Ratan Tata and NELCO Crucible – The untold story.

Newspaper headlines were screaming-“Cyrus Mistry takes over from Ratan Tata”.

Srinivas Iyer was reading newspaper sitting in balcony of his 1BHK flat in Dombivali. What irritated him was in every article, any mention about tenure of Ratan Tata as chairman of NELCO did not go beyond single sentence- as if chairmanship of NELCO was an insignificant event… or worse an unfortunate event in life of Ratan Tata.

How could people forget that NELCO was the crucible from which a visionary, tougher and yet humane Ratan Tata emerged.

He mind travelled into past. Year was 1980.

At Bombay House, Ratan Tata, chairman of NELCO was having meeting with Diego Fernandez and his protégés- Zal Engineer and Kanchan Mahashur. Industrial relations at NELCO were anything but cordial.

During same time at Chakala, employees were getting down from company bus to enter NELCO Factory. Among them were Srinivas Iyer, Anjali Aras and Chitamani Chitnis.

Srinivas Iyer, a fresh commerce graduate from Siddarth College, had joined NELCO in Time Office & Payroll Department.

Anjali Aras had completed her graduation, having failed to get job in Bombay Municipal Corporation; she managed to get job in accounts department of NELCO with help of Chintamani Chitnis, who happened to be her father’s friend. Like Chitnis, her father too was a union leader.

Chintamani Chitnis was worker in consumer products department, department headed by works manager Diego Fernandez. He was also active member of Shiv Sena affiliated union. He and his coterie were known for their rowdy behaviour. Personnel and Administration Department was their favourite target, esp. Saxena, who headed P & A Department.

None of them was known to Ratan Tata, nor was he aware of impact they would make in days to come.

It was month of June, month which brings with it everything you hate about Mumbai- heavy rains, waterlogged streets, flies, diseases, mud and dirt etc.

NELCO had practice of paying monthly salary advance upto Rs.100 to workers, provided they applied for it before 20th of the month. Advanced was paid on 20th of month at payroll office.
It was 20th of June, Iyer and Kersi Mehta from payroll were disbursing the amount. Chitamani Chitnis needed money to pay for his sister’s medical expenses. Being union leader he never bothered to fill form. Last month payroll department had made exceptions to meet his demands. But this time Iyer gathered courage and refused to pay as he did not put the requisition for advance before 20th, the closing date. Chitnis did not like it at all. He started hurling abuses, jumped on table infront of Iyer and threatened them. Mehta stayed calm, he asked Chitnis to step down and leave payroll department.

It was era of militant unionism. Negotiating/Confronting with union leader like Datta Samant was badge of honour for Industrial Relations manager-something he invariably mentioned in his CV and job interview.
Chitnis felt insulted, as militant union leader he was not going to tolerate insult from stooges of management. He wanted to teach them a lesson. He gathered other workers and they managed to get empty drums and spanners. They started beating drums with spanners and started shouting slogans against management.

Three days later, Chitnis was still in foul mood. He left his one room tenement to leave for factory. He lived in Goregaokar Chawl at Girgaon-area known for chawls, textile mills and militant unionism. He took local for Andheri, in local he met a co-worker Harpal Yadav, who told him that he came to know from reliable source, that Saxena was planning to conduct domestic enquiry against him. He had asked his assistant to collect necessary information from Iyer and Anjali to prepare charge sheet against him. Chitnis had poor attendance record- high absenteeism and habitual late coming. He had submitted highly inflated local travel bills to accounts department.

After having breakfast at canteen with his coterie, he started thinking about what to do next. Workers had again restored to slogan shouting, beating of empty drums with spanners, etc. He wanted to do something different. He suddenly remembered Kalya.

Kalya was sleeping peacefully under shade of banyan tree; He should not have been in NELCO in first place, as he was not an employee- neither on rolls nor on contract. But thanks to security guard Suresh Shetty, a father figure to him, he could not only sneak inside factory but also enjoy sumptuous breakfast and lunch from its canteen. He was rudely woken up by Chitnis with a kick, before he could comprehend what was happening, one worker put a card board around his neck and another worker started writing something on card board. They started dragging reluctant Kalya towards shop floor of consumer products division. They lifted him and threw him in the trolley started pushing the trolley around shop floor, shouting slogans and hitting empty drums with spanners. Shetty didn’t have courage to stop them.

A gentleman was watching all this from first floor of Industrial systems division and saying something to manager standing next to him. Kalya could not hear what he was saying due to thick glass partition, but obviously he was not pleased with what was going on, esp. the way they were treating Kalya.

Kalya could neither read what they had written nor understand what they were shouting. Had Kalya been human he would have known that workers had written “Diego” on card board. Diaego Fernandez was Works Manager for CPD, while gentleman was Ratan Tata, chairman of NELCO. Like Shetty he too was a dog lover.

Rakesh Malviya has joined NELCO few days back as junior officer in P & A department. He had found a good mentor in Saxsena, GM- Personnel and Admin. Saxena had given him a very important task of preparing charge sheet and hold domestic inquiry against Chitnis. He decided to meet Anjali over lunch to discuss about inflated bills submitted by Chitnis. Iyer had already submitted attendance record to Rakesh for charge sheet.

Chitnis did not like canteen food; he banged the plate in plate collection area. While he was leaving, he saw Rakesh having lunch with Anjali Aras. This irritated Chitnis further; he went to their table and started slapping Rakesh. Anjali ran away from canteen.

Slapping incident was the last straw. Ratan Tata called meeting of all senior managers and told them that he wanted to declare lockout, indiscipline was something that he could not tolerate. He then asked Saxena to communicate Labour Commissioner about lockout.

Saxena prepared necessary papers and asked Iyer to go to Bombay House to get them signed by Ratan Tata. That day it was raining heavily and Fort area was almost waist deep in water. Iyer somehow made it and reached Ratan Tata’s office in Bombay House. Ratan Tata came out of his office to meet him. Seeing pitiable condition of Iyer, he asked his secretary Sheila Shastri to get coffee for Iyer. Iyer’s respect for Chairman went up. Chairman cared so much for a junior employee like him.

Lockout was declared and went on for nearly 7 months. Later, better sense prevailed. Feelers were sent to Ratan Tata for compromise. He agreed to re-start factory and take workers back (except 4 who were dismissed for indiscipline). Chitnis was happy, as he managed to save his skin. Last 7 months were tough for him- financially and emotionally. NELCO kind of job with decent salary, light workload, highly subsidised breakfast and lunch, free transport etc. was difficult to find elsewhere.

At the same time Ratan Tata decided to act tough. The workers and union leaders stopped paying membership fee to existing union and shifted membership to Mumbai Labour Union. Thus existing union became defunct and its place was taken by Mumbai Labour Union, which was headed by Sharad Rao. Ratan Tata started new factory at faraway place called Vashi and shifted 113 workers to new factory, among them were Chitnis and his coterie. Much to his chagrin, Iyer became defacto head of industrial relations in this new factory. Message was clear- indiscipline will no longer be tolerated.

This event was a crucible that changed Ratan Tata. Unfortunately significance of NELCO lockout has never been recognised. Decade later, Ratan Tata succeeded legendry JRD Tata.

In her book “Business Maharajas” Gita Piramal, mentions about this episode and says-” NELCO stiffened Tata’s spine”.Same book also quotes Ratan Tata– “I learned a lot; I don’t think I would have learned as much the hard way as I did at NELCO. I am grateful to powers to be that they gave me NELCO…”

This event helped him later to handle strike at TELCO by Rajan Nair.

In an article written in Business India in December 1981, Ratan Tata said …

“For three years from 1972 to 1975 Nelco made a profit and wiped out some of its past losses, then in 1975, the Emergency came and consumer goods demand just disappeared, not just for Nelco, but for everybody. This was followed by an industrial relations problem since 1977. So, while demand improved, there was no production. Finally we confronted the unions and, following a strike, we imposed a lockout for seven months. Now that the lockout has been lifted we hope to improve production by 50 percent over the past year …”

The article further says…

“His ( Ratan Tata) claims appear to be valid, for Nelco’s prospects have certainly looked up. And, certainly, handling a company that has been in difficulty can provide more worthwhile experience than being in charge of a smoothly running company.”

Post lockout NELCO did well in areas of consumer products, telecommunications, drives and automation etc. Most successful product was NELCO “Blue Diamond” TV. Blue Diamond made significant impact and soon had market share of 20%.

In 90s, Ratan Tata could foresee that entry of Korean and Japanese consumer product companies in India will change all the existing equations. NELCO with its aging workforce could not face competition and there was no future for NELCO TVs. He decided to discontinue TV production, when it was at the height of its success. He called Zal Engineer, who was heading CPD, and told him about his decision and he also told Engineer to design a generous VRS for workers.

Engineer was shocked, like him others too felt that by stopping TV production, they were killing cash cow. Nobody had even heard of Korean companies like Samsung and LG. How could they even dream of displacing strong brand like Blue Diamond, Philips etc.?

But future developments proved that Ratan Tata was right.NELCO crucible had produced a leader who was visionary, tough yet humane.