US embassy cable - 05NEWDELHI5865

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, Labor 
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