The Fear Factor: Corruption, beatings and union-busting at Pepsico’s biggest bottler in India

While Pepsico reaps millions from the popularity of The X Factor, over 550 workers producing Pepsico beverages at the SMV Beverages and Steel City Beverages bottling plants in Jamshedpur, northeastern India, experience The Fear Factor.

The union recognized by management is not only fake, but illegal. The collective agreement signed two years ago remains a secret. The real union is not allowed to function and members are regularly harassed. Questions about wages and benefits are met with punishment. Any attempts to assert worker’s rights result in beatings by goons dispatched by a powerful local politician who is also the owner of the labour hire agency that thrives off hundreds of precarious workers working the Pepsi bottling lines – 300 casual workers throughout the year and 600 in the peak season.

Corruption and nepotism are rampant. The labour contract agency, Besera Construction, is owned by Basco Besera, the local politician who provides contract workers and “protection” to the Pepsico franchise. Besera recently wanted 12 contract workers from his electoral district made permanent and the Chief Executive of SMV Beverages, P.S.Kumar, happily obliged, bypassing contract workers with more than 10 years of continuous employment. Kumar himself is building his own factory nearby to supply packaging materials to the two bottling plants he manages on behalf of Jaipuria Group.

Jaipuria Group is – according to its website – “a business empire with diverse interests in food & beverages, textiles, education, real estate, waste management and energy procurement, Ayurvedic products and manganese mining.” Not only that, it controls 60% of Pepsico’s bottling business in India, with just seven bottling plants.

One of those plants – Steel City Beverages in Jamshedpur – was taken over by Jaipuria Group in 1999 and in 2000 a second plant – SMV Beverages – was built next door. Workers work at both plants, walking on the private road between the two sites. There are 250 permanent workers and 300 contract workers throughout the year, doubling to 600 in the peak season.

When Jaipuria Group took over the plant in 1999 it inherited a union – the Adityapur Workers’ Union organized and registered in 1970. It was a Coca-Cola franchise at that time and over two and half decades the union negotiated good agreements for its members. After Jaipuria Group bought the plant there were tough negotiations and management viewed the union as a threat to its power. Management’s solution was to create a fake union. In 2006 management selected 13 workers as executive committee members, threatened and coerced dozens of workers into become members, then bribed the Trade Union Registrar to issue a certificate of registration in the name of SMV Beverages Workers Union. Incredibly management decided to recoup the cost of the bribes paid to Registrar by levying a Rs.300 fee on all the workers who were forced to become members.

The real union, the Adityapur Workers’ Union, launched a legal challenge that led to an investigation by the State Deputy Labour Commissioner. The result was an inquiry report that exposed bribery and corruption in the registration of the fake union. The Deputy Commissioner noted that even the founding congress on June 22, 2006 was fake. All of the workers who were supposedly at the meeting to form SMV Beverages Workers Union were working at the time. Acting on this report the State Labour Commissioner denounced this fraud and corruption, issuing an order on November 2, 2007 cancelling the fake union’s registration. He pointedly addressed the order to the fake union and the Chief Executive of SMV Beverages, P.S. Kumar.

But even while the fake union’s registration was facing an official inquiry the management of India’s largest Pepsico franchise went ahead and signed a three-year collective agreement in August 2007. The agreement – covering workers in both bottling plants – was a secret. Then in August 2009, 18 months after the fake union’s registration was cancelled by the Labour Commissioner, management signed yet another three-year agreement.

After more than two years no one has ever seen a copy of the agreement and its terms and conditions remain a mystery. The agreement was never registered with the labour department as required by law and instead remains hidden the management office. What workers did see were two new cars – given free by the company as gifts to the President and General Secretary of the fake union.

The only other time the fake union appears is when union dues are collected at the end of the year. Workers who are supposed to be members of this non-existent union are given a receipt with the name SMV Beverages Workers Union, but the union’s registration number is missing since it was de-registered by the Labour Commissioner four years ago.

What is also missing are the contract workers’ pension fund and social security entitlements required by law. Besera Construction stopped paying into their government pension funds in 2008 without any explanation. The 300 to 600 contract workers have no social security entitlements, no leave, no bonus, no uniforms, no safety equipment, and no staff ID cards.

Contract workers who ask questions about any of these missing legal benefits are punished. Contract drivers (driving delivery trucks owned by Jaipuria Group but still employed through Besera Construction) were not given loads to deliver and left idle for days as punishment. They also lost their travel allowances when they raised questions about their legal entitlements. When they raised questions about their legal rights, they were brutally beaten by goons sent inside the plant by Besera Construction. Welcome to The Fear Factor….