The CITU-sponsored strike in Muthoot Finance, a leading gold finance company listed on both the Bombay Stock Exchange and NIFTY, has come as a bolt from the blue to the state striving hard to improve its business climate and move up the ‘Ease of Doing Business’ rankings. And the over a fortnight-long open spat, involving the company management and the labour union, became a talking point nationwide after Muthoot vowed to close down its 300-plus branches in Kerala. Now, are trade unions which held sway during the 1970s and 80s back to their old ways of haunting businesses? Or is this just the odd one? Express weighs in
KOCHI: Kerala has a long history of militant trade unionism tarnishing its image as an investment destination of choice for companies. The 1970s and 80s saw a large number of companies, mostly in the manufacturing sector, exiting Kerala due to a combination of factors, including hostile trade unions, frequent strikes and environment-related issues.
Some of the high-profile companies that have shutdown Kerala factories included Gwalior Rayons, Mavoor (Grasim Industries), Toshiba Anand, Premier Cables and Madura Coats. The once-flourishing industrial belts in Eloor near Kochi and Koratty near Thrissur now look more like a graveyard of dead companies.
Over the last couple of decades, however, Kerala has been striving to get rid off the bad image and with reasonable success too. It has attracted several big companies, especially in the IT sector, to set up units in the state. Several large home-grown companies such as Manappuram Finance, Muthoot Finance, Geojit Financial Services, V-Guard and Wonderla have flourished and were able to raise funds from the capital markets by listing its shares on the stock markets.
STRIKES GETTING TOO FREQUENT?
Over the last couple of weeks, a strike by CPM’s trade union wing CITU at leading gold loan company Muthoot Finance seems like spiralling out of control, spoiling all the efforts by the government to move up the ‘ease of doing business’ rankings. Following the strike, the Kochi-headquartered company has threatened that it would close down over 300 branches if these branches are not allowed to function. Last year, a strike by workers belonging to CITU-backed union at Synthite Industries’ main factory at Kadayiruppu near Kolenchery in Ernakulam, forced the company to shutdown operations for several days. In October 2016, a car carrier ship MV Dresden decided not to call at Cochin Port due to labour disputes.
Are trade unions taking back Kerala to the old era? Is militant trade unionism on the ascent in Kerala?
Navas Meeran, past Chairman, CII (Southern Region) & Kerala and managing director of Eastern Condiments Pvt Ltd, said the incidents at Muthoot Finance should not be escalated as it would affect the investments coming to Kerala. “The companies should have the freedom to operate in Kerala. If employees want to work, then no one has the right to physically stop from joining for duty,” he said. According to him, when an overwhelming majority of the employees do not want to join a trade union, the companies may find it difficult to recognise those unions. “At least 1/3rd of employees should be part of a union to recognise it. Natural justice demands it,” felt Navas.
While the Muthoot Finance Employees’ Union (MFEU) under the banner of CITU-backed Non-Banking and Private Finance Employees Association wants recognition, besides wage hikes, the company management has been sticking to the position that it will not approve a trade union, which doesn’t command “even the support of 1 per cent” of employees.
CP John, general secretary of the Communist Marxist Party (CMP), said no management can deny the formation of a trade union in their companies. Companies, which have large presence across the country, like Muthoot Finance, there has to be an agreement to recognise unions if they have at least 10 per cent of the employees or 1,000 employees, whichever is lower.
“Finally, it’s the government’s responsibility to resolve the dispute between the union and the company’s management. Just because CITU and government are from the same party does not mean that it is the trade union’s responsibility to settle the issue with the management,” he said. In both Muthoot Finance and Synthite Industries’ cases, the dispute arose when the managements chose not to recognise the CITU-affiliated unions.
Trade union leader and CPM’s former Rajya Sabha MP K Chandran Pillai said it was “wrong” on the part of the Muthoot Finance’s management to say that it will not recognise the trade union. “If the management feels that our demands are unfair, and the employees do not support the demands, then let them conduct a referendum through a secret ballot,” Pillai challenged.
‘KERALA IS EMPLOYEE-FRIENDLY DUE TO LABOUR RIGHT AWARENESS’
A head of a company, which has all-India presence, echoed similar view, and said Kerala enjoys some of the best environment for workers, including highest wages -- Rs 700/day for an unskilled worker and Rs 1,000/day -- due to the strikes for labour rights in the 1970s and 1980s.
“Now Kerala society demands certain work environment, which the companies have to provide for their employees. An air-conditioned facility for offices or other benefits are a given. This may not be the case in other states,” he said, adding that the trade unions should also be reasonable in their demands. “There is now a perception that trade unions are unnecessarily involving themselves in a company’s affairs. Due to this perception, the trade unions now are not getting the sympathy from society at large,” he said.
He pointed out that trade unions are very active and strong in developed countries such as France and Germany. “The problem comes when the trade unions become unreasonable in their demands. The managements should also be flexible to accept the reality and sit down with the union representatives to resolve the workers’ issues,” he said.
MUTHOOT STRIKE SHOULD NOT SPILL INTO IT SECTOR
The Information Technology (IT) sector in Kerala has been insulated from the trade unions, though they have made several attempts to infiltrate into the organisation. The Technopark in Thiruvananthapuram and the Infopark in Kochi have been able to attract some of the big names in the IT industry including Oracle Corp, Tata Consultancy Services, Wipro, Tech Mahindra and UST Global employing over 70,000 people.
Last year when Japanese automaker Nissan Motor Co, Ltd, opened its first global research hub to develop futuristic driverless cars and electric vehicles in Thiruvananthapuram, it created a buzz across the country.
Navas Meeran said the CITU-led strike in Muthoot Finance, which is a listed entity with branches across the country, may send the wrong signals, hampering future investments, especially in the IT sector -- a big job provider for the state’s aspiring young generation. “These days even a small issue gets blown up through social media, which may lead to a situation where big IT companies may choose to stay away from Kerala. All the good work done so far may come to a nought if the strike at Muthoot Finance drags on,” he said.
According to him, cities like Coimbatore with good connectivity and other advantages, are competing with Kerala to attract investments. “We have to be careful that investments that we could attract do not go to Coimbatore, which is fast developing as an IT destination,” said Navas.
Strikes May Hit state’s ‘Ease Of Doing Business’ Ranking
Kerala’s ranking in the ‘Ease of doing business’ index is as low as 21 in 2018. When the LDF Government announced new industrial policy last year, the objective was to climb up the ranking to the top 10 this year.
The Kerala chapter of The IndUS Entrepreneurs (TiE) said if the strikes continue to disrupt the functioning of establishments, it would hamper the state’s image in terms of Ease of Doing Business and will further degenerate the employment scenario in the state.
George Alexander Muthoot, who is a Charter Member of TiE Kerala and executive director of Muthoot Group, said there had been no trade union activity in Muthoot.
“CITU has been trying to create one for the past three years. Despite calling for 12 strikes totalling 52 working days over the past three years, they have been unsuccessful in creating it,” he said. Chandran Pillai of CPM, however, said the CITU does not believe in physically blocking employees who turn up for work.
“Ever since the LDF Government came to power, the investment climate has improved in a significant way. Nobody can deny this,” he said.
Though Kerala scores high on human-development indicators such as literacy and maternal health, it has not done well as job-creators. Unemployment in the state came in at 12.5%, while in Tripura and Himachal Pradesh it stood at 19.7% and 10.6% respectively. The failure to create a conducive business environment is cited for this. In contrast, dynamic states which are actively improving their ease of doing business - including Chhattisgarh (1.9%), Karnataka (1.5%) and Gujarat (0.9%) - recorded the lowest unemployment rates.
A striking past
Last year, a strike by workers belonging to CITU-backed union at Synthite Industries’ main factory at Kadayiruppu near Kolenchery in Ernakulam, forced the company to shutdown operations for several days.
In October 2016, a car carrier ship mv Dresden decided not to call at Cochin Port due to labour disputes.
Following the strike, the Muthoot has threatened that it would close down over 300 branches if these branches are not allowed to function.