The Growth & Downfall of Mysore Mills

Overview

The Indian textile industry is one the largest and oldest sectors in the country and among the most important in the economy in terms of output, investment and employment. The sector employs nearly 35 million people and after agriculture, is the secondhighest employer in the country. Its importance is underlined by the fact that it accounts for around 4% of Gross Domestic Product, 14% of industrial production, 9% of excise collections, 18% of employment in the industrial sector, and 16% of the countrys total exports earnings. With direct linkages to the rural economy and the agriculture sector, it has been estimated that one of every six households in the country depends on this sector, either directly or indirectly, for its livelihood.

A strong raw material production base, a vast pool of skilled and unskilled personnel, cheap labour, good export potential and low import content are some of the salient features of the Indian textile industry. This is a traditional, robust, wellestablished industry, enjoying considerable demand in the domestic as well as global markets.

The textile production has gradually shifted from developed countries to developing countries in the last 10 years.

The total trends of exporters and importers of textiles and clothing have also drifted towards the developing countries.

Seeing this trend, in 1992, post liberalization, Mr. Sanjay Reddy a veteran business man in the Karnataka region started Mysore Textile Mill with an initial capital of Rs. 50 lakhs (Rs.5 Million).

Looking at the paradigm shift in the consumption trends in the global market, Sanjay had believed that this mill could take his business to newer heights. He brought in new machinery from all corners of the globe and tried to ensure that both the workers and the management could work towards ensuring a growing business.

The business was making fast buck and Sanjay was happy with the turn of events. The Mill owners were getting huge dividends and the need for manpower was increasing by the year. It seemed like a cash cow business that could be milked for a long time to come.

While during this smooth run, a mishap happened and this changed the course of the business. Sanjay Reddy met with an accident and was almost bed ridden. His two sons who were based out of the United States of America were made in charge of the various business units.

Since the Indian business werent really a priority for them, the general administration of the unit saw an immediate decline. Over the years, the company owners started to dump their obsolete machinery here and repatriate most of the surplus without allowing reserves to build-up for machinery replacements. For them, this wasnt a source of reaping rich dividends but there seemed to have been an intent to milk the business dry before getting out. During the late 1990s, when the Mills' profitability had substantially declined, the Company still continued to shell out 18 percent dividend, which was tapered only when there was absolutely no money to distribute.

In 1999, Mysore Mills entered a period of crisis and thats when a serious move was made at the Central government level for direct interventions. The central government scotched up a plan and favoured handing over control of the Mills to Saraswati Mills of Pondicherry. Accordingly the shares held by the Mysore Mills were transferred to Saraswati Mills along with the management to G Krishnan.

This arrangement lasted only four years, when the government stepped in to stem the rot, following the 2003 flooding. P Krishna Sai, an IAS officer of the state, took charge and initiated action plan to plug out the leaks in the set up and establish a good rapport with the labour union. But his tenure lasted one year only, following machinisations, he was transferred and the old guard stepped in once again. The present Managing Director was a long time Mysore Mill hand, who had joined the company 10 years ago as a covenanted Assistant.

Mysore Mills problems came to the fore in 2003, when a unprecedented Cyclonic storm lashed the city of Mysore.

The flooding as such didnt come as a surprise to the mill owners since it had happened a number of times since 1992 however they looked at it as more of a heaven opportunity. Already drowning slowly in cash problems, the management clutched on to this last straw with all its might and decided to shutdown its shutters. They also claimed that they may not be able to open the mills again till the time the state or central government bails them out.

The bail out happened in the form of a Rs, 17 crore modernization plan and working funds of Rs. 4 crore guaranteed by the state government. But it soon turned out that neither modernization plan not the upswing in the market for textiles which gave profits to almost all

textiles companies in the country could bail out Mysore Mills since it was saddles by a management team that lacked concern and was irresponsible as it was mediocre.

The accumulated losses which stood at Rs. 7.5 crore in 1997 had moved up to Rs. 15 crore in 1999. The debt burden had also gone up from Rs. 5.8 crore to Rs. 43 crore. The cotton supply to the mill had been choked and workers were being kept idle inside the mill for about two months before the closure notice came in.

Along with the closure came the drumming up charge of that all the ills in Mysore Mill were due to the workers. That they were just too many. Mysore Mills claimed that the workers were paid too much and they worked too little.

Textile industry the world over and in India too had seen a progressive shrinking of manpower and more and more machinery had taken the place of the workers. Infact, the truth that Mysore Mills had glossed over was that the workmen strength had seen a sharp decline over the years.

The workmen strength had gone down from 17,500 in 1992-3 to 10,500 in 2005 and all through the initial stages the sales had continued to rise. Infact, it was instructive to note that during the

same period, the number of managerial staff had increased drastically.

Expert studies that had gone into studying of the mill had constantly said that the manufacturing cost needed to be cut by tenth and 70 percent of this was supposed to come from the wage bill.

Mysore Mill's management had much to answer since in the past four years, while the unit realization had been going up and the proportion of material cost to sales had been going down, how the labour cost was static. It had to explain about its unimaginative product strategy where the product was largely masculine oriented and had a low marketing efficiency.

There was a different consideration for the workers. They were being persuaded to rationalize themselves into shedding 1,000 of their strength and extend themselves to a seven day week. They were even expected to lose a part of their earnings and take on extra work load.

The first strike came off within the first few days of the declaration of these demands. However the management considered agreeing to their demands as a weakness and thus they went and hired more spinners and jobbers. This broke the strike immediately and most of the men went back to work within two days of the strike.

Therefore, the long suffering Mill workers formed a union and Mysore Labour Union and decided to negotiate their way through the shedding of work men, increase in number of hours of working and increase in work load at no extra price.