Economic Highlights

New Delhi, 25 September 2008

Lynching of CEO

FLIGHT OF CAPITAL IN U.P.

By Shivaji Sarkar

 
The lynching of the CEO of Graziano Transmissioni India, L K Choudhary, by workers in Greater Noida brings to the fore a grave sliding scenario in Uttar Pradesh. There is a gradual flight of capital. It reflects the sliding economy not only of the State but also in northern India.

The Industry has expressed its displeasure in Gurgaon, Haryana too, following several violent protests. Recall the incident at the Hero Honda factory, which had reached a flashpoint. The situation in UP is clearly worsening. Some years back Daewoo folded up not only because of problems at its Korean headquarters but also because of extortion by a nexus of politicians, local toughs often aided or ignored by both the police and district administration as well as similar violent protests by workers.

The protests have taken a heavy toll on UP’s development during the past seven years of regional party rule. Entrepreneurs and industrialists are concerned about their safety. It certainly has taken a toll on the investment sector. Multinationals have started shunning the State, particularly Noida, home of the present Chief Minister Mayawati.

The major companies that have closed down since 1998 are Nicco, Punjab Fibre, Stalin, Daewoo Motors, Hindo Rubber and Red Tape. Many others have moved shop to other States. Not just this. Small units are also fleeing. Today there are only 300 such units in operation in Noida and Greater Noida, whereas over 2,000 units have either downed their shutters or shifted operational base.

Worse, the trend is not restricted to Noida alone. The situation is similar all over the State. Once thriving Kanpur and Agra are mere replicas of their past. The Ganga and Taj expressways symbolize another lopsided development process. These, says Samajwadi Party leader Amar Singh, are symbol of greed of politicians and not development. Industries that can keep the rulers monetarily happy are thriving, allege some Noida entrepreneurs.

Change of regime in UP does not help much either. Overnight the “toughs” sympathizing with one set of political dispensation shift their loyalty. Those who were sporting the bicycle – Samajwadi insignia till a year back are now riding the elephant – BSP- literally.

Political dispensation too does not mind flexing the muscle on the strength of these “toughs”. They have become the face of UP. They “help” the industry when they start setting up their shop. They oblige them initially so heavily that gradually the industrialists become a pawn in their hands.

Despite the so-called one-window policy of Udyog Bandhu in UP, the labyrinths of power are so tricky that industry also feels happy at the “help” received from the “liaison men”, the way toughs present them at the beginning. They smoothen the process by interacting with bureaucracy, politician and the police.

The leverage they enjoy is utilized for pushing in their men in the new industrial unit. The number of employees that are forced upon an employer is often larger than their requirement. Off the record that is the story almost all employers narrate. They allege they have to employ redundant work force just to keep the politicians, local toughs and the bureaucracy happy.

The industrialists have often complained of their insecurities during the official Udyog Bandhu meet held with the district administration and labour department from time to time. Graziano too had reportedly made such complaints.

The chairman of Gautam Buddha Nagar (Noida and Greater Noida) chapter of Indian Industries Association Jitendra Parikh says the area has turned into a nightmare. The police remains inactive and do not provide security to the establishment or industrialists. If this persists, many MNCs would become victims of violence as was the case with  Daewoo and others.

Importantly, the situation in Noida and Greater Noida also calls for a re-look at labour issues. Much violence, Parikh agrees, is because of dispute in reduction of the workforce. While entrepreneurs are keen on protecting their profit margins, the liberalized economic situation does not ensure a proper compensation or alternative employment to the worker. This often leads to a stressful relationship. Wildcat strikes have almost become a rule in the area.

The statement of Union Labour Minister Oscar Fernandes that Graziano CEO’s lynching is a “warning” to the employers, is itself a telling comment on the critical labour-employer relationship today. It is a different story that Fernandes apologized the next day to the Industry saying he didn’t mean to hurt anyone and was “giving a general view.”

The General Secretary of Greater Noida Industries Association, Aditya Ghildiyal too is concerned about the labour factor. But, he feels the police are extremely lax in providing security and Noida is clearly on the decline, thanks to the apathy of the administration. No foreign investment has come to the State for years and if the situation persists many indigenous ones would too look for safer haven. Similar sentiments have been echoed by other industry bodies such as Association of Greater Noida Industries and Phase Two Industries Association.

Agreeing with the industrialists, a State government official said that “Political masters and their henchmen do not allow the administration to function. Bold and upright officials are shunted out. Have a look at the transfer list. Very few officials can stay here for a long duration”.

Law and order has never been the State’s forte for over a decade now. The ruling regional parties have mastered the art of extortion. Every new scheme announced means a new way to fill up their party and personal coffers. It also means favouring some close confidantes, particularly among the Industry. Samajwadi Party had done it and the BSP is doing it now. And by now the industry knows well that the prescription for survival is in developing close ties with the ruling class. Performance depends neither on capability nor on market but how happy they manage to keep the ruling class!

“There are only two ways. Either swim with the rut or shift. Many have opted for the latter”, sums up an industrialist. Clearly, there is need for a review at the central level of investment climate by including hitherto the ignored factor of political influence. If it is not done, the NCR that has been emerging as a hub of activity may become a cluster of the biggest ghost townships. Uttar Pradesh symbolizes a malaise that is afflicting other upcoming industrial areas.---INFA

 (Copyright, India News and Feature Alliance)