Why Atlas Cycles’ Lay Offs Could be the Harbinger of a Larger Malaise

One of India’s largest bicycle manufacturers, Atlas, halted operations in its Sahibabad plant in Uttar Pradesh from Wednesday.  Both trade unions and industry leaders fear that the move is indicative of the distress that awaits manufacturing establishments in the post-lockdown period.

“The company has spent all (its) funds and is left with no other source of income. There is no cash available even to meet daily expenses. The company is not able to purchase raw materials…. and in such situation it is not in a position to run the factory,” the Haryana-based manufacturer said in a notice issued on Tuesday, adding that the entire workforce has been laid off for an unknown period, as a result.

As many as 500 contractual workers, employed through a third party agency, have already been retrenched by the cycle manufacturer, Newsclick has learnt.

Bad blood fomented against the employer the next morning as workers were denied entry to the unit. The workers accused the company of not adhering to labour laws while taking the “sudden” decision.

“The company did not care to take its workers into confidence before going ahead with a decision that will affect the livelihoods of everyone,” said Mahesh Singh, General Secretary of Atlas Cycles Ltd. Employees Union. Gathered in front of the company gate, the permanent workers, some of whom had been working for Atlas for more than 15 years, demanded that the company management rolls back its decision. The crowd was dispersed on Wednesday only after local police resorted to a baton charge.

Section 25M of The Industrial Disputes Act, 1947, requires an industrial establishment – which employs not less than 100 workers – to seek prior permission from “competent authority” before laying off the workmen. The employees’ union at Atlas’ Sahibabad factory alleged that no such permission was sought and hence the notice is “illegal”.

“We are told one morning that production has been stopped and everyone has been laid off – what else, other than ‘anger’, will be our reaction?” asked Singh, adding that fear and insecurity has spread among the workers regarding their dues, which includes their wages for the month of May.

The company had resumed production on May 11 – calling in only its permanent workforce – after having paused operations for more than a month owing to the lockdown due to COVID-19, NewsClick was informed.

Though the company notified that the workforce will be provided with a “lay-off compensation” – which, according to the ID Act is 50% of the total of their basic wages and dearness allowance – Singh alleged that there was more to it than what met the eye.

The workers at the factory are employed on a piece rate basis, over and above a basic minimum monthly wage. “The workers would work for up to 12 hours; for which they would earn around between Rs 15,000 to Rs 20,000,” Singh said. However, since the law only prescribes half of ‘basic’ wages as lay-off compensation, Singh fears that the compensation would not be more than Rs. 5,500, if calculated on that basis. He said that it would put the workers in an “undesirable” financial position, despite the protection deal that many other labourers are bereft of.

The situation at Atlas reflects the worries of the workers in the wake of the COVID-19 pandemic, glimpses of which can be witnessed in Sahibabad, an industrial area known for its engineering products. The area houses around 900 MSMEs – registered and unregistered – and workers in Sahibabad are being pushed to a “new normal” that includes lay offs and wage cuts, say trade unions.

“There are around 20,000 to 25,000 workers in Sahibabad who have either been laid off or retrenched. The majority of these workers are migrants who come from distant towns in Bihar and Odisha. Many of them have already returned; others are being forced to,” said Ishwar Tyagi, President of the Centre of Indian Trade Unions (CITU) in Sahibabad.

Tyagi mentioned two cases to illustrate how the lockdown has affected workers in Sahibabad. According to him, The Indure Pvt. Ltd., a company which manufactures pumps, has not paid monthly wages to 300 of its workers since February. He said that another company, namely, Anupam Products Ltd., has replaced around 50 members of its permanent staff with contractual staff, who work on reduced salaries.   

“The situation is worse in unregistered companies,” said Tyagi, adding that a hue and cry can be heard from “every second company” against their “unjust” actions. He said that the companies are passing down the brunt of the lockdown to the workers. 

Admitting that such action is being taken, Charanjit Singh, the office secretary of Sahibabad Industries Association, said the companies were going through with it since they had been “forced” to. 

“Lay offs and wage cuts are inevitable when production cannot resume properly,” said Singh, who mentioned reasons like the non-availability of raw materials and a liquidity crisis for their troubles.

According to him, the government has failed to address both the causes and that the recently announced credit infusion for the MSME sector would not improve the situation. “With less support from the government and a slump in demand in the market, the factories are left with no other choice but to cut labour costs,” Singh said, suggesting that such cases of lay offs will only increase among industrial establishments in the near future.