The unfortunate Wistron happenings

The recent happenings at the factory of Wistron Infocom Manufacturing (India) Private Limited the contract manufacturer of Apple iPhones and products for Lenovo and Microsoft are most unfortunate. As has been widely reported a mob of about 500 disgruntled employees went on a rampage in the factory earlier this month.

The initial FIR filed by the company estimated the losses at over Rs 400 crore; this was after a few days scaled down to about Rs 56 crore. In the filing with the Taiwanese Stock Exchange, the company estimated the losses to be Taiwanese $100 million in the region of about Rs 26 crore. The damage, however, is much more than whatever these numbers.

By way of background, it may be mentioned that Narasapura in Kolar district on the outskirts of Bengaluru is a National Investment and Manufacturing zone (NMIZ). The NIMZ were conceived to be integrated industrial townships. The zones themselves are an integral part of the National Manufacturing Policy (NMP) an ambitious programme designed to raise the global competitiveness of the Indian manufacturing sector. The success of the NMIZ depends a lot on the initiative of the States. Narasapura off Bengaluru with a whole array of big units, being a shining example of what can be achieved.

Thus, Wistron the Taiwanese contract manufacturing giant opened their unit in Narasapura and also opted for the liberalised customs warehousing provisions of in bond manufacture. They have invested in excess of Rs. 2800 crore in its 43-acre manufacturing facility for the manufacture of iPhone SE with an export target of 3 million units in 2020-21. India being, besides Brazil and China, one of three countries in the world that manufactures Apple products.

Everything did seem to be going well-till this horrific incident happened. And in retrospect, it appears that this was a crisis waiting to happen.

Wistron employs around 1400 permanent employees and 8500 contract workers. The contract workers were contracted through five different firms; another contractor provided the housekeeping staff. There are murmurs that local political heavyweights are involved in some of the firms.

Reports suggest that the anger among the workforce had been simmering over the last six months. Contract workers were not said to be paid their full salaries -and even this was not being paid in time. Overtime was not being paid. An inspection report by officials of the Director of Factories Boilers and Industrial Safety after the incident has confirmed that there was a difference between what was paid by the company to the contractors and what was actually paid by the contractors to the workers-even this was being paid erratically. The report also suggests that the housekeeping staff have not been paid.

Employees are said to have approached the management a couple of months back who took the stand that this was the concern of the contractors. Subsequently in October this year, over 100 employees had approached the Kolar administration requesting the intervention of the district administration. The administration is said to have requested the management to adhere to the requirements of the Factories Act. Nothing happened.

Obviously, neither the company nor the local administration saw the writing on the wall. Resentment was brewing and while the exact trigger for the outburst is unclear, like in all such acts of leaderless violence there are multiple versions. Whether it was premeditated or spontaneous is unclear – what is clear is that workers indulged in large scale vandalism and destruction of property. The police intervened. An FIR has been registered against 7,000 unknown people including 5,000 contract workers, in connection with the violence. 158 people are said to have been arrested.

Apple has moved swiftly to curb the damage. A team of auditors rushed to the plant and their initial report has been troubling. Apple's guidelines mandate that third-party staffing agencies pay the workers on time as well as offer other benefits as per rules. These have been held to have been violated. And this was precisely what the workers had been saying all along. Apple has placed Wistron on probation and has stated that no new orders will be placed on the company till matters are sorted.

Wistron has issued a statement regretting and apologising for the incident; the vice president overseeing the manufacturing unit has been asked to leave. And to think that it was only this year that the government had announced that Wistron was eligible to be part of the much-talked-about Production Linked Incentive scheme!

While the Karnataka government has assured that it will take steps to assuage investor sentiment, it needs to act urgently. This incident has hurt Karnataka’s investor-friendly image coming as it does after the lockdown of the Toyota plant in Bengaluru. Action needs to be taken against the management and the erring contractor firms about which there has been no mention thus far. And the Karnataka government needs to be cognizant of the fact that such incidents coming as they are after July 2020 ordinances amending the labour laws are not good. These ordinances amongst others amended the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA). They were aimed at improving the ease of doing business in and attracting investments to Karnataka.

Karnataka and the country cannot afford to have a repeat of such incidents.