MEMORANDUM SUBMITTED on 6 July 2004
to the Honourable Prime Minister, Dr. Manmohan Singh
regarding privatisation of Modern Food Industries (India) Ltd.

Modern Food Industries Employees Union
Lawrence Road, New Delhi - 110 035

(Regd.-3238) & recognized
Office: B-89 Gulmohar Park, New Delhi 110 049

July 6, 2004
New Delhi

To
Dr. Manmohan Singh
Honourable Prime Minister,
Government of India

Subject: Urgent action on the part of your government towards

Reversal of Privatisation of Modern Food Industries Limited (MFIL).

What were the contents of the agreement of sale of MFIL to Hindustan Lever Limited (HLL)? Why were two different yardsticks adopted in terms of workers jobs in the case of MFIL and BALCO sales?

Public discussion inside and outside parliament on whether HLL violated the agreement on privatisation with the former disinvestment ministry or whether the disinvestment ministry gave the go ahead to HLL to strip MFIL of all its assets, loot the public exchequer, throw the workforce out of jobs, persecute the fighting workers who opposed privatisation.

Punishment for officials and ministers responsible for deliberately destroying national property, selling it to a multinational HLL, and collaborating in the onslaught on the livelihood and rights of workmen.

Why no action was taken on the CAG report which questioned various aspects of the MFIL sale.

Investigation into why Arun Shourie gave the clean chit to HLL and sold the remaining 26% shares to the same, right when that company had applied to being sick under BIFR and the workmen had made numerous objections to the sale of remaining 26%.

Immediate stop to any state government converting the lease hold land into freehold land to prevent HLL management from selling the immovable assets valued at thousands of crores of rupees.

Reopening of all closed units including Fruit Juice Bottling Plant, C-4 Lawrence Road, taking back of all workmen who have been forcibly deprived of their jobs, immediate stop to outsourcing bread production, disallowing HLL from using contract labour

Report of Actual Fact Finding Committee set up by the former Prime Minister, on the conditions of workers in Modern Food Industries Limited and BALCO be made public, tabled in parliament and a public discussion be organised on the same.
Our Charge:

MFIL was declared by the government as a mini-navratna as late as 1997. The decision to sell MFIL to a private capitalist was taken in the same year. Till 1997, MFIL was a profit making company on the whole, as a look at its balance sheets till that year will show. As soon as the decision to sell it off was taken, the officials responsible for MFIL as well as the government of the day deliberately began converting MFIL into a loss making company. From 1998, MFIL began showing losses. This was in turn used to justify sale of 74% of its

shares at a ridiculously low price of 105.45 crores in January 2000. (According to CAG report, HLL was given 20 crores rebate to allegedly modernise, and what is more, HLL claimed about 17 crores of the 105.45 crores back from government, alleging that the evaluation of machinery had been wrong!).

The then disinvestment minister Arun Jaitley was in such a hurry to sell MFIL that he "forgot" that there was a need for a legal framework for privatisation. The entire process of bidding and sale was and remains a mystery. The terms of agreement of the sale have never been made public, at least to the workers of MFIL. Why this secrecy? What were the provisions that government introduced into the agreement to safeguard workers interests? Why did the then government not heed any of the hundreds of complaints and messages from workmen and their unions regarding the compulsory retrenchment and other acts of the HLL management? This clearly reveals that a deep conspiracy was hatched by ministers, officials and HLL to hand over this national property to a multinational by any means fair or foul.

There was and is not till date any legal framework for the sale of Public Sector Undertakings. We are not for a moment suggesting that the government now establish a legal framework for hanging workers, or privatisation of PSU's, or sale of national assets! We know whether one is hanged by "rule of law" or "outside the rule of law", the result is the same for the victim. What we are demanding is that the sale of MFIL to HLL be declared null and void for this reason alone, apart from all the other reasons we have placed before the government in the past and will do so in this letter.

In 2001, HLL applied to the Board of Industrial and Financial Reconstruction (BIFR) to be declared a sick company, even while the Minister of Disinvestment declared that it was a profit making company. The aim was to get BIFR to agree to restructuring of the company, that is closures, retrenchments, etc. With the assistance of the then government, the BIFR was twisted to satisfy HLL. Even the weak statement of BIFR that any restructuring should be done only in consultation with workmen was violated.

At the same time, despite protestations from workmen, government sold the remaining 26% shares of MFIL to HLL for 44.07 crore rupees. Why the haste in selling these shares to a loss making company which was being declared sick on demand of the company?

In the meantime, HLL has reduced the workforce and carried out "restructuring" through drastic and forcible means. At the time of sale in January 2000, there were nearly 1650 regular employees in the 21 units of MFIL in different parts of the country, an equal number of casual workers on the rolls, as well as many more workers working on contract basis. Inother words, there were more than 3500 employees working on regular/casual basis on the rolls of MFIL apart from over 2000 employeed on contract basis in the 21 different units spread accross the country. Today there are about 700 regular employees, and no casual workers. In Delhi Bread Unit-I, we have the scene of contract workers being hired while the casual workers have been dismissed! The Bhagalpur, Patna, Silchar, Ujjain, and Faridabad Beverage unit, have been closed down. So have the Roller Flour Mill Faridabad and the Delhi Bread Unit-2 at Kirti Nagar. Now the Fruit Juice Bottling Plant at C4-Lawrence Road has been closed, a unit that was showing profits till 2002. Plants from Delhi Bread Unit-I have been sold off to private parties, and moves are on to close down Delhi Bread Unit-I, at Lawrence Road, as well as the Kanpur, Chandigarh, Jaipur, Ranchi units.

HLL has converted MFIL into a trading company after its own image. It is using the brand name of Modern Foods to sell poor quality bread produced by outsourcing in sub contract units in different parts of the country by exploiting cheap labour, while trying to sell the prime land valued at thousands of crores of rupees. For this purpose, it was negotiating with the previous government to quickly convert the lease hold land into free hold land. It may be noted that the total land in prime areas of different cities leased out to Modern Foods by the different governments amounts to 4,42,301.58 sq meters.

HLL has targeted the fighting workers for persecution, dismissing/suspending three leaders of the Union in Delhi Bread Unit-I in September 2000 on trumped up charges. These workers as well as others being persecuted have been told that by the time the courts decide that these charges are trumped up, HLL would have achieved its aim of closing down all or most of the units, and making windfall profits through sale of prime land.

Far from any capital having being introduced into MFIL, HLL has been stripping MFIL of its assets.

The activities of HLL since it took over MFIL are completely at variance with official pronouncements of successive governments of how privatisation will take care of the workers and how it will lead to infusion of fresh capital and modernisation. Instead sub contracting and contract labour is the norm and there is stripping of assets, not infusion of capital. The privatisation of MFIL needs to be immediately reversed. Government must immediately ensure that land is not transferred into the hands of HLL. It must declare the sale of MFIL to HLL null and void and begin the process of rehabilitating the victimised workers. It must prosecute the HLL management for destroying national assets, as well as try those ministers and officials who were part of the conspiracy.

Some salient features about disinvestment and after which can be verified:

" Money received from disinvestment:

According to the Disinvestment Commission and pronouncements of various governments, money recovered from disinvestment would be used for retraining workers, ensuring livelihood, as well as infusion of fresh capital into other PSU's. Where is the 149.52 crores that government received from the sale in two parts? The workers from Modern Food Bread Unit-I have certainly been "retrained" as hawkers and loaders, earning around 1000 Rupees a month in Delhi. Is this what the retraining program is all about.

" Lie after lie:

Disinvestment was first raised by the United Front government of Shri Deve Gowda as a way to ensure that chronically loss making enterprises in the Public Sector which were acting as a drain on the economy were either closed down or turned around taking full care of the workers interests. MFIL was a profit making undertaking on the whole, with some units running losses. Some of the losses were due to fulfilling social need of spreading food processing technology to areas like Silchar, Bhagalpur, Indore, and so on. Other losses were due to siphoning off of funds by the concerned ministry and officials. There was no problem

in making it even more efficient, and serving the general interests of society for which MFIL was first set up. (nutritious food at low cost to serve the working masses, control the price line of bread and biscuits, assist in mid day meal schemes, assist in calamity relief, as well as ensure that pineapple and mango and other fruit growers are assured of a market for their produce to be transformed into real fruit juice for the consumer of good quality and reasonable cost)

After MFIL was sold, Mr Arun Jaitly, then disinvestment minister, declared that "government is not in the business of making bread" as justification for selling MFIL to HLL. He sidestepped the question of loss making and profit making, as well as the social concerns which prompted government to set up MFIL, and gave an ideological argument that government had no concern for health, poverty and other social concerns. Left unsaid was that the government's concern seemed to be to initiate privatisation where the opposition would be "least". Today's demonstration is proof, if anyone needs proof, that the privatisation of Modern Foods is not at the periphery, but the heart of the debate. A government that declares that it is not in the business of making bread, but subcontracts it to traders, is not going to survive.

We have attached a synopsis of a call attention to a matter of urgent public importance in the Rajya Sabha by Dr Manmohan Singh, leader of the opposition in the 13th Lok Sabha for your reference. This discussion took place on August 24, 2001.

The relevant quotes of Shri Shourie are worth noting:

"In Modern Foods, bread sales in 2000-01 were 31 per cent higher than they were the previous year. In the first four months of 2001 they have been 80 per cent higher than they were in the corresponding period in 2000. Wages have increased on an average by around Rs. 1600/- per employee per month. A Voluntary Retirement Scheme more generous than the one prevalent in Government has been instituted on the demand of employees. Rs. 29 crore have been invested towards modernization, product and marketing development, and VRS payments. Retraining, and other programmes have been commenced to enhance productivity. Plant hygiene has been greatly improved."

and further on

"While drafting the Share Holders' and share Purchase Agreement in consultation with prospective bidders, we have striven hard to ensure that provisions are included to strengthen the health and prosperity of the company, to protect the interests of employees, and, most of all, to safeguard the security of the country. Provisions have also been included to preclude malpractices about which apprehensions have been expressed - like asset stripping."

All this is nothing but a pack of lies.

We have attached the synopsis of Arun Shourie's reply to Shri Basudev Acharya in the Lok Sabha on August 14, 2003.

The salient points to note are:

Shourie admits that there is a difference in agreement regarding labour between MFIL and BALCO. He has no answer as to why government of India had agreed to terms of disinvestment with Modern Foods which were inimical to workers. Also why GOI sold the remaining 26% shares to HLL in November 2002, even when it had clear evidence that HLL had attacked the rights of labour, carried out massive retrenchment, as well as closed down units and disposed off machinery.

Shourie expresses his faith in the company management that they have not forcibly thrown out workers, even when petitions had been signed by workers who had taken VRS to the company to take them back if they had not been forcibly thrown out. Shourie repeats the lie of the company management that wages of workers had been increased, even though the workers had pointed out again and again that the so called wage agreement was a pending agreement in January 2000 before privatisation which was due in any case. In fact no new wage agreement has been signed for the last 4 years! Shourie repeats the lie of the HLL management about injecting funds for financial restructuring without any verification. Shourie's answer, in sum, is an unabashed defence of HLL management, repeating all its lies, and prettifying the attacks on workers.

Right at the time Shourie was giving a defence of HLL, it put up a closure notice on Fruit Juice Bottling Plant, C-4, Lawrence Road Delhi, which is an hours drive from parliament. This unit was making profits till 2002. The closure was declared bad in law by the Delhi government, but the arrogant HLL management has stuck to its decision and no action has been taken by government, central or state, since then.

A week after Shourie's statement, the then Prime Minister's Committee came to Bread Unit-I Lawrence Road, to meet the management and workers. The chairperson of the committee, as well as other members, were witness to use of contract labour in front of their eyes, the removal of 2 of the 4 plants, as well as the lack of any signs of modernisation. They were given a blow by blow account of the activities of HLL management.

In an interview to Vikram Khanna April 10, 2002, Shri Arun Shourie says

"Are their benefits from privatisation that you can already point to?
A: Take the case of Modern Foods, which makes bread. Its sales are about ninety per cent higher than just a year ago. Workers average pay has increased. The plants are hygienic. In the case of Balco (Bharat Aluminium Company), an expansion programmme of 3000 (three thousand) crore rupees (S $1.05 billion) has been announced. Not a single worker has been retrenched. A five year wage agreement has been entered into, which provided for an immediate twenty percent increase in the basic wage."

We do not know where Arun Shourie gets his figures from. Whether he visited the plants before privatisation and after privatisation and found them more hygenic! It is interesting that Shourie talks about not a single retrenchment in Balco (this is within a year after privatisation) and keeps quiet about MFIL which faced massive retrenchment. Why? What was the minister hiding?

Closure of units, disposal of plants and machinery, resorting to outsourcing production,
in a word conversion of MFIL into a trading company in the image of HLL

Units closed since HLL took over ownership:

Fruit Juice Bottling Plant, C-4 Lawrence Road, Delhi 35
Roller Flour Mill, Faridabad
Delhi bread Unit-2, Kirti Nagar
Bhagalpur
Silchar pulp plant
Patna
Ujjain
Beverage Unit, Faridabad

Units about to be closed down (as per our information which is incomplete)

Kanpur, Chandigarh, Jaipur, Ranchi, as well as the flagship unit of MFIL, Delhi Bread Unit-I, Lawrence Road.

Machinery from all the closed plants have been disposed off to private parties. In other units, plants are being sold off preparatory to closure. In Delhi Bread Unit-I and II, the 4 new plants which were commissioned in the late eighties and early nineties have been sold off to private parties. Only two plants are running in DBU-I, Lawrence Road, out of original four, and these two are of 1968 and 1975 vintage. Delhi Bread Unit-II, Kirti Nagar, is closed down.

Production has been subcontracted out to sweat shops in outlying areas and machinery has been sold to these contractors. Instead, production of bread earlier carried on in Delhi Bread Unit-I, Lawrence Road, is being carried out in Sahibabad, Sonipat, Aligarh and in JB enterprises, Gurgaon. This is the "secret" of HLL showing increasing production while drastically reducing workforce, disposing of machinery, and closing down units. The conditions of production in these outsourced units can be easily imagined as far as hygene, quality control as well as conditions of labour are concerned.

HLL claims to have modernised - the only new machine they added was a mixing machine, which has been lying idle for two years now. This machine was bought from Bhootnath Wala Gali in Nangloi, Delhi. This machine has a capacity of 50 kg of maida and takes much longer to mix then the old machine, which had a capacity of 250 kg maida and did the job in 5 minutes flat! So much for their investment in machinery!

In sum, HLL has converted MFIL into a trading company which trades on the brand name of Modern Foods that was established by decades of hard work of the workers of this company.

Retrenchment, suffering of workers, work conditions

In 2000 January, there were nearly 1650 regular workers, an equal number of casual workers as well as many more contract workers.

There was need for all these casual workers, and that is the reason so many contract workers were being hired.

Today, four and half years after privatisation, the regular workforce is about 700, there are no casual workers, while about 20 workers are hired on contract in Delhi Bread Unit-I, Lawrence Road. Nearly 2700 regular and casual workers have lost there jobs in this period, a reduction of workforce by 78%! Four in five workers have lost their jobs through forcible VRS.

The work conditions inside the plants have become intolerable. The working hours and workload has been increased. Workers are forced to work on bad machinery. The quality of raw materials has been deliberately deteriorated.

There has been no new wage agreement for over 4 years.

Apart from the workers and their families, many others have lost their livelihood including dealers, transporters and distributors. Suppliers of raw materials for the bakery and fruit line have also suffered. HLL has destroyed the fruit juice/ fruit pulp work to give a boost to its owns jams. It has vertically integrated to get its wheat from its own wheat processing.

Price Control

Modern Food Industries played a major role in ensuring quality bread to workers all over the country and this was the reason for setting up both units in far flung areas as well as franchise units.

HLL has destroyed this by looking at the issue solely from point of profitability. For instance, the weight of bread is now 500 grams, but its cost is that of the 800 gram bread that MFIL used to produce before privatisation. In other words, cost has increased 60%!

Similarly, fruit juice and fruit pulp from fresh fruit was assisting in producing nourishing real fruit juice at low cost as well as enabling the farmers to have a ready market for their produce. Closure of FJBP, Lawrence Road, and the Bhagalpur and Silchar plant affects the producers of mangoes and pine apples in UP, Assam and Bengal, has deprived workers and consumers of quality fruit juice.

Midday meals

One of the major activities of MFIL was provision of mid day meals as well as calamity relief. This entire activity was a factor serving the society. Now there are reports that government of India and various state governments like Delhi government are planning to hand over midday meal schemes to HLL. This would be a travesty of justice. HLL will

simply outsource the midday meals to sweat shops and make superprofits out of this. This must not be permitted at any cost.

License for contract labour

HLL has applied for license for using contract labour in MFIL. So far, as a result of the opposition of workmen, the government has not issued this license. However, in front of the Prime Minister's Committee, HLL management was using contract labour in its Bread Unit-I, Lawrence Road, unit in Delhi, when they came for investigating the conditions. This shows the contempt that HLL has for the law and its confidence that it has the right connections in government. HLL should be prosecuted by the government for the same.

"VRS"

The HLL management introduced a compulsory VRS scheme of threats of transfer. When some workers, after being forced to take VRS, complained, the HLL management in Modern Food Industries Bread Unit-I put a notice that workers who wanted their jobs back could do so. When a number of workers applied for the same, the HLL management refused to accept their petitions. Their petitions are before the courts, waiting for a slow death.

Meanwhile, a widow working in Delhi Bread Unit -I, Sursata Devi, was retrenched at the age of 32 years after just four years of service. She was given Rupees 42, 345. She has been fighting since then for reinstatement and justice. She did not know that VRS applied only for a person above 40 years of age with at least 10 years of service, and the management conveniently forgot to tell her that!

Reign of terror

Right from the very first day of take over the HLL management unleashed a reign of terror on workmen. Its strategy was to terrorise the workmen. As part of this strategy, they suspended Shri Govind Singh Yadav, Shri VK Narang and Shri Ganesh Thakur on trumped up charges, which the subsequent police investigation proved to be false. This was done as early as September 2000, that is within 8 months of take over. The management openly declared- our aim is to keep you out so that we can retrench the workers at will. This was the policy pursued. Govind Singh was illegally terminated subsequently. The sentence of termination hangs over the head of the other two like the damocles sword.

Meanwhile, inside the different units, workers are openly threatened into signing VRS. All casual workers were thrown out. All members of fighting unions were victimised. In its fascist onslaught on workers, the HLL management has twisted the law to suit itself, as well as violated it when it did not suit it.

For instance, the courts found that termination of Govind Singh Yadav was technically invalid and he should be reinstated. Instead of doing so, the HLL management has challenged the courts. It has brow beaten Labour Department in Delhi to organise a so called "elections"

to ask workers whether they are for the fighting union, or not, under conditions of fascist terror in front of the eyes of management as recently as June this year, while keeping the fighting leaders outside the premises.

In the case of Fruit Juice Bottling Plant, Delhi government declared Closure as bad in law. This has not prevented HLL from continuing to keep the unit closed.

Land

As an appendix, we have attached the list of units in the different parts of the country, as well as the land in these places. The total land occupied by MFIL is 4,42,301.58 sq meters. There is 36,000 sq meters of land in Delhi alone, apart from flats and other properties. There is 22,257 sq meters land in one of prime areas of Mumbai. HLL has from day one has its eye on this land.

We demand that the government ensure that ownership of this land is in no way handed over to HLL.

BIFR Report

HLL filed to be declared a sick company in front of BIFR in 2002. On what basis did BIFR agree to HLL's restructuring plans without consulting workmen and their unions? Did BIFR ensure that HLL would implement its instruction that restructuring would be carried out only in agreement with workmen?

On what basis did Arun Shourie hand over the remaining 26% of MFIL shares to HLL even when it was claiming it was a sick company and all evidence was that it was aiming to close down units, destroy machinery, as well as retrench workers on a massive scale, while carrying on production through outsourcing and contract labour?

Table the report of the Actual Fact Finding Commitee before parliament and the people

The Actual Fact Finding Committee set up by former Prime Minister Atal Bihari Vajapyee and presided over by Shri Hashubhai Dave, finally met the workers of MFIL Bread Unit-I, Lawrence Road, and Fruit Juice Bottling Plant, C-4, Lawrence Road, in August 2003. They were made aware of the actual conditions of workers.

We want to have this report tabled in parliament immediately and a discussion organised on the same, as well as measures to undo the wrongs done to the workers of MFIL and the nation.

Reverse Privatisation

Finally we demand the reversal of privatisation of Modern Foods for all the above reasons.

Sincerely yours,
Govind Singh Yadav
Secretary
Modern Food Industries Employees Union