People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 09

March 04, 2007

The Ugly Face Of BALCO Privatisation


Dipankar Mukherjee


THE privatisation of BALCO has been the most bizarre instance of crony capitalism in the post 1991 era of structural reforms followed by successive Indian governments. BALCO was the foremost public sector run integrated aluminum producer in the country prior to the selling of 51 percent of its shares and transfer of its management to a strategic partner, M/s Sterlite Industry in 2001 during the NDA regime. This strategic sale was opposed tooth and nail by the BALCO trade unions and the Left parties. There were serious charges of gross undervaluation of assets, collusive bidding leading to the sale of prime public assets at a throwaway price to M/s Sterlite, which became a subsidiary of M/s Vedanta Resources, a London stock exchange listed company. The 7,000 strong workforce put up a stiff resistance through a continuous strike for 67 days after the sale of BALCO, which, apart from highlighting the shady deal, symbolised their genuine apprehensions about their job security, sustenance of existing terms and conditions of work as well as the future of local development in the backward area of Korba in Chhattisgarh where BALCO is located. 


Some of these concerns are addressed in a study titled “Impact of Privatisation on Labour: A study of BALCO Disinvestment“ conducted by Dr. Babu P Remesh for the V.V.Giri National Labour Institute, an autonomous body under the ministry of Labour, government of India. The study examines the impact of privatisation on labour, employment and livelihood aspects of workers and worker communities. This is the first time that any such study has been made by a reputed institution under the aegis of the government of India. 


In August 2006, CAG report no. 17 of 2006 affirmed in no uncertain terms that BALCO was indeed grossly undervalued and now comes this well documented study report from VVG NLI reconfirming the torrent of complaints from thousands of suffering employees of BALCO about gross violations of labour related clauses of the shareholders agreement between the government and Sterlite. 


The study was based on an analysis of both primary and secondary data. The broader contextualisation of the disinvestment of BALCO was attempted through a detailed analysis of the available secondary information, and the material available from the department of disinvestments, government of India. Subsequently, the field work of the study was carried out in and around BALCO Nagar, Korba, during February – July 2005. The following sections of the report substantiate the charges of gross violation of labour related clauses of share holders agreement in letter and spirit.




The report says:


“From detailed interviews with the VRS optees, it was evident that various modes of coercion were engaged in implementing the VRS agenda by the new management. Many of the respondents felt that they were forcefully dragged into the scheme, though there was no open or direct threat from the management to accept the VRS. A commonly used methodology was to prepare the workers to accept the VRS by creating ambiguities and uncertainties. According to some of the respondents, prior to the introduction of each VRS offer, the management was resorting to many indirect pressurisation tactics at workplace, which forced the workers to seriously think of leaving their job, whenever a suitable situation comes.


An important strategy adopted by management was to humiliate the workers by directly attacking their self-esteem and questioning their loyalty to the firm. Many of the respondents suggested that one of the major considerations while contemplating VRS was the demoralisation and trauma that they had experienced at the workplace during the post-disinvestment period. It was widely reported that Sterlite appointed some youngsters, who were given ‘huge’ salaries and positions, bypassing all the existing norms in recruitment. The major qualification for these managerial staff was their proximity to Sterlite authorities”.




“A major reason for dissatisfaction of the VRS beneficiaries was the arbitrary decision of the management to follow a deferred payment system, whereas the VRS compensation amount is paid only in five installments with a gap of 6 months between each payment. This act of the management is a departure from the standard procedure, as noted earlier by the FFC. Many of the retirees cited that this deferment of payment had created lots of problems in future household planning. Instances were cited where the retirees had to find out other sources of finance for certain already committed heads of expenditure, in anticipation of the realisation of the VRS amount in single payment. These include: completion of construction/renovation of houses and marriage of daughters, following pre-committed obligations. It was also widely complained that while payment of ex-gratia was made in five installments, all payable amounts and recoveries from the workers to the firm were deducted from the first installment itself. Many of the retirees as well as trade unionists functioning in BALCO accused that while the workmen were given their dues in five installments, the ex-gratia to the company’s executives was paid in one go. It was also cited that the management had deducted a sum from their VRS amount, to recover the advance payment made to them at the time of resuming duties after the 67 days’ strike, following the direction of the apex court”.




“More than 80 per cent of the VRS optees complained that they did not receive the VRS amount immediately and had to wait for one-three months or even more. Many of the retirees had really tough times approaching the concerned officers repeatedly and requesting to release their VRS dues. It was generally felt that the management had not shown much interest in ensuring the timely payment of VRS amount and at times the retirees even had to bribe the concerned staff, the amount of which was reported to vary from Rs. 100 to Rs. 2000”.




The wider impact of privatisation and VRS on the community and service providers to the employees, as well as the local development of the area, was also studied in detail. The report elaborates the following on this issue:


“Another major concern that was addressed in the study was the impact of privatisation on the development of the locality – i.e., BALCO Nagar and the villages around it. It was anticipated that the shift of management from the public sector to a private strategic partner may lead to certain changes in the approach of the management in addressing issues related to local level development. This aspect assumes added importance, as all the public sector undertakings set up in backward and developing regions (such as Korba) were specially known for their concern for regional development in terms of provision of employment to local people, creation and provision of basic amenities and services free of cost or at moderate / subsidised rates (which include, water, sanitation, electricity, creation of roads and so on). In this line, BALCO, before the disinvestment, had a commendable track record of contributing towards local development. A considerable share of the workforce in the company was inducted from local people.”


After privatisation, the scenario changed completely, as the report points out:


“ They pointed out the case of a new unit, which has been launched under the aegis of Vedanta, a sister concern of BALCO, where a majority of the workers inducted so far are non-locals. They also cited that the presence of workers from Chattisgarh is minimal among the contract workers involved in this project as well as in the other construction ventures in the locality. In the construction sites, the contractors mostly engage migrant labour. The contractors are getting most of the workers from other states such as Jharkhand, Orissa, Bihar, West Bengal and so on. They recounted that during earlier times, around 60-70 per cent of the contract workers were selected from local areas, though the contractors were often outsiders. Now, both the contractors and manual workers are outsiders”.


“The two schools located inside BALCO Nagar had been the major educational institutions in the area, apart from a few government primary schools. Due to the subsidised fee structure and other benefits available to the mostly within the BALCO employees, the enrolment in these schools was mostly from within the BALCO community. Of late, due to the cumulative effect of several factors, there is a visible decline in the school enrolment rates. In the light of this development, the new management closed the junior wing of the school functioning within BALCO Nagar (in 2004) and integrated the remaining students and teachers to the Main School. However, it was pointed out as really painful by many of the respondents that now the company is using the junior school building as a warehouse/godown.”


As a worker reacted: “They (the new management) have converted it as a godown. It’s not because they don’t have any other building or space to store the gunny bags. It is just to show us that this is what they think about the education of our offsprings and the development of this locality.”


“The local people increasingly feel that their township has become more alien to them. The schools are unaffordable and getting closed; the hospitals are not meant for local people; even entry of locals into the BALCO township area for vending or petty business purpose are highly monitored and scrutinised. The people also believe that the new management has no interest in maintaining the green belt in the region and upgrading the public utility services in the region, though development activities are being carried out for private use of the company on emergency basis.”


The present study by Dr. Babu P. Remesh has unmasked the ugly face of privatisation of the public sector undertakings as a whole and BALCO in particular. The report itself is a document which clearly exposes that M/s Sterlite and its present holding company, M/s Vedanta have flagrantly violated all labour clauses of the Shareholders Agreement in letter and spirit. This is a breach of the contract on which the unholy deal was finalised by the NDA government. Does the UPA government possess the courage to cancel the deal with Sri P.Chidambaram, the erstwhile Director in M/s Vedanta Resources at the helm of its Cabinet?


More such studies should be conducted of the other companies which were privatised during the NDA regime, like the Modern Foods, Centaur Hotels, VSNL, Hindustan Teleprinters, etc. so that the social and economic costs of privatisation are revealed in all their stark and brutal reality.