Identifier
Created
Classification
Origin
05NEWDELHI5865
2005-07-28 13:03:00
CONFIDENTIAL
Embassy New Delhi
Cable title:  

LABOR PROTESTS TURN VIOLENT OUTSIDE DELHI

Tags:  PGOV ELAB ECON EINV ASEC PHUM IN JA 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 04 NEW DELHI 005865 

SIPDIS

E.O. 12958: DECL: 07/27/2015
TAGS: PGOV ELAB ECON EINV ASEC PHUM IN JA
SUBJECT: LABOR PROTESTS TURN VIOLENT OUTSIDE DELHI

REF: A. NEW DELHI 5365


B. NEW DELHI 5845

Classified By: Charge Bob Blake for Reasons 1.4 (B, D)

C O N F I D E N T I A L SECTION 01 OF 04 NEW DELHI 005865

SIPDIS

E.O. 12958: DECL: 07/27/2015
TAGS: PGOV ELAB ECON EINV ASEC PHUM IN JA
SUBJECT: LABOR PROTESTS TURN VIOLENT OUTSIDE DELHI

REF: A. NEW DELHI 5365


B. NEW DELHI 5845

Classified By: Charge Bob Blake for Reasons 1.4 (B, D)


1. (C) Summary: A July 25 protest rally in support of workers
of a Honda subsidiary turned into an all-out riot in Gurgaon,
following apparent provocations by unions linked to India's
Communist parties. Located 25 kilometers southwest of Delhi,
Gurgaon is a major hub of multinational corporations (MNCs)
and a showcase for the new India. Workers claimed that Honda
management had attempted to prevent the in-house union from
affiliating with the Communist Party of India's trade union
federation. Honda management told us that many of the
protestors were not Honda workers. Although this incident
demonstrates the potential difficulties that corporations
face when they fail to address adequately the concerns of
Indian workers, the MEA insisted that it was an isolated
event. This labor unrest remains an isolated incident for
now, but the Left is sure to seize on it as a means of
pressuring the government to create a social safety net,
limit MNCs' prerogatives, and send talk of labor law reforms
to the deep freeze. Ironically, most MNCs here have better
labor standards than Indian companies, although the Japanese
seem to be an exception and Honda, it seems, had management
problems in Gurgaon. End Summary.

Two Days of Violent Clashes Between Protesters and Police
-------------- --------------


2. (U) Workers at Honda Motorcycle and Scooters India (HMSI)
planned a July 25 protest rally to press Honda management to
increase wages and allow them to affiliate with the All India
Trade Union Congress (AITUC),which is affiliated with the
Communist Party of India (CPI). After AITUC representatives
addressed the rally, it turned violent, as protesters threw
stones and burned a police vehicle and two motorcycles.
Police reinforcements retaliated with brutal assaults,
striking many demonstrators in the head with lathis (batons)

supplying local news channels with gruesome footage that
played around the clock. Estimates of the number of injured
varied from a low of 25 claimed by the Gurgaon police to a
high of 1,000 in some speculative news reports. Wild rumors
flew of as many as a dozen deaths, but we never saw any
confirmation, and the rumors faded.


3. (U) On July 26, Haryana police again clashed with
protesters near the hospital in Gurgaon. Many protesters
claimed that injured protesters had disappeared from the
hospital, accusing police of spiriting them away. Joining
relatives in the crowd were workers from other companies and
supporters from trade unions and Left parties. At least 60
people who were arrested in the two days of conflict remain
in police custody. In Delhi, police used tear gas and water
cannon to disperse a crowd outside a Haryana State office
building. The majority of the Delhi protesters were from the
AITUC or Communist parties.

Workers Demanded Higher Wages and Trade Union Affiliation
-------------- --------------


4. (U) The central issues in the dispute are worker attempts
to organize a union affiliated the AITUC, and their call for
wage increases. A contact in the MNC community confirmed
that Honda's wages were not as high as those at other
companies in the Gurgaon area. Problems date back to at
least December 2004, when, according to press accounts, a
visiting company official from Japan mistreated a worker at
the plant. Four workers who protested this incident and
sought to form a union were dismissed, and 50 workers who
lent support to the fired workers suspended.

5. (U) AITUC Secretary Amarjeet Kaur maintained that while
an in-house union was registered in May, Honda management
demanded that employees sign an agreement not to affiliate
with the AITUC. She claimed that employees who did not sign
were dismissed. After upset workers staged a "go slow,"
cutting production by 90 percent, Honda proceeded with a
lockout in certain sections of the plant. It is unclear
whether Honda received permission from the Haryana state
government before initiating the lockout, as required by
Indian law. In early July, Honda required workers to sign
agreements of good conduct, prompting more resistance from
workers. Tripartite negotiations continued throughout July,
but remained at an impasse. The central government did not
intervene as labor disputes are in the state government's
jurisdiction.

Charges of "Outside Influence" from Both Sides
-------------- -


6. (U) According to Honda, 90 percent of those injured were
not their employees. The company claims that "outside
forces" were "misleading" their workers, most likely a
reference to the AITUC. Left MP's assert that Honda paid the
police to beat the workers and break the union, and thundered
that foreign multinationals must adhere to international
labor conventions if they intend to operate in India. Sonia
Gandhi confidante Ambika Soni was quoted in the papers as
asking whether Honda was following the rules.

Honda Responds
--------------


7. (C) Hero Honda president Sunil Munjal stressed to the
Charge that management had been making a sincere attempt to
resolve the dispute. He asserted that outside unions, which
had not been party to the negotiations, were behind the July
25 protests. Many leaders of the AITUC are also CPI leaders,
but Munjal said it was unclear whether the Communist
political parties were directly involved in the incident in
Gurgaon. The company has pledged to pay for the medical
expenses of workers injured in the riots and to reinstate the
1600 workers who had originally signed the good conduct
agreement. Munjal told the Charge that he was under extreme
pressure from the government to reinstate the 54 fired or
suspended as "ringleaders," but the company is currently
refusing to do so. Honda management met with the Haryana
Chief Minister on July 27 and with the Prime Minister on July
28 to attempt to resolve the situation.

Left Parties Take Up The Cause
--------------


8. (U) The Gurgaon unrest spilled into Parliament on July
26, the first full day of the Monsoon Session. One MP
provided an eyewitness account of the "organized gangsterism"
of the police, waving a blood-stained cloth for emphasis.
Later, the Left parties and the NDA staged a walkout in
Parliament after the Home Minister refused their demand for a
judicial probe, saying that was a decision for the Haryana
State government to make. After consultations with the PM
and other senior UPA officials, embarassed, perhaps, that
such unrest occured in a Congress-run state, the Home
Minister agreed to order the investigation by the central
government. The Left parties called for strikes in Haryana
on July 28 and announced that August 1 would be an "all-India
day of protest" against police excesses. Under pressure from
the Left and Congress officials in "damage control" mode, the
Haryana Chief Minister, himself a Congress member, suspended
Gurgaon's Deputy Commissioner and put the Senior
Superintendent of Police on leave. At least for now, the
Gurgaon incidents appear to have distracted Left party
attention from the PM's visit to the US.

Labor and MNCs: Knee-Jerk Fear Not Justified
--------------


9. (C) Labor unions accuse MNCs of taking a tough stand on
unions and treating them as lesser partners in negotiations.
They note that MNCs try to restrict union activity to
"in-house" unions not affiliated with India's major trade
union federations because when a central trade union
representative is involved, the union is more demanding. The
AITUC and CITU, India's Communist-affiliated labor unions,
have been actively trying to organize workers at MNCs without
much success. The Congress-affiliated union, the largest of
the central trade unions, had previously remained quiet about
MNC organizing efforts, but will now likely join the protests
in solidarity with the AITUC and CITU or risk losing face.


10. (C) Although labor unions and the Left focus their
attacks on MNCs, it is important to note that MNCs in India
neither act, nor are treated, uniformly. Recent surveys
indicate that labor issues are far more critical to large
Indian companies (many of which are also MNCs) than to
foreign companies because Indian companies are more
labor-intensive. Foreign companies tend to use more
capital-intensive technology to avoid a large pool of workers
and associated labor problems. Having recently visited a
Ford plant and noting its good relationship with labor,
EconCouns stresses that not all MNCs deserve the criticism
from labor unions and the left; many foreign companies have
actually been more sympathetic to labor concerns than Indian
companies have been. The Japanese may be the most notable
exception, as they have faced similar problems in other
countries. However, West Bengal's Industries Minister
insisted that Japanese investors in his (Communist-ruled)
state have an excellent track record on industrial relations,
and he did not anticipate any disruption in the West
Bengal-Tokyo economic relationship.

Incident Demonstrates Need for Clearer Labor Policies
-------------- --------------


11. (C) While many in the business sector have been clamoring
for labor law reforms, the Left's opposition and its role as
a UPA coalition partner has prevented much movement (Reftel
A). This week's violent display will likely preclude further
discussion of the issue for the duration of the UPA
government. Analysts have repeatedly called for clear and
transparent laws on workplace conditions that are properly
enforced so that workers and investors would better
understand their rights and obligations. JNU professor Arun
Kumar noted that "even the communist parties would support
reform in labor policies which provide better working
conditions, and foreign investors would also be comfortable
when there are clear rules." The Left has also said it would
support labor reform if a social security net were in place
(Reftels).

Damage to India's FDI Potential or an Isolated Incident?
-------------- --------------


12. (U) Japanese Ambassador Y. Enoki said publicly that this
incident would harm India's image as an investment
destination for foreign companies. In response, the MEA
described the events as "an isolated incident" that "should
not become a benchmark for judging the investment climate in
India." MEA's statement also noted that India's democratic
procedures provide "an effective mechanism" for industrial
disputes and that the legal interests of foreign investors
will be "fully safeguarded." Hyundai Motor India president
BVR Subbu believed the Honda dispute was a micro-management
issue unique to that company, and that foreign investors will
continue to come to India as long as they see profitable
opportunities.

Comment
--------------


13. (SBU) Regardless of who provoked the clashes, police
violence was excessive, and Congress will face criticism from
both the Left and the BJP. The Left parties have been
agitating for a larger role in UPA decision making, and this
incident will provide them with plenty of grist for
criticism. It will also make it next to impossible for
Congress to push forward with labor reforms that would relax
hire and fire policies. This episode demonstrates the
difficulties in the manufacturing sector in India, where low
growth results in fewer job openings, and workers and their
unions actively resist retrenchment. Labor disputes like
this are rare in the call-center and IT field where high
growth allows employers to offer good benefits and create new
jobs.
BLAKE