Pioneer Industries Ltd

By Marketing Research Team, 3EA
Pioneer Industries Ltd

Pioneer Industries LTD (PIL) is a custom-built assembly type industry. Established in 1941 as a private enterprise, the organization ran into trouble due to financial vicissitudes and conditions peculiar to this industry the world over. When the Government of India was approached for help by way of subsidy, they initially placed orders on a cost-plus formula and subsequently, 1952, acquired two-thirds controlling interests. The government acquired full control and ownership over the enterpriser in 1961. Since then the government has been extending generous financial help and seeking overseas technical help from a host of countries to strengthen the organization.

In 1965, a visiting team from Japan studied the organization and observed that it can hope to double the output merely through re-organization of work which required no additional inputs by way of capital or technology. But the organization did everything except change work methods. A sum of over Rs. 100 crore was invested, new equipment and facilities acquired, technical collaboration entered into with internationally renowned firms and manpower increased from 5,000 to 7,500. The quality of workmanship of the firms was lauded when the product stood up to severe tests, and the engineers and officers of the organization achieved a major breakthrough in product design capability. Yet, the level of production stagnated and the length of the production cycle more than doubled between 1973-82.

The government had been giving substantial help to the organization by protecting the market and liberally increasing the prices to cover costs. In the early 1970s the administered price was virtually doubled on a cost-plus-profit basis to help the organization tide over its losses. As a result, in 1979-80 the firm could show a surplus of about Rs. 1.8 crore even through the output was merely one-third of rated capacity. The cushion of liberal price policy soon evaporated, and in 1984-85 alone the company incurred a loss of over Rs. 15 crore. There is a general feeling among the employees and the junior and middle managers of the organization that its personnel and industrial relation practices and policies have been principally responsible for the poor performances.

In the early years, soon after the organization began operation, the management sent one of its officers to register a trade union for the workers in order to forestall the emergence of a communist union. The communist union which nevertheless came into existence had eventually to wind up because of the tactics of the management. However, the communist ensured that their loyal supporters infiltrated into the management- sponsored union. As a result, although the firm has all along had only one union for workers and on association for the staff, there have been persistence factions in both bodies based on political cleavages. Among the several groups, the Marxist communist and right wing BJP command sizeable support. Although both the union and association have been independent of outside affiliation and leadership, the employee leaders have often been identified with specific groups in the wider environment.

The leadership kept changing during the two decades from 1947-67 because there has been no wage revision during this entire period. It is significant to note that two other organizations in the public sector which manufacture a similar product had revised wages during this period. The wage increase given was back in 1947-48 was made by a cut in the DA in 1948-49 because of financial stringency. The cut was restored only in 1963 but in the same year DA was delinked from the cost of living, once again off-setting whatever benefits had accrued. While the workers' union kept a low profile through these tabulations, the association picked up a draftsman by name AK who they believed could take on the management, and made him general secretary. AK studied the various issues in depth and submitted a list of seven collective and116 individual demands. After much reluctance the management constituted a bipartite committee, but limited its brief to an examination of anomalies in pay scales. Although the committee submitted a unanimous report, the management dragged feet because the finance ministry did not concur with the recommendations. The bureaucrats eventually opted for an ad-hoc settlement by elongating pay scales and that too only with regard to 7 out of the 47 categories. The outcome did not satisfy the association but nevertheless raised hopes of securing a more favourable outcome through a confrontation. The association gave a strike call and over 95% of the members participated in the longest ever strike lasting 58 days. This was in 1967. The strike was withdrawn on the assurance of the government that a sub-committee of the Engineering Wage Board would be constituted to examine the special features of this industry. Encouraged by this favourable outcome, the workmen joined hands with the staff and a Joint Action Committee (JAC) was formed with AK as the convener.

Worried by this unity of workers and staff, the management influenced the government to back out of the promise to appoint a special sub-committee. The management's strategy was to create the impression that AK had failed to force the government into a special consideration of their claims and thereby sow discord. The government eventually backed out of its commitment and handed over the matter not to a special sub-committee but to the Engineering Wage Board. The employees protested vehemently that the special circumstances obtained in their industry needed separate consideration. The more the management tried to forge disunity, the harder the attitude of the leadership became. They began systematic efforts to prepare workers for conflict.

AK conducted a survey of 4000 employees and came out with disturbing conclusions. One out of every four workers had no pay to take home after the statutory deductions and various other cuts. Many had to absent themselves on pay day to escape from their creditors. The indebtedness among majority of the workers ranged between five to ten times their gross annual earnings. There was widespread resentment against the management among both workers and staff. Marshalling these facts and sentiments, the leaders insisted that they had been denied a wage increase although similar other enterprises were benefited.

Analysing that AK was the backbone of union militancy, they decided to suspend him for irregular attendance. Construing this as an act of victimization, the staff walked out of work. The management cut the wage of those who walked out, which sparked yet another walkout with the workers also joining. The JAC ultimately submitted a strike notice over a charter of demands, the first being the reinstatement of AK. The strike lasted 27 days. The strike ended at the instance of the local Congress MP who got the concerned minister to assure satisfactory solution. A one-man commission was appointed. AK pulled political strings and a commission was appointed which awarded better benefits than the workers themselves had asked for. The employees virtually deified AK for getting them such impressive benefits and his influence rose to dizzying heights.

Soon after the settlement, a new CMD was appointed. Concerned at the growing popularity of AK, he lured the leader to accept promotion from the staff category to junior manager. As a manager AK was miserable and frustrated. He had to sever his connections with the associations and the union. His disciples, mostly with strong Marxist leanings, assumed the mantle of leadership, gained prominence and gradually side-lined him. Two years went by and his frustration mounted. Apart from the loss of influence he had enjoyed as a union leader, the management had not lived up to the promise to creating a separate department for him to preside over. Soon, AK asked the CMD to demote him to his original position, but the latter refused to oblige.

AK now pilled strings through a top national level leader of the INTUC who happened to be on the Board of PIL. He offered to affiliate both the union and association to the INTUC if only his demotion could be secured. Enamoured by the prospect of building a base for his union in this important city, the leader accomplished AK's demotion as draftsman. The leadership of the union which was in the hands of strong Marxist sympathizers did not immediately invite him to take over leadership; through they were once his disciples. However, AK put up a panel o0f candidates headed by once PS who had INTUC learning for the 1973 elections and trounced the Marxists. A wage revision became due subsequently in 1974. AK was invited to be the chief negotiator on behalf of both the union and the association although be held no formal position. As the negotiations were under way a state of Emergency was promulgated in the country. In November 1975 a draft agreement giving several benefits was finalized with the joint Secretary in the concerned ministry.

As the agreement was pending for approval by the government, the INTUC leader pressurized AK to affiliate both the bodies to his union as had been promised. The leader's fear was that once the settlement as through AK would become all powerful and might refuse to affiliate. AK pleaded that since PIL was a stronghold of communists, and he himself had no formal position, he had to first secure a favourable settlement and win confidence before moving towards formal affiliation. The INTUC leadership grew suspicious of AK. They offered to send him on a tour of some Asian countries if he formally affiliates the union to the INTUC, but he was silent.

In tripartite negotiations held in January 1976, the government went back on the draft settlement reached in November1975 on the ground that the Bureau of Public Enterprises (BPE) had certain objections. AK believed that there was foul play. The enterprise level management could not persuade the government to stand by the promise. In the mean mile, the undertaking got a new CMD. Taking advantage of the emergency; the new CMD introduced a second shift to augment production, besides introducing a multi-trade system to make better use of skilled manpower.

Negotiations were started afresh and a new wage settlement was worked out by December 1976 within the framework of BPE norms, providing for an incentive instead of DA based on the local cost of living index. The agreement was to take effect from September 1974 from which period arrears were to quick implementation of the settlement but the CMD wanted time. Soon there was a change of hearty and pay slips were prepared for the month of January with the EDP facilities of neighbouring enterprise (although PIL had its own EDP). The pay slips came as a rude shock to the workers since hardly anyone benefited financially in spite of the many commitments made in the settlement and conveyed to the workers by the leader-ship. Most workers got no arrears and in some cases excess payments were sought to be recovered.

AK wrote to the CMD immediately to stop the distribution of the pay slips, pointing to the grave consequences of such manipulation of trade union affairs and called for discussion to sort out the discrepancies arising out of the arbitrary understanding of the management in calculating the arrears. Management paid no heed to his letter. Irate workers beat up AK and his associates within the factory premises. In an emergency meeting of the union's general body held soon after, the leadership was seized by the Marxists.

With the workers' hope dashed, production and productivity began to slide down. The down-stream has continued unbated. The second shift had to be reduced to a skeleton shift. The multi-trade system began inoperative. A study conducted by the BPE acknowledged that the 1977 wage agreement was principally responsible for the strained industrial relations and low productivity.


  1. Identify the personnel policies which affected industrial relations climate in this case.
  2. Which of the problems in this case are a creation of the enterprise level management and which are a result of the public enterprise environment?
  3. What is your assessment of the management's way of handling the unions and the union leadership?
  4. Could the management have avoided political intervention at various levels?
  5. Was the 1977 wage agreement principally responsible for the strained industrial relations and low productivity? How could it have been handled?

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Case Study by: Marketing Research Team, 3EA