Story of a workers' cooperative

MADHURA SWAMINATHAN

Democracy at Work in an Industrial Cooperative, The Story of Kerala Dinesh Beedi by T.M. Thomas Isaac, Richard W. Franke and Pyaralal Raghavan; ILR Press, An Imprint of Cornell University Press, Ithaca and London, 1998; pages 255, clothbound £35.50, paperback £14.50.

THIS book provides a fascinating account of a unique experience in cooperative production, the story of the Kerala Dinesh Beedi Workers' Cooperative Society Ltd. (KDB), from its inception in 1969 to the present day. Beedi workers in India - the third largest component of the workforce in India after agricultural workers and textile workers - live and work in conditions of poverty and exploitation. Large private companies control the production of beedis (or hand-rolled cigarettes) while the workers earn a pittance and face all the insecurities of work in the informal sector. The distinction of the worker-owned and run KDB cooperative is that it has managed to survive and make profits in a fiercely competitive environment while raising the standard of living of its workers and improving their work environment.

The story of the origins of KDB is worth recounting. In northern Kerala, the freedom struggle was led by the socialists and later the Communists, and class struggle was part of the freedom movement. In this process, the beedi workers of Malabar developed an activist and democratic consciousness. As early as 1934, a trade union of beedi workers, the Kannur Beedi Thozhilali Union, was formed. A critical event was the General Strike of 1937 called by the Kannur union to press for a charter of demands for beedi workers. The strike was withdrawn after 38 days with very little gain to the workers but it was an important step in raising the consciousness and political awareness of workers and remarkable for the solidarity provided by peasants to industrial workers. One of the demands of the union was that workers be allowed to read when they are not actually at work, and it became a practice (one that still continues at KDB) for workers to take turns at reading newspapers and books out loud to their co-workers. Another turning point was the strike of 1946, which led to a restructuring of the industry. With trade unions growing in strength, private producers, located mainly in Mangalore, began to shift beedi-making from large-scale establishments to home-based production. Over the next 20 years, beedi production in the region grew rapidly. Kannur's share of beedi workers in the State rose from 14 per cent in 1951 to 45 per cent in 1971.

THERE are two interesting features of worker activity and mobilisation during this period of growth. First, there were several unions among beedi workers with different political affiliations. When KDB was formed, it brought together workers from different unions, and the success of KDB showed that union differences could be overcome to achieve a concrete developmental task: team spirit and worker solidarity were stronger than political rivalry. Secondly, pressure from beedi workers, led by A.K. Gopalan, the leader of the Communist Party of India (Marxist) group in the Lok Sabha, brought about the enactment of a national law for the protection of cigar and beedi workers in 1966.

In 1967, a government led by the Communists returned to power in Kerala and, unlike other State governments, it was committed to the implementation of the Cigar and Beedi Workers Act and to support beedi workers. In response, in October 1968, one of the prominent private firms, Mangalore Ganesh Beedi, closed down all production operations in Kerala, and 12,000 workers lost their jobs overnight. The Kerala Dinesh Beedi Workers' Cooperative Society grew out of this crisis. With the active support of the State Government, a workers' cooperative was formed, and the production of beedis began in February 1969. The next 25 years saw a phenomenal expansion, making KDB the fourth largest beedi firm in India today.

KDB is in a league apart from other beedi producers in respect of the wages and benefits offered to workers. Not only does it comply with the periodic wage revisions made by the State Minimum Wages Committee, it also provides a range of other benefits to workers. A comparison with the earnings of home-workers in the Kerala-Karnataka border area showed that in addition to paying a higher wage for production, the KDB offered holiday wages (Sundays, casual leave days and other earned holidays), medical allowances, maternity benefits, retirement and death benefits, pensions and thrift loans. There are no child workers at KDB. A major effort has been made to improve the work environment with the construction of work sheds and the provision of water and sanitary facilities, adequate floor space, ventilation, and benches with backrests for beedi rollers.

THE improvement in wages and working conditions brings to the fore one of the central dilemmas of cooperatives, that is, the conflict between distribution and accumulation. It is argued that worker-cooperatives maximise earnings per worker and so reduce surplus for accumulation, leading eventually to their degeneration or self-extinction. The authors show that the tension between distribution and investment was resolved by KDB through the dynamics of interaction between the central society and the primary societies.

The central cooperative society, located at Kannur, performs four major functions. It purchases raw material in bulk; it raises financial resources and manages overall finances; it is in charge of marketing and it also coordinates and supervises the primary cooperative societies. The centralisation of certain activities has allowed the KDB to "maintain an effective balance between the distribution of surplus and the need for investment for the future" without compromising on worker-control (the majority of the board of directors of the central society are workers). Specifically, the surplus for distribution to workers is centralised and paid out as a bonus (reward for work) rather than as dividends. This is not to deny that tensions exist between the central society and the primary societies. The authors argue that there is a need to provide some material incentives to the relatively efficient primary cooperative societies and give them greater autonomy over day-to-day activities.

Another issue is the tension between workplace democracy and adequate supervision and work discipline. Can managers controlled by workers supervise workers effectively and maintain work discipline? One of the areas in which this predicament has been faced by KDB is in the determination of wages. The use of a piece-rate system of wages provides a built-in mechanism to encourage output. However, there are three components of wages - attendance, basic wages and dearness allowance - and the wage structure has created some conflicts between individual and collective interests. A 'roller' has to make 600 beedis to register his or her attendance. A piece rate is paid for rolling up to 800 beedis, and from the 801st beedi, a fixed lump sum cost of living allowance is added to the payment. With this wage structure, workers who roll more beedis earn more but there is no incentive to continue production after reaching the 801 mark. The structure also implies a decline in marginal wages as output rises. For example, in 1993, a worker making 2,000 beedis earned at a rate of Rs.24 per 1,000 whereas a worker making only 801 beedis earned at a rate of Rs.38 per 1,000. The union's rationale for this wage structure is an egalitarian one, namely that cost of living benefits should not be higher for more productive/skilled workers. It has, however, affected the intensity of work. The issue of piece-rate versus fixed dearness allowance continues to be a contentious one.

Based on data from 22 primary societies, the authors undertake a detailed analysis of efficiency and profits across societies. The first major finding is of large variations across societies: profits per employee ranged from Rs.594 in Badagara to Rs.2,914 in the Kannur city primary society. What accounts for these large differences? Correlation analysis shows that the distance of the primary society from the work centres was negatively correlated with profits, that is, societies with greater transportation costs made fewer profits. Another infrastructure variable, the rent paid by the cooperative, is also negatively correlated with profitability. Total workforce strength was negatively correlated with profits per worker, indicating that smaller societies tended to be more profitable. The two main components of the production process are leaf-cutting and beedi-rolling and these depend on workers' skills. The number of beedis rolled per day per worker was, as expected, positively correlated with profits. Efficiency in leaf-cutting as measured by leaf outturn (beedis per kg of tendu leaf) turned out to have no significant correlation with profitability.

When the composition of the workforce in terms of age, experience and gender was examined, some very remarkable results emerged. The number of new workers was negatively correlated with profits. The most striking result, however, was that of a large negative correlation (-0.74) between the number of women workers and profitability. There was also a negative correlation, of -0.84, between the percentage of women workers and beedis rolled per worker per day. These findings are worrying as they suggest that "women workers are not producing nearly as many beedis per day as men are and that this low output is the major factor limiting the efficiency of the primary societies." A further examination of the data showed that women were efficient in leaf-use, a highly skilled task. One explanation for low output is that women work less than men because of responsibilities at home. The correlation between the proportion of female workers and days of leave, however, turned out to be insignificant.

When different variables were combined in a multiple regression framework, two factors emerged as important determinants of profitability. First, efficiency in the use of leaves had a significant positive impact on profitability. However, there was a trade-off between increasing leaf efficiency and total daily output because when a worker attempts to increase output, it can adversely affect leaf outturn. Secondly, and this is more important, a high proportion of women workers had a negative effect on profits. As the number of days that women worked was not very different from that of male workers, the explanation could perhaps be found in the hours women worked. The burden of household work could explain why women work for fewer hours a day; it could also mean lower concentration at work (many women, for example, brought young children to the workplace). As the authors put it, "the double shift is (thus) a practical production problem for KDB as well as a burden on individual women workers." Again, there is a dilemma for the cooperative. With its favourable wage and working conditions, "the cooperative has become an attractive employer for young women in the Kannur region" but the rise in the female work force appears to impact adversely on profitability. KDB will need to deal with this issue imaginatively by means such as the provision of day care services, and increase in leaf-use productivity through better supervision.

The authors do not ignore the serious problems that face KDB today. In recent years, there has been a decline in sales, and KDB has been forced to restrict output and limit the number of working days. The price differential between KDB and other beedis is a critical factor here. In 1994, the retail price of a packet of Dinesh Medium beedis was Rs.50 as compared to Rs.42 for Ganesh beedis and Rs.38 for another brand of beedis called Surya beedis. The private sector is able to sell cheaply by exploiting workers, paying lower wages and avoiding excise taxes. Operating alongside an unregulated private sector, the survival of KDB is itself remarkable. In recent years, the mounting evidence on the harmful health effects of tobacco consumption has raised ethical questions for those engaged in its production. Can a workers' cooperative justify the production of tobacco products? Declining sales and the ethical issues around tobacco production have resulted in plans for diversification, especially in agro-processing, and this is the next challenge for KDB.

To conclude, this is a well-written book that combines descriptive statistics with interview material to tell KDB's engrossing story. It is recommended reading for any person interested in the concept of cooperative work.

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