract workers. All the Ministers in the State Cabinet have contributed a month's salary.

The Balco workers have the support of coal mines in Korba. The miners of South Eastern Collieries Ltd. have decided to donate a day's wages amounting to Rs.28 lakhs to the striking Balco workers. Similar offers of support have also come from the workers of the National Mineral Development Corporation (NMDC). Workers in the Bhilai Steel Plant, the National Thermal Power Corporation and the Chattisgarh State Electricity Board have all offered financial assistance. On March 23, a seminar on privatisation was held at Balco Nagar. Among others, senior Communist Party of India leader Gurudas Dasgupta participated.

B.L. Netam, an activist of the Centre of Indian Trade Unions (CITU), said: "We are ready for the long haul. This is no longer just a workers' agitation; the people have become involved in it and they are ready to make sacrifices." The workers burnt effigies of the Union government and Anil Agarwal in Balco Nagar on April 1.

Brahma Singh said that only 23 workers are working in the plant, mainly to carry out maintenance work. He said that the unions had ignored advertisements issued by Sterlite seeking their cooperation to arrive at a settlement. "Although the management sent their agents to us to negotiate, we have steadfastly refused to deal with Sterlite...We are confident of success," he said.

A Chattisgarh Mahabandh on March 16, called initially by the trade unions but later backed by Ajit Jogi, was a success. Jogi paid a visit to Balco Nagar to boost the morale of the striking workers. The success of the bandh, despite Jogi's absence (he was away in Bangalore to attend the AICC meet), indicated that the anti-disinvestment agitation had acquired a significant momentum.

The Balco issue has acquired new overtones since the Tehelka expose, particularly in the context of Jogi's allegation that the Balco sale involved corruption in high places. However, the protagonists of economic reform, including leading industrial organisations such as the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII), have said that the attention on political corruption should not hinder the unrolling of reforms, a notable feature of which is the hastened privatisation of profitable PSUs. However, critics argue that the shadow of corruption is an inevitable part of the very concept of privatisation of public assets.