Aspects of India's Economy No.s 39 & 40

In July 1991, the Indian government began to implement its 'new economic policy', largely dictated by the International Monetary Fund and the World Bank, but on the whole eagerly embraced by the Indian ruling classes as well.

An important agenda of this policy was bringing about `labour flexibility'. This included two types of changes. First, changes in the law to allow easy retrenchment and closure, which the Government termed an 'exit policy'. Second, the replacement of permanent labour (enjoying various legal rights, in particular job security) with contract labour, which was far cheaper and could be fired at will. This agenda has been reflected in various statements of the Government, and continues to be reflected in the latest World Bank document (Country Strategy for India, September 15, 2004):

In the thirteen years since the introduction of the new economic policy, the government has periodically announced that labour legislations required for such 'labour flexibility' are in the offing. However, at each juncture the major trade unions -- including those affiliated to the ruling parties at various times -- have announced their opposition to such changes, and no major legislation has formally been presented or passed in this respect. While a major change was imposed in retirement benefits (converting provident fund dues to a pension), the laws on industrial disputes and contract labour remain the same in 2004 as in 1991.

Without legislation
And yet the World Bank’s depiction of labour market “inflexibility” is false. In fact, “labour flexibility” already existed to an extent before 1991, and has been greatly increased since then without legislation.

Since 1991, hundreds of thousands of workers have been forced to leave their jobs with paltry 'voluntary retirement' payments (aggregate official data is not available in this respect). Tens of thousands of factories have closed without legal formalities. Even as the pool of job-seekers steadily rises, total organised sector jobs have declined in the last five years, both on account of closures/retrenchments and the failure to fill vacancies (the real decline is likely to be much larger than that captured by official statistics: a host of companies have stopped running, with a large number of workers on their rolls, but until these companies officially wind up, their workers would continue to be recorded as employed). Between March 1996 and March 2002 the total number of registered factories (including factories in the unorganised sector) declined by 4.6 per cent, and the number of workers they employed fell by 22.9 per cent. In the organised sector, total employment has fallen by 1.2 million between 1997 and 2003. Even without any official exit policy, a large measure of labour `flexibility' has been put in place.

How has this drastic change been brought about without formal legislative measures? A combination of methods has been employed simultaneously, the crux of which is the political offensive of the ruling class. Managements have waged a widespread joint drive to change the terms of labour. From the latter half of the 1980s managements began refusing to conclude new settlements with their existing unions; indeed, in a reversal of the normal situation, managements began the practice of presenting `charters of demands' to their unions — dictating reduction of workforce, complete freedom of deployment anywhere, linking wages to 'productivity', and freedom to use contract labour. (A cover story of Business World at the time of the historic 1988 lock-out of the Hindustan Lever plant in Sewri termed the phenomenon “The Militant Employer”.) It became standard practice to victimise union activists, impose illegal lock-outs (often by such simple devices as failing to pay the electricity bill), and force workers to accept 'voluntary' retirement schemes.

The collusion of governmental authorities with managements' illegal actions was crucial to the success of these methods. Proceedings were not initiated or seriously pursued in the case of illegal lock-outs and other offences. Among other steps, the Government explicitly stated on several occasions that no fresh nationalisations would be carried out. The Board for Industrial and Financial Reconstruction, which was purportedly set up to revive such sick companies as could be revived, actually operated as an elaborate mechanism for owners to extract tax concessions, loan write-offs, and concessions from the starving workers, but the BIFR completely failed to ensure the reopening of illegally closed units.

In recent years official collusion has become open, often rendering it unnecessary for managements to proceed illegally. Where managements' applications for factory closure were once automatically rejected by state governments (under section 25 of the Industrial Disputes Act), the Maharashtra labour commissioner told the Economic Times (12/8/03) that such applications were now being allowed “in the changed scenario”. The Times of India (22/9/03) reported that “A labour department official admitted that seldom before had so many closure applications been upheld.”

Collaboration of the judicial system
Equally important has been the active collaboration of the judicial system, acting on a clear signal from other State institutions and the overall ruling class 'climate'. There was a substantial body of 'pro-labour' judgements in the past. No doubt, one should not exaggerate the long-term benefit to workers of such judgements; they lulled the permanent workers, and the majority of trade unions focussed solely on obtaining relief from the courts. This abandonment of direct agitation rendered them inert and vulnerable when relief from the courts was no longer forthcoming.

That change in judicial stance took place in the 1990s. It was expressed in a number of rulings. (See Endnote: “The courts as instruments of the new labour policy”) Many of these rulings were made in direct contradiction of a substantial body of precedent, and in the absence of any new legislation, underlining the fact that the courts implemented these changes as part of the new ruling class policy.

Undermining resistance
Where trade unions genuinely representative of the workers resisted these changes, openly pro-management 'trade unions', thugs and the police were freely employed against the workers. But in the majority of the cases, the existing established `trade unions' have subtly or openly collaborated with managements in a variety of ways, the most important being the failure to put up serious resistance struggle. If a worker felt that it was unlikely that his/her union would put up a serious struggle against a voluntary retirement scheme, it became an individually rational choice for him/her to accept the payment as soon as possible.

A crucial element in the entire offensive has been the creation of a climate of despair and resignation. In tandem with the actions of managements, the government itself and the mass media have carried out a systematic propaganda drive to the effect that the current changes in the terms of labour are inevitable, are part of a worldwide change and cannot be resisted; workers' only hope lies in creating self-employment or in developing the skills required in the new economy. Their failure to get jobs, or ones that pay a living wage, results from their lack of enterprise and unwillingness to adapt. This propaganda drive helped demoralise and sap the will to resist of those workers not already overcome by other odds.

In other words, while the formal legal situation did not change dramatically, the changes were achieved as part of a concerted political drive by the ruling classes, both directly (in their role as employers) and through their State institutions, their media, and their political representatives.

Depression of wages
This situation has facilitated a widespread depression of the share of wages in value added, brought about by various means.

One method is the widespread increase in workload, whether as the result of failure to recruit additional staff as output increases, failure to fill vacancies caused by natural attrition, or actual retrenchment carried out while maintaining/increasing production/services. For example, while railway freight has risen by a third and passenger traffic by half during the post-1991 period, railway employment has fallen by about nine per cent. (This has predictable consequences: for example, engine drivers are forced routinely to work for twelve hours or even longer without a break — resulting in more accidents.)

Secondly, not only do unorganised sector wage increases lag behind inflation (so that real wages decline), but even outright wage cuts are imposed in many sectors. The entire jute industry in eastern India does this routinely, but wage cuts are now being imposed on sections of permanent workers once thought secure (for example, a section of permanent transport and dock workers in Mumbai has recently suffered a cut of more than half their nominal wages, to levels below the minimum wage).

The most endemic form of wage-cut is the replacement of permanent workers in industry with low-paid contract workers. This is to be found not only in production but service sectors as well.

As a result of such changes, wages as a percentage of costs of the corporate sector have declined (from 6.1 per cent in 1991-92 to 4.4 per cent in 2002-03, according to the Centre for Monitoring the Indian Economy). Reserve Bank of India data reveal that as a percentage of net value added in large private sector firms, remuneration to employees fell by almost 11 percentage points during the period of 'reform' (see Table 1). The share of profit before tax grew by 11.5 percentage points. The share of managerial remuneration went up five times. In the pre-'reform' period, remuneration to employees was 21 percentage points higher than profit before tax; after more than a decade of 'reform', it is less than profit before tax.¹

Share of Wages, Managerial Pay, and Profits in the Private Corporate Sector,
Before and After ‘Reform’

(Remuneration to Employees, Managerial Remuneration, and Profit before Tax as Percentages of Net Value Added in Large Non-Government Public Limited Companies)
	RE/NVA	MR/NVA	PBT/NVA
Average of 1988-89 to 1990-91	49.8%	0.2%	28.9%
Average of 2001-02 to 2003-04	39.1%	1.0%	40.4%
RE = Remuneration to employees (salaries, wages and bonus; provident fund; employees’ welfare expenses) MR = Managerial remuneration PBT = Profit before tax NVA = Net value added [RE + MR + net rent + net interest + tax + dividends paid net of dividends received+retained profits net of non-operating surplus/deficit]
SOURCES: “Finances of Large Public Limited Companies, 1990-91”, RBI Bulletin, December 1992; “Finances of Large Public Limited Companies, 2003-04”, RBI Bulletin, May 2005. These surveys cover selected private sector, non-financial large public limited companies, each with a paid-up capital of Rs ten million and above. The size of the first sample (1988-89 to 1990-91) was 645 companies; the second sample (2001-02 to 2003-04) was 1015 companies.

While similar data for the unorganised sector are not available, those working to unionise unorganised sector workers report that the reverses suffered by the organised sector workers have worsened the terms of labour for the unorganised sector as well. Indeed, according to national income data for the years 1993-94 and 2000-01, wages as a share of value added in manufacturing have fallen in both the organised and unorganised sectors.

In sum, during the last 15 years the working class in both the organised and unorganised sectors has suffered its worst setback in post-1947 India. Not only has unemployment soared, but exploitation of those employed has greatly intensified.

Below, we look at the case of one firm where this drive was implemented during the period of the new economic policy: Otis Elevators. (The following account is largely based on a series of detailed reports by a democratic rights organisation, Lokshahi Hakk Sanghatana, and interviews with the union of the field staff in Mumbai, Otis Elevators Employees’ Union, or OEEU.) We look at Otis' operations in Mumbai.

The evidence contradicts the World Bank's contention that “Employment in India's registered firms (those with more than 100 employees) is highly protected”, that “These provisions make labor rationalization in registered firms very difficult”, and that “the use of contract labor is restricted to temporary activities by the existing Contract Labor Act”. Rather, the firm has been able to tighten management control over the entire labour process, reduce its permanent workforce drastically, subcontract production to a number of small firms, and hire sweated contract labour through contractors on a large scale. In doing so it has been able to make use of its financial power and its status as the leading firm in the industry. It has used various coercive methods, and has had the active or passive assistance of the State, a Shiv Sena-led union, government authorities, and (by and large) the media.

All this has been carried out in order to reduce the share of wages in value added, and indeed has resulted in a steep rise in profitability. This has required a continuous state of war with the permanent employees, and the new practices have led to a series of deaths in accidents involving unskilled contract workers. These practices also affected the quality of the firm's services (in some cases leading to customer accidents), but given the firm's leading position in the market and its ability to manipulate the media, the management is ready to sacrifice quality to some extent. The management's final objective appears to be the replacement of the permanent workforce with a contract workforce. A significant section of permanent employees has been putting up resistance to the management's drive, and it is this resistance, not labour legislation, that poses a hurdle to the management.

Otis Elevators: multinational firm with a monopoly hold
Otis Elevators (India) Ltd (OEIL) was set up in 1960 as a subsidiary of the American multinational Otis Elevators. Since the late 1990s the American parent firm, Otis Elevators, has increased its stake from 45 per cent to 95.7 per cent.²

Otis Elevator Company, USA is the world's largest elevator company. It is in turn a subsidiary of United Technologies Corporation, the US-based military contractor/engineering giant, which was ranked at 141 in Fortune's list of the world's 500 largest corporations for 2003. In 2003 it had a turnover of $31 billion; profits of $2.4 billion; and 203,300 employees.

OEIL is by far the largest elevator company in India, and claims a market share of around 40 per cent. It had sales and service revenues of Rs 5651 million in the year ended March 31, 2004, and profit after tax of Rs 529 million.³ Of the two segments of its activity – i.e., new equipment and service – service was particularly profitable, accounting for just 36.9 per cent of revenue but 73.8 per cent of operational profit.⁴

Otis and its union: how the fight began
In 1994, there were about 1,200 non-executive staff at the Otis factory in Kandivli, Bombay. About 830 more were employed in the field, erecting and maintaining the elevators. Since 1961, the workers were represented by an internal union, Otis Elevators Employees Union (OEEU), with whom all agreements were signed. The OEEU had initially been representative of the workers, but by the 1980s its local Mumbai committee had developed collusive relations with the management.

Workers rebelled in 1989-90, and a new group of young, militant employees (mainly field staff), who enjoyed the confidence of the rank-and-file, won the union elections. The field staff, a relatively skilled section, was assertive and capable of running the union without external assistance. They began to democratise union practices. How cosy the relations of the earlier leadership were with the management can be seen from the fact that the displaced leadership of the union were made executives, and indeed the former vice president of the union eventually became the senior human relations manager – tackling the union.

The new leadership was immediately faced with the most pressing question before the labour movement. From 1988, the management had begun to introduce a number of changes to reduce the share of wages and increase management control among the field workers. Among these were the use of casual labour for work of a permanent nature and the sub-contracting of jobs. “Casual” employees would be taken on for as long as six years without being made permanent. The use of such employees had an impact on safety too. In 1992, a trainee was made to work alone and without supervision. As a result of a risky short-cut his foreman instructed him to use, he was crushed to death.

The new leadership agitated against these practices, and that year struck a major blow when it forced the management to make 98 casual workers permanent and to stop recruiting casual labour. In 1993-94 Otis workers, including casual workers, of the Mumbai satellite towns Thane, Navi Mumbai, and Kalyan, were organised by OEEU, and made part of the union.

Before this, the Otis management had resorted to subcontracting mainly for distant places. However, when the casual workers were made permanent the management began to develop a system of subcontracting for field operations in Mumbai city.

These two steps – taking up the cause of the casual/contract workers and attempting to coordinate at an all-India level – posed a threat to the entire direction in which the management wished to take the firm in the near future.

Legal and physical attacks on the union
The management cracked down pre-emptively. In August 1991, there was a mass victimisation of workers in the factory and field. Wages were stopped; deductions were made on various excuses; false charges were filed against workers and some were transferred. When OEEU went on a work-to-rule agitation in February 1992, the management responded by cutting the full wages of 350 employees. The union managed to keep them going with a subsistence allowance collected from the other workers. This continued for four and a half months.

At 11 a.m. on June 2, 1992, around 40 men entered the Otis factory in Kandivli. They were allowed to stay there until 4 p.m., collecting signatures on applications to join the Bharatiya Kamgar Sena, a Shiv Sena-affiliated trade union which has traditionally been brought in by managements to break inconvenient unions. Most workers in the factory, where the OEEU was not very strong, signed on, apparently figuring it best not to cross swords with the BKS. The BKS has a reputation for violence, and is particularly powerful in the Kandivli area.

The management immediately stopped all communications with the OEEU and began negotiating with BKS. The management and BKS signed an agreement in December 1993. Workers were then asked to give an undertaking that they supported the agreement and also agreed to the deduction of an unspecified amount from their ex-gratia amount for the union fund, as dictated in a letter from the BKS to the management, the contents of which were not made public. Terrorised, 300 workers signed the undertaking.

A section of the terrorised factory workers resorted to bringing in another locally powerful semi-criminal “union” to take on the BKS. Clashes began between the two “unions”. The police merely looked on when the BKS attacked. Using the clashes as an excuse, the management locked out the factory in February 1994. Eventually, the BKS violence and repression in the factory crushed all opposition to the management.

Management concentrates fire on field staff
With this the management turned its attention to the field staff, where the resistance to the management was centred.

In February 1994, an Otis foreman complained that he was attacked by unknown assailants, and charged, among others, an Otis worker, brother of an OEEU activist. At Kanjur Marg police station, the worker was beaten with a leather belt. Then wires were wrapped around his fingers and he was given electric shocks for 15 minute stretches, supplemented with psychological torture. This was followed by more beating. The fact of torture was later confirmed by medical examination.

The union organised two mass protests against the torture. The worker was much later acquitted of all charges. No action, of course, was taken against the police officers involved. On the contrary, the Kanjur Marg case turned out to be merely the harbinger of much more general repression to come.

Lock-out
The lock-out was successful in the factory: within one and a half months all the workers had been intimidated into agreeing to the BKS terms. On April 19, 1994, the management extended the lock-out to the field staff of Mumbai – but only to members of the OEEU, not the BKS. Repression intensified to levels which do not find a parallel in the recent history of organised workers in the city. In May 1994, one worker was arrested and tortured severely in police custody (his religion, Christianity, was also insulted by the police). The protest demonstration against the torture was locked into a compound (so as to shut off escape routes) and brutally lathi-charged, injuring 14 severely with several fractures and head injuries.

In all, during the lock-out period, about 150 workers, including the main office-bearers, were arrested and charged with one or the other offence under about a dozen police stations.

The handful of BKS members, combined with executives (former employees) and some contractors, carried on skeletal services during the lock-out. However, against a full component of 400 field staff in servicing, during the lock-out only 140-150 persons with varying levels of skill were engaged in servicing 5,000 to 6,000 lifts throughout the city. Apart from requiring routine servicing every five days, these lifts normally witness 3,000 to 4,000 breakdowns per month (ranging from the simple to the serious).

Short of staff, Otis neglected many of its less prestigious or prominent clients, resulting in at least two serious accidents. In one of them, at a home for blind children in north Mumbai, a lift door opened when there was no carriage in place. A blind boy fell through this door to his death; he was followed shortly thereafter by another boy who suffered severe injury. Another similar incident occurred in an apartment building in a posh area of Mumbai in November 1994. Negative publicity given to these incidents, as well as to the earlier lathi-charge on workers, placed pressure on the Otis management. Moreover, the management feared losing market share if the lock-out were extended even further. On the other hand, the union too was under severe pressure to settle, after eight months without wages.

So the Otis management re-started negotiations with the OEEU in December 1994, and shortly thereafter signed a settlement with it for the field staff in Bombay. In the settlement the OEEU had to agree to increased productivity and the use of contract labour, but the management had to assure that the existing field workforce would be fully productively employed and no retrenchment would take place. No action could be initiated against workmen without following due process of law. An important provision insisted upon by the union was a joint management-union safety committee to review all safety issues.

Post-lock-out situation: massive increase in subcontracting of manufacture
Since 1994, the management has systematically increased subcontracting in both the factory and field.

In 1990-91, there were 800-odd permanent workmen on the rolls of the Otis factory at Kandivli. By 1999, this had been brought down to 450 through repeated rounds of 'voluntary' (actually, intimidatory) retirement schemes. Of even these 450, only about 150 received regular work, while the remainder were made to sit idle. The remaining production – ie, the bulk of it – was carried out by subcontractors. (Some sophisticated parts are imported – for example, PCB cards for control panels. The manufacture of escalators in India was discontinued, and replaced by imports – at first from Otis’ subsidiary in Malaysia, and now from its subsidiary in China.)

Most of the work of lift manufacture is low-technology, and can be carried out in small workshops: for example, the rails on which the lifts run are cut and planed in these workshops from steel T-sections, using machines supplied by Otis. (The 2003-04 Annual Report lists 27 small scale undertakings – largely engineering firms, electronics firms and fabricators – to which Otis owed dues.) Otis executives are sent to these small-scale firms to monitor quality, and rectification of defective work is also carried out by the field staff. (Further, an Otis factory in Bangalore, with about 100 workers, carries out in the main work such as the finishing of doors, interior panels, etc.)

Otis’ savings on wages are large. The monthly wages of the factory workers were in the range of Rs 14,000-17,000. By contrast, according to the OEEU’s sources, the average monthly wage in the units to which Otis is subcontracting is around Rs 4,000.

A section of workmen of the Kandivli plant refused to accept VRS payments, and stuck to their jobs despite the pressure brought on them by the management. So, on December 29, 2003, Otis transferred the plant with the workmen and staff (totalling 235 in all) to a virtually unknown firm named United White Metal (UWM) which hitherto did not manufacture lifts. Otis claimed to have ensured “the continuity of service to existing workmen under the same terms and conditions.”

However, after just nine months, UWM applied to the state government for permission to retrench 117 workmen, or exactly half. UWM pleaded that the turnover was falling and the firm was making losses. In fact, the Kandivli plant was manufacturing the main machines for Otis lifts, and Otis’ sales of new lifts were increasing sharply with the boom in construction activity. Nevertheless, the state government gave permission for the retrenchment.

In other words, Otis not only subcontracted the manufacture of the machines, it also subcontracted the retrenchment of the Kandivli workers. They were removed with only statutory compensation (15 days’ pay for each year worked) – far below the level of VRS payments.

Subcontracting was also introduced in a major way in the field operations. Whereas earlier there were 58 workmen in the modernisation department, by 1999 there were only 31; of the 24 jobs on hand, by 1999, 16 were being performed by subcontractors and only eight by permanent workmen. Some construction department manpower was transferred to the service department, and 60 per cent of the construction jobs were being performed by subcontractors. Meanwhile, by not filling up the posts rendered vacant by superannuation, resignations and deaths, the management reduced the number of permanent field staff to just 625 (compared to 700 in 1994).

Alarmed by the trend, the OEEU focussed on the issue of subcontracting as the most important issue between it and the management. By 1998 the management went on a fresh drive against the OEEU, with suspensions, wage deductions, charge-sheeting, transfers of office-bearers and other active members to far-off sites, and so on.

With the proliferation of subcontracting, safety issues became a flashpoint between the union and the management. The union had no direct access to the contract workers, nor even knowledge of the sites on which they worked. It only came to know of certain accidents in which contract workers died. These included the cases of Asad Khan (March 15, 1999) and Roshan Perreira (June 18, 2001), which were investigated by Lokshahi Hakk Sanghatana. According to an internal communication of Otis Elevators of October 2000, there had been five deaths of workers working for Otis sub-contractors over the previous two years. With the help of these fact-finding reports we get glimpses of the new world of labour.

The contract system and the contractors in the field
The difficulty for the management in subcontracting field jobs was that these are skilled jobs.

There are three categories of permanent field staff in Otis. About 35 per cent are highly skilled, 15 per cent are skilled, and 50 per cent are semi-skilled. These jobs require certain minimum educational levels and between three and five years’ training before confirmation, apart from further training on the job.⁶

This is particularly the case in the erection and installation department, where skilled personnel can examine the drawings, assign jobs (such as carpentry, welding, wiring, and assembly) to unskilled or semi-skilled workers, leave them to work unsupervised, and check their work later. Any error can be rectified without much loss or risk. Skilled workers need only execute particular tasks within the whole project.

Since the unionised workers of OEEU oppose the employment of contract workers, the latter cannot be placed under their supervision. Moreover, the skilled workers would not take shortcuts, would insist on observing various important safety procedures which are part of the company's established norms, and would insist on an eight-hour day plus weekly holiday. All this could slow down or make more expensive the execution of the job. Clients such as construction firms sometimes press for speedy execution, even at the cost of safe working procedures.⁷

The management prefers to engage subcontractors who are themselves highly skilled (frequently ex-Otis field staff). Their skills can be upgraded periodically by the company itself. By engaging a large number of subcontractors, each with between five and 20 workers in his employ, the company is able to avoid dependence on any single contractor. Unionisation of the contract workers is rendered extremely difficult. It is difficult even to find out the names of the contractors and the sites at which they are employed, let alone develop links with their workforce. Moreover, unskilled workers can be easily replaced if necessary, with neither Otis nor the contractor bearing any responsibility.

In the course of time, the company has been able to introduce, and regularise the working of, subcontractors in the maintenance department as well. Maintenance involves two aspects: routine maintenance and repair. Repair is a highly skilled task, since it involves analysing the situation, locating the problem, and rectifying it. This continues to be carried out very largely by the permanent staff. However, a small but growing share of routine maintenance work (eg oiling and cleaning)is carried out by subcontractors. Moreover, to some extent this work too has been 'de-skilled'. In the lifts with newer technology, when a part malfunctions, it is not repaired on the spot; rather, the entire module is removed and replaced.

Typically, a subcontractor is paid a lump-sum for the entire job. Since he pays the labourers by the day, by getting the job done as fast as possible he maximises his profit margin. The management accepts contractors of a standard far lower than it would accept for its permanent workforce. The LHS report describes two Otis contractors:

Nor was this the end of Garde’s career as an Otis subcontractor. He and Thomas were also the subcontractors in the case of Everest Building at Versova, Mumbai, where their unskilled contract worker Roshan Perreira was killed in an accident on June 8, 2001.

At the time of Asad Khan’s death Garde and Thomas were executing 12 Otis jobs — 10 modernisations and two new lifts. Neither of them was present at the site of either of the two fatal accidents of their workers. “If I have to be practically at the site, the job can't go on”, Garde said. He justified this by comparing his job to that of an Otis supervisor, who is in charge of several sites at a time. But an Otis supervisor leaves the job in the hands of skilled and specially trained workmen, which was not the case with Hail Mary's workmen.

Garde was quite blunt about the benefits of the system to Otis: “We do the job faster than the permanent employees, and at lesser pay”, he told the LHS team.

Grave dangers to unskilled workers: the deaths of Asad Khan and Roshan Perreira
Neither the contractors nor Otis waste time and money in providing much safety training. Garde claimed to LHS that Asad Khan was given some four to six hours of such training on one occasion in June 1998. According to Asad's co-worker, someone from Otis came and instructed the contract workers on 'safety measures'. These consisted mainly of wearing a helmet, safety belt, and gloves while working. Thereafter Otis had no presence on the worksite. After this `training', Asad was issued an identity card by Otis to work on the site as a contract worker, and was put to work frequently without the presence of the subcontractor or any trained worker. Whereas it is one of Otis’s safety norms that at any lift site in which work is going on, there must be at least two workers working together, a contract worker reported that the normal situation was for each contract worker to work alone.

The case of Roshan Perreira was even starker. He had arrived in Mumbai in search of work just a week before the accident in which he died. He did not receive even the nominal briefing given to Asad Khan. Nor was he given personal protection equipment such as safety shoes and a helmet. Had he been wearing a helmet at the time of the accident, the fatal injury to his head could have been avoided.

The manner in which Khan and Perreira died clearly points to abandonment of safe working procedures by subcontractors in order to minimise training time and to speed up the work. (The LHS reports have gone into great detail on these incidents, which we have omitted here.) According to the management version, Asad Khan was working on the lift top, and wanted to run the car up in 'inspection mode' (one-fourth the normal speed). However, when he did so the car unexpectedly took off at normal speed; he was thrown off balance and fell on the spear cam, a metallic bar protruding from the top of the lift, piercing his pelvis and damaging his internal organs.⁸ The subcontractor's failure to cut off all high-speed circuits, as well as set the lift in inspection mode, till the completion of work proved fatal. These safety measures were bypassed in order to speed up the work.

Roshan Perreira's case was similar: he lost his balance while standing on a lift moving upward; his hand pressed a lever which opened the landing door of the 12th floor; and he got caught between the lift car and the wall of the lift shaft. His head and shoulder got crushed between the car and the wall, with his legs protruding upward. His co-worker phoned the Otis management for help, and they sent two of their subcontractors to the spot, neither of whom could extricate Roshan. At this point the police and fire brigade were called. Roshan's body had 23 injuries; he died of haemorrhage and shock. Once again safety procedures had been grossly ignored.⁹

According to the company's own account, on November 4, 2000, one Babloo Kumar Jha, a subcontractor's worker, was cleaning the ground floor landing door sill in a building. When Lalan, his assistant, returned, he found that the elevator was six inches above floor level, and Babloo's head was jammed between the car and the landing sill. Lalan tried to open the landing door, but was unable to do so. He then cranked the elevator up and construction workmen at the site removed Babloo from the pit.

While the management denied allegations made by the OEEU and LHS, internal memoranda show that it was perfectly aware of the real situation, and place the blame squarely on the system of subcontracting:

Note that the concern is to better implement the subcontracting system, not to discontinue it. Indeed it has grown further since the above memoranda. It is unlikely that safety procedures of subcontractors have improved either: LHS also investigated the death of another Otis contract worker, Vijay Shinde, in Nagpur, October 2002, and its findings were in line with earlier investigations.

The world of the contract worker: insecurity and helplessness
For lack of contacts, it is difficult to find out much about the contract workers, except when they are killed in accidents (even then, it has only been through the alertness and persistence of the OEEU that the victims are sometimes tracked down; the management and the police have misled or been uncooperative). It is known that in general they are young men; they are unskilled labourers; and they live in slums. Sometimes the contractors hire their relations or persons from their own village, but this is not a general rule.

Roshan Perreira, for instance, was a young man of 23. He was the son of a rickshaw driver from Kodangollu in South Kanara district of Karnataka. Two years before his death he had come to Palghar, north of Mumbai, in search of a livelihood, and had come to Mumbai just a week before the accident. Little else is known about him.

This account gives us a glimpse of the political economy in which contract labour is employed here: where the employed are an island in a sea of unemployment/under-employment, and are thus much more victim to exploitation and arbitrariness.

Gaping wage differentials between contract workers and organised sector
By 2001 Otis had increased its contract workforce in field operations to more than 300 in Mumbai alone and, by its own account, 500 nationwide. OEEU estimates that the figure has risen to perhaps 1000 since then. From the cases of the accidents investigated, it appears that the subcontractors employ them at below minimum wages. One contract worker employed with an Otis subcontractor in 1999 told the LHS team that he received just Rs 50 a day for each day that he actually worked (ie with no paid leave of any sort; further, it appears they work considerably longer hours than permanent staff). Fifty rupees per day was also the wage received by Asad Khan, the victim of the 1999 Worli accident. This was considerably below the then minimum monthly wage of Rs 2,520 for electrical equipment workers fixed by the Maharashtra government. The worker who spoke to the team also told them that he did not receive the benefit of Employees’ State Insurance Scheme (ESIS). Further, he said that while a worker with experience earned slightly higher wages, he would not earn more than Rs 100 for each day actually worked even after acquiring six to seven years of experience. This would approximate the minimum wage if he obtained work for the entire month. These contract workers do not receive any paid leave, not even Sundays.

By contrast, at the time of Asad Khan’s death, the starting monthly salaries of permanent workers in Otis field operations were as follows: for a semi-skilled worker, Rs 5,500 to Rs 6,000; for a skilled worker, Rs 6,500; and for a highly skilled worker, Rs 7,000.

Today the “career path” of a typical Otis contract worker in field operations is as follows: an unpaid apprenticeship; then wages of Rs 1,500 per month, which are increased over time to Rs 2,000-2,500 – well below official minimum wages. A few experienced workers might get Rs 4,500-5,000. Hours are not fixed: Otis workers engaged in erecting lifts stay at the site like construction labour.

Today the wages of permanent workers have risen to a starting wage of more than Rs 10,000 for semi-skilled, Rs 12,000 for skilled, and Rs 13,000 for highly skilled. Wages for semi-skilled to highly skilled workers range from Rs 14,000 to Rs 17,000. Not only do permanent workers earn more than four times the wages of contract workers, but they enjoy a range of other benefits, most importantly paid leave and fixed hours of work. They are also in a position to refuse to do work in violation of safety norms.

A voluntary retirement scheme was implemented in the office as well, and now the office staff too are hired on contract. New employees receive Rs 2,500-3,000 per month.

Intensification of exploitation
As we have seen above, the management consciously broke up the work performed by permanent workers with various levels of skill in order to be able to use unskilled workers. The price of the labour power of unskilled workers is particularly depressed in a country like India, where there is a large pool of unemployed workers willing to work at starvation wages.

The management intensified the exploitation of the contract workers by lengthening the working day (including not providing holidays of any kind), speeding up the work, reducing manning levels, and most of all by cutting wages steeply (ie, paying much less in comparison to the permanent workers). Neither did the Otis management spend money on training, nor (as the subcontractor Garde complained) did it bear the cost of the measly compensation paid to the employee's family in case of death.¹⁰

A natural consequence of Otis’ subcontracting policy has been deterioration in the quality of its services. This has been particularly so in the case of maintenance. A number of significant accidents have occurred over the years -- the 1994 fatal accident at Banajee Industrial Home for the Blind (mentioned earlier); the December 2001 fall of a young boy as a result of a defective lift door in Matru Ashish building; and the March 11, 2004 fall of an Otis lift from the 14th floor of the residential quarters of the Bhabha Atomic Research Centre, resulting in injuries to all 10 passengers (six of them were seriously injured). All three lifts were serviced for Otis by subcontractors. A further risk to escalator users was posed by the fact that Otis discontinued the manufacture of escalators in India, and relied on imports instead, leading to an endemic shortage of spare parts.

Collusion of media and government authorities
The OEEU and LHS attempted to publicise the ill-effects – for both workers and the general public – of Otis’ policies. They met with initial success with a report on the 1994 accident, which received wide publicity. This was a period when it was not yet difficult for reporters to file pro-labour, anti-corporate sector stories in the press. The negative publicity was taken very seriously by the Otis management. Later, partly as a result of the change in the practices and climate in the major newspapers (particularly in the Times of India, all-important in the Mumbai region), as well as a concerted effort by Otis to block any negative publicity, it became near-impossible for reports unfavourable to Otis to get covered in the press.

Any official investigation, and the accompanying publicity, would have been taken very seriously by Otis, and may have stalled or disturbed its subcontracting policy. However, two key government authorities thoroughly colluded with Otis: the police and the lift inspectorate. Both failed to investigate accidents seriously, even major ones, involving Otis. Thus both the ruling class media and State institutions played an important role in reinforcing Otis’ policy of subcontracting.

Depression of wage boosts Otis profits
Otis launched its war on its permanent workforce in India, and in particular in Mumbai, in the early 1990s. This coincided with two events.

First, the emergence of a more democratic and struggle-oriented leadership among the Mumbai field workers, who threatened to become a nucleus for the entire workforce all-India. From the very outset, this force contested the use of casual/contract labour.

Secondly, the New Economic Policy was announced and implemented from 1991. While no formal legislative step ensued, a climate was created of repression of the working class and reversal of rights they had won through struggles. This climate emboldened the Otis management to bring about sweeping changes.

For about three years the contest of wills continued in Mumbai, till the end of 1994. This period witnessed fierce repression on the workers – suspensions and withholding of wages, the induction of a semi-criminal union to split the workers, physical attacks on workers, a lock-out in the factory and field, arrests, police torture, and a lathi-charge. The management did not win the clear-cut victory it wished at this stage, and it was forced to sign an agreement with the OEEU, the union it had targeted. Nevertheless, the management won the crucial right to use the system of subcontracting. The OEEU has since been searching for ways to struggle effectively against this system.

While we have described above the developments in the Mumbai region, a similar process took place at the all-India level. Mumbai alone accounts for nearly half the all-India Otis workforce, and it has also been the centre of resistance to the management. It was the Mumbai workforce that took the initiative to form an all-India federation, and to oppose the management’s plans. Correspondingly, the management’s repressive measures have been concentrated in Mumbai. On the other hand, th effects of the changes are even more drastic in other regions, since the resistance there has been weaker. For example, the voluntary retirement schemes have faced much stiffer resistance among Mumbai field workers than in other regions, where the permanent workforce has fallen much more steeply.

In the above, we have stressed the wage differentials between permanent and contract workers. However, as the narration brings out, the management’s drive has also been for greater control: to obtain complete flexibility of deployment and working hours, and to prevent any questioning of procedures by workers.

Between 1990-91 and 1993-94 Otis’ profitability (profits before taxes and extraordinary expenditures as a percentage of income) fell from 10 per cent to 7.1 per cent. It jumped to 10.6 per cent the following year, 1994-95, during which the lock-out was in effect during April-December 1994. It climbed steadily thereafter to reach 14.1 per cent in 1999 and 19.6 per cent in 2003-04 (see Chart 1).

Labour costs (payments to, and provisions for employees) rose as a percentage of total expenditure from 31.1 per cent in 1990-91 to 35.1 per cent in 1993-94. From there they fell more or less steadily to reach 24.5 per cent in 2003-04.

Profits before tax and extraordinary expenditures (PBTEE) rose during 1993-94 to 2003-04 at a compound annual rate of growth 25.1 per cent. By contrast, labour costs grew at the compound annual rate of only 7.5 per cent. Thus in 2003-04 PBTEE was 940 per cent of the 1993-94 figure, whereas labour costs grew to only 206 per cent of the 1993-94 figure (see Chart 2). After discounting for inflation, there is hardly any growth in labour costs.

Another comparison brings out more clearly how profits rose at the cost of labour: In 1993-94, labour costs were Rs 370 million, and PBTEE was Rs 81 million, that is, labour costs were more than four and a half times profits. However, by 2003-04, after a decade of stagnation of labour costs, the two were almost identical: labour costs were Rs 762 million, and PBTEE was Rs 757 million.

Of course, we do not get a full picture of labour costs from the annual reports of the company. The production of Otis products has been subcontracted to small units; a part of the field operations are being performed by subcontractors. These will not be reflected in payment to employees, but in products or services purchased by the firm. Since separate data for these labour costs are not available, let us look at the growth of total expenditure, which would include all such costs. Between 1993-94 and 2003-04 expenditure rose at the compound annual rate of 11.5 per cent. The 2003-04 figure was 296 per cent of the 1993-94 figure (see Chart 2). Whereas, as we have seen, profits grew much faster: PBTEE rose to 940 per cent of the 1993-94 figure.

The struggle continues
However, the management has not succeeded as yet in one important objective: dismantling the organised force of the field workers. These workers have maintained their democratic unity and continuity of leadership team despite the sustained offensive of the management. They try to use such opportunities as remain to prevent changes in practices, raise issues of the safety of both permanent and contract workers, and defend their jobs and wages. The field workers of course enjoy the advantage that it is not as easy to subcontract their work as that of production workers. Their skills continue to be required by the management. However, the management continues to refine and expand its use of subcontracting in the field, evidently with the ultimate aim of entirely doing away with the need for permanent employees.

Reproduce the objective and drive of the Otis management over all the large firms in the country, and a picture emerges of the labour scene today. The depression of wages not only directly affects the working class; it depresses general demand by depressing demand for items of mass consumption, in turn stunting and distorting industrial growth, and thus employment. Moreover, the dismantling of the organised sector working class, and its replacement by dispersed, sweated, groups of workers, has also had a terrible social impact, fraying and tearing the social fabric. Urban India today is marked by growing atomisation, insecurity and reactionary violence: witness the proliferation of criminal gangs in the metropolises and communal killings such as those in Ahmedabad, once a city of textile mills and the organised social life of mill labour. The struggle of workers against these policies thus becomes part of a struggle for broader national and social objectives.

ENDNOTE:
The Courts as Instruments of the New Labour Policy
Of all the expressions of the new posture of the judicial system, most striking was the courts' about-face on contract labour. Under the Contract Labour (Regulation and Abolition) Act, the use of contract labour for particular jobs may be abolished (ie may be barred) upon an application by the workers, if the work is deemed of permanent or perennial nature. A large body of case law was developed over the years, even as late as the 1997 Air India judgement, whereby, if contract labour were abolished for particular jobs, the contract workers employed at the time would have to be absorbed as permanent workers. However, in a 2001 judgement, the Supreme Court ruled that even if contract labour were abolished for particular jobs, the existing contract workers need not be absorbed. At one stroke, this made it meaningless for the contract workers to apply for abolition of contract labour. Not only did this directly affect tens of thousands, perhaps hundreds of thousands, of contract workers whose cases were pending, but it effectively closed the door of the courts to millions of contract workers. (Contract workers in Maharashtra had also extensively used the Maharashtra Registration of Trade Unions and Prevention of Unfair Labour Practices [MRTU & PULP] Act in order to obtain an interim stay on their being removed from service while their case for permanency was pending. In the Kalyani Steel [2000] and Cipla [2001] cases the court ruled that contract labour could not avail of the MRTU & PULP Act.)

In a number of other ways, the courts made clear that they had made a political choice to reverse the precedents, implement the new economic policy and effectively ensure that workers could not approach the courts for relief. For example, in the past, in matters of disciplinary action against a worker, if the court found that principles of natural justice had been violated in the inquiry, it would order his/her reinstatement; but under the new dispensation it may order that the inquiry be held again from the stage at which the violation occurred. This means that the disciplinary action continues pending the disposal of the case, perhaps for years on end. Another instance: In matters of wage adjudication, the courts enjoyed wide discretion, since there was no legislation that spelt out the principles on the basis of which it was to be carried out. Nevertheless, over the years a large body of precedent had developed spelling out the concerned principles. However, in a wage adjudication of Mukand Iron and Steel pending for 13 years, the Supreme Court recently struck down the High Court's interim order regarding the workers' wages, directed that the workers be paid at their 1991 wages (considerably lower than those by the interim order) pending the disposal of the case, and referred the entire matter back to the Industrial Court for fresh adjudication.

The courts used direct and indirect threats to force workers to accept privatisations, illegal closures and other changes. In the case of the sale of the public sector firm Balco to the private firm Sterlite, on May Day 2001 the Supreme Court accepted an affidavit from Sterlite offering to pay two months' wages as advance if the workers agreed to resume work, dropping their demand for the privatisation to be reversed. The Supreme Court went out of its way to 'advise' the workers to consider the 'offer'; under this pressure, on May 8, the workers withdrew their strike against the privatisation. In its judgement in this case some months later, the Supreme Court ruled that the workers need not be consulted in cases of privatisation.

The Supreme Court's 'advice' to workers in another case gave wide scope for victimisation. The Pune-based Bajaj Auto was ordered by the high court to make some hundreds of contract workers permanent. When the matter went in appeal to the Supreme Court, the Supreme Court steered the workers to accepting a settlement whereby, upon being made permanent, they were liable to be transferred to any part of India, including dealerships of the firm. Upon accepting, all 400 workers found themselves immediately transferred to the most distant spots from Pune, such as Sikkim, in intolerable conditions.

The courts also entered the more explicitly political realm repeatedly. On August 6, 2003, a Division Bench of the Supreme Court pronounced (in the case of the summary dismissal of Tamil Nadu government employees) that government employees had no “fundamental, legal, moral or equitable right” to strike work. In Communist Party of India (Marxist) vs Bharat Kumar and Others (1998), a three-Judge bench of the Supreme Court upheld the decision of the Kerala High Court that no political party or organisation has a right to call or enforce a bandh (general shutdown). The Kolkata High Court passed an order placing a near-complete ban on public processions.

The class outlook of the judicial system was brought to the fore once again in the case of the killing of labour leader Shankar Guha Niyogi in September 1991. Leading industrialists of Bhilai conspired to have him killed, as he was organising their contract labourers. At the end of a six-year trial, the trial court in Durg sentenced five conspirators, including two industrialists, to life imprisonment, and their hired assassin to death. However, in appeal, the high court acquitted all six. On January 20, 2005, more than 13 years after the assassination, the Supreme Court acquitted five and commuted the sentence of the sixth, the hired hand, to life imprisonment.

These instances are not necessarily the most important cases of this period, nor do they cover the entire range of judicial policy, and indeed there are many individual cases which would appear to contradict the above summary. However, we have cited a few instances merely in order to illustrate the overall trend of judicial policy. (back)

1.The data on wages, of course, is incomplete to the extent that firms have increased the subcontracting of activities to outside units. The payments made on this account would show up as purchase of finished goods. (back)

2. Fifty-five per cent of the shares were held by the parent company till October 1993;24 per cent was owned by the Indian business group Mahindras, who managed the firm; and the remaining were held by the public. In 1993, the parent company diluted its shareholding to 45 per cent.

At the end of the 1990s, the parent company availed of the new liberalisation allowing it to increase the percentage of its shareholding. In October 1999 the Mahindras sold their 24 per cent stake to Otis Elevator Company, Singapore. This raised the American parent's stake in Otis India to 69 per cent. Keshub Mahindra stepped down as chairman of the firm, eventually being replaced in 2001 by Patrick L'Hostis of Otis Elevator Asia Pacific Area.

After two 'open offers' for the remaining, widely held, shares of the company, the shareholding of the parent firm rose to 95.7 per cent by the end of 2002. The present Chairman is Randal Wilcox. (back)

3. However, after deducting two extraordinary items – voluntary retirement costs and loss on the sale of the manufacturing facility – the net profit is shown as Rs 32.8 million. (back)

4. These figures are for the period ending March 31, 2003; this break-up is not provided in the 2003-04 annual report. (back)

5. Since the Mahindra business house was at the time managing OEIL, the OEEU also attempted to form a coordinating committee of Mahindra firms in 1990. (back)

6. The minimum qualification for semi-skilled workers is a Secondary School Certificate. When recruited, they are trained for three years (on a stipend). Once confirmed, they are placed in the 'help' grade.

The minimum qualification for skilled workers is an Industrial Training Institute certificate with an NCTVT certificate. Those recruited are taken as electricians, and are given three years’ training on the job. After three years, they are put in either the 'skilled examiner' or 'skilled fitter’ grade.

The minimum qualification for highly skilled workers is having completed the 12th Standard in Science. After recruitment, they are trained for five years (on a stipend). Within that period, they are to take two Government examinations: a Public Works Department wireman certificate and a 1st Class PWD wireman competency certificate, with the basic training of a fitter. This category is given classroom training as well as training on the job. Workers in this category are meant to have the capacity to analyse problems on the spot and find answers on their own. (back)

7. For example, in July 1998, permanent employees insisted that scaffolding be erected in order to work on a counterweight stuck on the 8th floor in Express Towers, Mumbai, since there was no door opening nearby. The job was instead given to a subcontractor. The subcontractor lowered a rope from the lift top on the 13th floor; a contract worker in the adjoining shaft caught hold of the rope and swung to the counter-weight, later swinging back after completing the work. Had he fallen, he would have plummeted eight floors. (back)

8. The management allege that Asad made a number of mistakes, which if true would only prove his lack of training. (back)

9. Contrary to norms prescribed for Otis' permanent workers, the circuits of the landing door locks were bypassed; had this not been the case, the lift would have automatically stopped when the landing door opened. Moreover, the lift was not operational in the manual mode, whereas when working on top of the lift permanent workers are meant to operate it only in the manual mode. (back)

10. Garde told Asad Khan's mother that he would pay her Rs 50,000 in three instalments. He gave Roshan Perreira's father Rs 25,000 in cash and two post-dated cheques of Rs 25,000 each. The company accepted no liability for Asad Khan's death, and did not even accept that Perreira was working on an Otis job at the time of his death, but claimed he had been hired by the building society. (back)


No.s 39 & 40, June 2005