A Revolution That Went Wrong

We dont want to be pawns in the ideals of the KEU (the Kamani Employees Union), says an angry worker at Kamani Tubes Ltd. He is a member of the recently formed rival union the KT Kamgaar Ekta Society.

It is an ironic, and sad, twist to a remarkable tale. Ten years ago union leader Thankappan startled the corporate world by organising a workers cooperative that dragged Kamani Tubes back from the brink. But these days workers meetings are rambunctious affairs. Our campus is filled with helplessness, infighting and recrimination, says KEU vice president Gautam Mody. A noisy meeting is underway as Mody explains this over the phone.

 

The workers desperation is not surprising. Wages have not been paid since March 1997 and power to the plant at Kurla was cut off in June 1997. Monthly losses have hit Rs 25 lakh; and the banks are hovering in the wings to collect debts totalling Rs 14 crore.

Is Kamani about to go down the tubes? The management and the KEU assert that it can be saved. They have worked out a revival package with Ahmedabad financier Sarvajit Consultants, which is willing to put in Rs 8 crore at 18 per cent interest. But this requires that banks cede charge on KTLs assets, and agree to a one time settlement of Rs 9 crore.

KTL has asked for a BIFR hearing on the issue but has had no luck yet. Banks and FIs have flatly refused fresh funds unless KTL drums up money without them having to cede charge on assets. But who will provide unsecured funds to a sick company? asks chief executive N S Nanavaty.

One effort to save the company has already gone wrong. In 1996 KTL tied up with Kamanwala Industries to develop its Ballard Estate property in Mumbai for Rs 26 crore. But IDBI blocked the deal at the BIFR arguing that it was not transparent enough.

KTL appealed against IDBIs move but by the time they finally won the appeal, Kamanwala decided to back out because real estate prices had dropped by a good 40 per cent in Mumbai. They are now asking for arbitration to recover their deposit from KTL a sizeable Rs 87.5 lakh.

What went wrong? One factor was that KTL couldnt keep pace with changes overtaking Indian industry. Top management salaries rose spectacularly in the nineties, but the workers were unwilling to pay large sums to MBAs. The first MD was J K Arvind, a technical works manager in KTL before its revival. The current management says he didnt realise that KTLs real estate could be used to modernise the company. Arvinds departure triggered an exodus and the managers of finance, purchasing and marketing resigned; though replacements were found, a strong management team never developed.

Ironically, it was perhaps the one-time saviour Thankappan, who became part of the problem. A Bank of India official feels that the image of a strong union may have scared away hotshot managers. When quick decisions have to be made in a changing market, managers may feel their hands tied by having the shareholding workers constantly questioning them, says P R Yagnik, general manager of rehabilitation finance at the bank. Thankappan explains his resignation from KTLs Board of Directors in a similar light: I didnt want to scare away promoters and managers, but I still come here for the workers. He is, sadly, subdued these days.

There were other hurdles that KTL could not surmount. Sugar barons reduced their demand for brass and copper tubes after subsidies to the industry were slashed (they switched to cheaper steel tubes). KTL also faced a setback when the 1993 riots in Mumbai prevented it from delivering exports. A Rs 13 lakh lacquering and polishing plant aimed at the export market could not be commissioned. By 1994, KTL recorded a loss of Rs 2.32 crore. At this stage the banks also began to get tough about loans to loss-making companies. The BIFR called for a fresh techno-economic study on the viability of KTL in 1995.

The study was carried out by consultants G D Apte and Company, who finalised the report by 1996. They found that KTL was still viable but needed big doses of cash starting with Rs 4 crore as working capital. The banks refused to dig into their pockets until KTL modernised; and KTL could not modernise till the real estate deal with Kamanwala was approved by BIFR. Mody splutters: This was a clear case of discrimination against workers.

It is a sad fall for a company which came so far. Back in 1989 Kamanis 600 workers dipped into their savings and put in Rs 12,000 each to buy up the companys equity from the feuding Kamani family (the plant had been closed for five years at the time). They also made a string of sacrifices: a wage freeze at 1985 levels; a contribution of 10 per cent of their salaries as an interest free fund; and a loss of bonuses until the company could pay. Recalls Kamani worker Rajagopal: For us the union leaders were gods.

Today the workers have no earthly gods to turn to. Their fate hangs in the scales of the BIFR whose slow proceedings bring little succour. KTL sent its latest appeal to the BIFR on February 20 asking for a hearing to make a final settlement with the banks. Every days delay means a loss of Rs one lakh. But so far the only response is one that sick companies today must live with: a deathly silence.