The four companies are finding it impossible to relocate their Delhi units to alternative sites for a variety of reasons ranging from a severe funds crunch to lack of sites with the necessary infrastructure. Around 10,000 workers will be thrown out of jobs as a result of the closures. It is estimated that the Supreme Court ruling will affect 25,000 workers.
In its judgment in July, the Supreme Court had ordered the closure of all hazardous industries in Delhi with effect from November 30, 1996. The order says: The closure w.e.f from November 30, 1996 shall be unconditional. Even if the relocation of industries is not complete, they shall stop functioning in Delhi w.e.f the given date.
Shri Ram Foods and Fertilizers Ltd sees no possibility of relocating its unit because it will involve a cost of nearly Rs 500 crore. The company said it does not have the required funds required to shift the unit. A source said certain installed machinery also cannot be shifted out of the factory. Siel, hence, has earmarked Rs 50 crore for its workers in its Delhi unit as compensation charges according to the court ruling. Swatantra Bharat Mills also does not see the relocation option as a viable one until the state government gives building clearances for real estate development on the land.
Without these permissions, the company will not be able to borrow loans from the banks. This is because banks do not offer loans on the guarantee of the land alone for financing the cost of relocating the unit to an alternative site.
The Supreme Court order says that the owner can develop 32 per cent of the area freed by the relocation of the unit for his own benefit. The remaining 68 per cent must be surrendered to the Delhi Development Authority for developing green belts. With the state government not giving permission on land use, the company will have no alternative but to close down the unit and retrench the labour after paying the required compensation.
Swatantra Mills will have had to spend Rs 55 crore merely to relocate the 45,000 spindles plant even without planning for any modernisation. The company is paying Rs 28 crore to its over 1,500 workers as labour compensation in accordance with the court's orders. Of the total liabilities contingent upon the unit's closing down, Rs 20 crore is term loans and Rs 15 crore is trade liabilities.
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Birla Textiles of the KK Birla group and part of Texmaco has not been able to find an alternative site. A senior executive with the company told Business Standard, Ours is a very large unit with several hundred workers. It is not easy to find such big spaces with the infrastructural facilities which we require.
Hence, the company is considering closing its unit permanently. The company will have to pay a compensation of around Rs 25-30 crore to its workers. This is inclusive of the shifting bonus to be paid to existing workers.
The public sector unit Hindustan Insecticides finds relocation an unviable option, primarily because of paucity of resources.
A top official told Business Standard, With the ministry of chemicals and petrochemicals not sanctioning the required finance and our internal generation of funds being inadequate, relocation is not immediately possible. The labour union of the PSU has also filed a review petition with the SC.
The PSU manufactured chemicals like the DDT and BHC, which are to be phased out. The company said generation of internal resources is hence difficult since its production levels are declining.