Maruti strike may hit FDI, Kharge tells Manmohan

Written by Ronojoy Banerjee | Ronojoy Banerjee | parul | Parul Chhaparia | New Delhi | Updated: Oct 17 2011, 08:15am hrs
Three instances of labour trouble in just five months at the Manesar production facility of the countrys largest carmaker, Maruti Suzuki, has forced the top political leadership to sit up and take notice.

FE has learnt that labour minister Mallikarjun Kharge submitted a status report to Prime Minister Manmohan Singh last week apprising him of how the latest strike broke out and the financial loss faced by not just Maruti Suzuki but also a clutch of its vendors.

The labour minister is learnt to have told the PM that if the strike continues, it could severely hit FDI inflows, especially as Japans Suzuki Motor has 54% stake in the company.

Top government sources said that as the strike is a state government problem and the labour ministry cannot directly intervene, the PM had sought a report on the matter. A direct intervention from the top is also not ruled out, a source said.

According to the status report prepared by the labour ministry, around 400 auto-part manufactures were losing around one-fifth of their business due to the unrest. A labour ministry official said that the Centre was unhappy with the Haryana governments handling of the situation. There is no apparent action which reflects that there is an actual willingness to resolve it. The state labour department does not even send us daily status reports, despite being asked repeatedly, said the ministry official.

Kharge is learnt to have told the PM that failure to sort out the issue would also impact the country's image as a manufacturing destination, especially at a time when the government is trying to bring in a new manufacturing policy (NMP). The NMP aims at creating 100 million additional jobs and increasing the share of manufacturing in the GDP to 25%.

The crisis at Maruti Suzukis Manesar plant and fresh incidents of violence have not only destabilised the growth of the automobile industry expected to grow by 11-13% in the fiscal year ending March 2012 but also tainted the countrys image of a low-cost manufacturing destination in the international market, said YK Modi, member, international labour organisation.

The PMs intervention in the labour strike comes less than a week after he expressed his concerns on the stir. Recently, we have witnessed some incidents of industrial unrest. This is a matter of serious concern to me and I believe we need to address this issue with alacrity and sincerity, Singh had said.

The impact of the Maruti strike has been far-reaching. While the government is estimated to have lost around R350 crore in excise revenue, the company itself has lost over R1,500 crore in production since June.

The strike has also paralysed production in much of the Gurgaon-Manesar belt, causing the share price of the company to fall nearly 18% since June this year. On Friday last, the companys share price closed at R1,028.45 on the BSE, down 2.65%.

A senior executive of a leading component manufacturer in Gurgaon said: Our business has been hit severely. Its becoming a recurring problem with that plant, he said. Even other competitor firms have spoken out against the strike. While Hyundai described the recurring labour problem at Manesar as very unfortunate, the apex body, Society of Indian Automobile Manufacturers, called for the government to intervene after the issue escalated into a law-and-order problem.