Note

Maruti’s Migration to Gujarat
Bharat Jhunjhunwala

Maruti Suzuki is speeding up its manufacturing facility in Gujarat. It is only natural that a company will try to locate such that it can have access to cheap labour. The flip side of 'cheap labour', however, can be worker's oppression. The British procured indigo cheap from India because Indian labour was cheap—courtesy their oppression. Multinational Companies are locating their manufacturing facilities in China because the ‘communist’ Government does not tolerate industrial unrest much. It becomes easy for companies to pay less and extract more work with government backing.

More than one-half of the profits of Suzuki Japan are earned in India. There was pressure on the Indian outfit to maintain, if not increase, these profits. Japanese nationals were given key positions in management considering the importance of the India operations. They did not understand the culture of Indian workers, it seems. They expected workers to be alert, fast and committed to the work. In contrast Indian workers mostly follow the 'do as you please' policy. Indian society believes in friction as regulator. Pressures of competition were operating at the same time. Competitor companies were bringing in new models. It was necessary for Maruti to keep its cost of production low to face this challenge. Maruti was using casual labour in large numbers to attain this objective. The Company opposed formation of a trade union. It had bought off the union leader during the previous strike at Manesar plant leaving the workers high and dry. The workers were feeling pressures from all sides—wages were low, pressure of work-load was high, there was less communication with the management and the Company was adept at buying out the leaders of the trade unions depriving the workers of any legitimate voice. A small argument between a worker and a supervisor got blown up and resulted in death of a manager due to this simmering tension.

Maruti's migration to Gujarat could be seen as the latest episode of the global race to the bottom. The Company has to pay more to purchase peaceful work in Haryana hence it is migrating to Gujarat. Objective of the Company is to produce cars at the least cost. Low cost labour helps here. The other factor, as they say, is good governance. Company has to pay huge bribes to sundry state government officials, false cases may be lodged on not paying the grease money, water and roads be badly managed, time taken in land allotment be large and refunds of sales taxes be obtained with much difficulty, in such case also the cost of production will increase. Many Multinational Corporations are now shifting their high-end manufacturing facilities back to the United States from China. They have found that the increased costs due to bad governance are more than the savings from cheap labour. Therefore, migration of Maruti to Gujarat is to be condemned if it is in search of cheap labour; but commended if it is due to good governance.

Globalization opens up the global markets and increases demand for Indian labour. But it does the same for other low wage countries as well. This leads to the lower wage countries emerging ahead.

The best way to ensure welfare of workers is to increase demand for labour. This can be done by providing tax breaks to companies using higher number of workers than the industry norm. Employment subsidies can be provided to smaller factories. Workers would have sought another employment instead of bearing the pressure at work and accepting low wages at Maruti had the job market been buoyant.

Frontier
Vol. 45, No.9, Sep 9-15 2012