MEMORANDUM SUBMITTED BY LOK RAJ SANGATHAN
(May 21, 2003)
to the Honourable Committee set up by the Ministry of Labour
to enquire into results of privatisation of
Modern Food Industries (India) Ltd., and BALCO

We, the public minded citizens of the Lok Raj Sanghathan, wish to bring certain important aspects of the privatisation of Modern Foods India Limited (MFIL) to your notice.

As you may be aware, one of the important principles enunciated by the Disinvestment Commission was that sale of shares of a public undertaking taken up for prvatisation ( and we consider the term "disinvestment" to be a euphemism for privatisation) must be on a very wide basis. Just the opposite has happened. The entire undertaking has been sold in two stages to a single bidder, that too to a multinational company, which until then had nothing to do with the manufacture of bread.

Following the sale of equity of the MFIL to Hindustan Lever, the effective managerial and financial control of this public sector company engaged in manufacturing nutritious and affordable bread for the consumer has shifted into private hands. Events that have unfolded in the past three years have borne out the apprehension of several organizations, including the LRS and the trade unions of MFIL made at the time of privatisation, that instead of continuing with MFIL as a running profit making orgainsation, the new owners of MFIL are more interested in closing down units and arranging for production of bread by others on contract basis., and in the process throwing out large numbers of workers in various locations out of their jobs.

We understand that the Comptroller and Auditor-General had occasion to make adverse comments about the valuation that was done as also the non-inclusion of assets like land, plant and machinery and so on. The value of land which was not calculated at the time of the sale ( for a mere Rs. 112 crores) can now be sold in the open market for an amount far higher than the price paid by Hindustan Lever for MFIL assets and business. Further by closing down vital production lines, the new owners of MFIL are no longer committed to producing affordable food.

Following privatization, the obligation to protect the legitimate interests of the employees of MFIL has been by-passed. Instead there has been tremendous pressure on employees to take VRS, false cases have been foisted upon some and in several cases the new owners of MFIL have flouted labour laws by dismissing protected workmen fighting privatization, without the labour court's approval. Clearly the new managerial mantra is to crush the workers with an iron hand and to ignore the law of the land while going about this.

All these events bring out in sharp relief the betrayal of public interests and the workers' interests under privatisation. Under- priced sale of assets, private profit in the running of enterprises over all other interests, and the sense of insecurity and deteriorating work conditions have been the features of the MFIL privatisation.
LRS urges the Committee to study these matters in detail since the future of several public sector concerns and therefore, the public and the workers' interests are linked to the test case of privatisaion of MFIL. We have attached a copy of the writ petition filed in the Hon'ble High Court of Delhi by the LRS along with the Workers union of MFIL. We reiterate what we have stated in the Writ Petition, namely, the disposal of such public undertakings can and should be done only under statutory powers and cannot be a matter for mere executive decision making.

(signed)

TS SANKARAN
(HONORARY CHAIRPERSON)