The Rs 1,400 crore company has resorted to closure of one of three continuous process units with a capacity of 250 tonnes rendering 200 of the total strength of 3,000 workers jobless. The plant, with a capacity of 800 tonnes, produces synthetic fibre and polyester yarn of which 80 per cent is exported. State public works minister and Nagpur district guardian minister, Nitin Gadkari, confirmed closure of the particular unit and blamed the union for the present condition. "The irresponsible leadership with destructive mentality has spoiled industrial peace," he said.

Gadkari, who spoke to Indo Rama managing director OP Lohia said that he would like to arrive at a compromise formula in the larger interests of workers and the company. Sources also confirmed that the company had no alternative but to goin for closure as the ongoing violence and disruptive activities by the workers union was affecting production and quality.

The feud between the management and union has been on since last November when the present union affiliated to the Left overpowered the one affiliated to the ruling Shiv Sena. Immediately after the election, the union demanded termination of an agreement reached between the management and the then Sena union in April 1997 for three years.

According to the April agreement, the company has agreed to give a hike of Rs 1,060 - Rs 1,600 (Rs 300 to Rs 500 per month) to be paid for three years. However, the new union demanded scrapping of the previous agreement and sign a new one which was categorically denied by the management. The Nagpur district collector gave a compromise formula suggesting the company management to pay an additional Rs 100 - Rs 300 per month.

Insight

Shutting down one of the three plants, at a time when polyester prices have just started looking up, is theworst possible scenario for Indo Rama. After more than a year of depressed prices, polyester prices, post-budget have started to look up.

A further boost to the synthetic textile industry was given by increasing cotton prices both in the international and domestic market. Instead of capitalising on the price move, the company will be affected by a decline in volume. A shutdown at a time when Reliance has commissioned major capacities and is aggresively capturing the synthetic textile market will put a question mark on Indo Rama's survival, which is already in doubt considering its pathetic financials. Mounting losses could result in a complete closure of the plant.