How To Make Dough And Sell It Too

Sukh Raj stands near the wrought-iron gates of the Modern Food Industries factory in Delhi’s congested Lawrence Road industrial complex, threatening to slash his wrists if there are job losses following the company’s takeover by Hindustan Lever. This middle-aged worker reflects the views of hundreds of workers in the company.

"This is not a sale. This is complete betrayal of trust by the government. We will gherao Parliament if this deal is pushed through," says a terse note written by Ramdutt Sharma, general secretary, All India Modern Food Industries Employees Joint Action Association.

Sharma’s contentions are clear. The total assets (including real estate and machinery) of the 35-year-old company-which has 14 wholly-owned bakery units, 19 franchise units and six ancillary units across the country-is worth Rs 2,100 crore. The 16 acres of factory land that Modern Foods owns in the capital itself could be worth as much as Rs 111 crore. Add 18 acres in Mumbai’s Goregaon, four acres in Kanpur and all the rest of Modern Foods’ land (not including the building, plant and machinery and the many residential apartments it owns), and the total could come close to Rs 550 crore. However, when contacted by Outlook, a Hindustan Lever spokesperson said that real estate value is never considered when determining the price of a takeover deal and neither was Hindustan Lever interested in getting into the real estate business.

Modern Foods’ turnover has been increasing since 1994. And it was only in 1998-99 that it suffered a loss of Rs 10 crore (on a turnover of Rs 171.85 crore). Modern is still the biggest bread brand in the country, with a 32 per cent marketshare in the organised sector. Ironically, the company-before the disinvestment proposal was floated-had drawn up an ambitious expansion plan to set up 17 units to penetrate the small-town and semi-urban market. But the plans were put on hold following the government’s decision to disinvest.

Sharma claims there are countless errors in the note prepared by the Disinvestment Commission for the government. The note admits that Modern is the country’s No. 1 bread brand and then claims it has a poor public image as compared to its competitors in north India. "What image does Air-India have compared to international airlines? A brand which occupies the topmost rank cannot have a poor public image, right?" asks Sharma, adding: "This is like recalling the East India company... Soon there will be very little of original India left." The Hindustan Lever spokesperson claims that the government wanted Modern Foods to be taken over by a reputed transnational corporation and Hindustan Lever fitted the bill perfectly, an additional factor in its favour being the way it handled its takeover of the Tata Oil Mills Company.

What went wrong with Modern Foods? Senior officials admit that labour was a crisis point ever since the government announced its disinvestment plans. "Let’s not forget that security is one issue which motivates many people to work for a PSU. But ever since the government announced its decision, a large number of workers started going on leave. There was this feeling of despair in the air," says a senior official, adding: "We are not a sick company. Our turnover and profits have increased continuously, barring two years. But this does not merit such a treatment. This is nothing short of a scam." Says M.K. Pandhe, citu general secretary: "This is definitely a case of kickbacks, otherwise no one sells this company for a hundred crore."

Interestingly, the first disinvestment report on Modern Foods was squarely rejected by the then food processing minister Dilip Ray. The issue was also brought to the notice of the then prime minister, Inder Gujral, who had agreed that only 50 per cent of the company’s shares would be divested and that there would be a condition of job security for three years. "Everything stands changed today. Hindustan Lever has picked up the stake for just Rs 104 crore and the job security period has been reduced to one year. Hindustan Lever has openly said that it would not be able to absorb more than 700 of the current 2,000 workforce. After serving a PSU for so many years and earning profits for it, the workers cannot be thrown out on the streets and left at the mercy of the multinational corporation," said a note written to Vajpayee by A.D. Nagpal, general secretary of the Chandigarh-based All India Modern Bakeries Workers Federation.
But it’s too late now.