Wednesday, November 22, 2006



After 1857, Kanpur became an important center of Textile Industries. Large scale industrialization in Kanpur began in 1862 with the establishment of Elgin Mills along the coast of Ganga in northern part of Kanpur at Civil Lines. Riverside Power House (RPH) was also established adjoining Elgin Mills in western side. Elgin Mill was the first cotton textile mill of Kanpur. The success of Elgin Mills gave impetus to the establishment of a series of other cotton mills in Kanpur. Muir Mills was second mill established here in 1882.

The British India Corporation (BIC) was headquartered here and led the development of many industries. The Juggilal Kamlapat Singhania family launched many industrial units between 1930 and 1970. The group is known as J K Group of Industries till date. The Jaipuria family contributed to the patriotic cause, by building the Swadeshi Cotton Mills in response to charges that the foreign rulers were raiding India of its cotton only to sell back textiles to the residents. Kanpur was known as the "Manchester of India" during the 20th Century.


All the giant cotton textile mills of Kanpur are closed now. These mills have now become part of Industrial History of Kanpur. All these Textile Mills were established by Britishers. In order to cope up with the economic depression after the First World War (1914-1918), the six large companies of Kanpur united themselves and formed British India Corporation Ltd. (BIC) in 1920. For many years after independence, the management of BIC remained under the Britishers. The BIC acquired the following mills in Kanpur.

1. Lal-Imli Mill

2. Cawnpore Textiles Limited

3. Elgin Mills-I

4. Elgin Mills-II (Cawnpore Cotton Mills)

Textile mills were in pity conditions during 1960's due to mismanagement, embezzlement and managerial mal-practices under Indian Private Sector. After using in all benefit, the management threatened to close these prestigious mills. In order to save these mills from closure and consequent unemployment, The Government of India under Prime Minister Indira Gandhi decided to take-over them. National Textile Corporation (NTC) was formed in 1969. The NTC (a Govt. of India undertaking) acquired the following mills of Kanpur.

1. Muir Mills

2. New Victoria Mills

3. Luxmi Ratan Cotton Mills

4. Atherton West Mills

5. Swadeshi Cotton Mills

These mills were under heavy debt. Therefore, the Government invested a large sum of money in them so that they could run smoothly.

The condition of BIC Mills also deteriorated due to mismanagement. BIC had taken loan of large sum of money from the two Government of India undertaking i.e. State Bank of India (SBI) and Life Insurance Corporation of India (LIC) by mortgaging it's shares. As the BIC could not repay these loans, it came under the ownership of Govt. of India.


In 1984 Rajeev Gandhi was elected Prime Minister. Rajeev Gandhi was a young and rather inexperienced fellow. Bureaucrats used Rajeev Gandhi’s inexperience as their power. Rajeev banned any new appointments in these mills. Thus due to this foolish decision, the production-link broke and as the time passed, many departments stopped working. The production fell down, orders could not be complied. This was the planned way to close down the mills.

Then Congress Government under Prime Minister ship of P. V. Narsimha Rao completed rest of the job. Due to reduced production mills were running in heavy losses. Govt. Of India decided not to invest any further in these mills. NTC and BIC came under heavy debts.


In the wake of sickness in the country’s industrial climate prevailing in 1980’s, the Government of India set up in 1981, a Committee of Experts under the Chairmanship of Shri T.Tiwari to examine the matter and recommend suitable remedies therefore. Based on the recommendations of the Committee, the Government of India enacted a special legislation namely, the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) commonly known as the SICA.

The main objective of SICA is to determine sickness and expedite the revival of potentially viable units or closure of unviable units (unit here in refers to a Sick Industrial Company). It was expected that by revival, idle investments in sick units will become productive and by closure, the locked up investments in unviable units would get released for productive use elsewhere.

The Board of experts named the Board for Industrial and Financial Reconstruction (BIFR) was set up in January, 1987 and functional with effect from 15th May 1987. Government companies were brought under the purview of SICA in 1991 when extensive changes were made in the Act including, inter-alia, changes in the criteria for determining industrial sickness. This BIFR reported Mills in Kanpur non-viable in 2000. So Government of India made the final decision to close these mills.

Thus, the oldest mill of Kanpur- Elgin Mills of BIC was completely closed on 30th June, 2001. In 2002, Government declared official closure of all the 5 NTC Mills. Almost same phase of deterioration prevailed in BIC Mills and they also closed down. At present, only the Cawnpore Woolen Mills (Lal-Imli) is partially open.


Till the end of 2002, all the textile mills of Kanpur were closed by the Government officially one by one. But the justifications for all this process whatever happened is not just so straight forward to say, but main grounds on which the closure of Mills occurred can be summed as follows.

1. Poor concentration on Modernization by Private Owners. The Mills were owned by private owners in the starting years. They used these mills to earn their immediate profits and they had no intentions to run these mills very long .They never introduced the modernized techniques and equipments in the mills to enhance and improve their production. This resulted in reduced sales and poor quality production. The mills had to face losses.

2. Mills were forced to buy Cotton from CCI. After nationalization the mills were forced by Government to buy cotton from CCI (Cotton Corporation of India).The Cotton supplied by CCI was of poor quality and even at a very higher cost (almost 250% costly).This poor quality raw material resulted into poor quality of products and hence the sales were reduced.

3. Government failed to Invest and Modernize. Private Owners wanted to close the Mills due to their poor conditions. But Government nationalized them to save from closure and consequent unemployment. Reasons for Nationalization were:

The Mill products were cheap. So these mills were important for poor people.

To prevent consequent unemployment.

To invest, modernize and develop the mills.

The Government completely failed to invest and modernize these mills.

4. PSUs’ were allowed to buy from Open Market. Public Sector Units (PSU) like Military were allowed by the Government to buy products from Open Market rather than from these Mills. This encouraged the discrepancies; even these PSUs’ were buying products at higher costs from Private Companies rather than cheaper Mill Products. This forced mills to sell their products to Private Dealers cheaper, which they sold to PSUs’ at higher costs.

5. LABOUR MOVEMENT. The bureaucrats not only indulged in corrupt practices but also victimized workers. Their legitimate demands were not met. Therefore workers resorted to protest and movement resulting into loss of production. This is also a possibility that it was a calculated policy of the Government Officials to force these mills to close down and blame the workers.

6. Government promised experts and Good Governance, but failed. After 1985, No Managing Director (MD) in NTC was for full time, these temporary postings resulted in various discrepancies. Non-Technical Administrators also played a big role. Heads of NTC were appointed by Government based on political connections who had no ideas about Textile Industries. E.g. D. N. Dixit was appointed the national head of NTC in 1990’s due to political approach as his close friend was then Chief Minister of a state. Weaker administration resulted into strong worker unions. So workers refused to increase efficiency provided in advanced machines.

7. Production was as per Political Requirements rather than Market Requirements. This kind of Production Strategy made it difficult for mills to compete with private industries. Most of the times the products were of inferior quality due to old machinery. But when high-quality stuff was made good enough to compete, Production was stopped to encourage the mass-production of cheap products to be distributed to the poor by political parties in power.

8. International Pressure. World Bank and International Monetary Fund (IMF) were pressurizing Indian Government to stop running Industries. According to them, Government should only make Industrial Policy. The Industries should be established and managed by Private Sector only. They encouraged India to either close loss making Industries or to give to Private Sector and even stop the Subsidy. Govt. of India positively reacted to their intentions and stopped all kind of Subsidies on Mill products.

9. Scientific Management failed due to poor wage structure. The administrators in agreement with Trade Unions tried to implement Efficiency system to improve the production standards, but this completely failed due to poor wage structure as in case of workers Basic wages are really low and all the encouraging amount given to the workers was based on basic wages.

Let capacity of a Mill is to produce 70 Units per day. According to efficiency system Mill administrators reduced this to 60 units, now workers have to work for let say 6 hours instead 7 hours to meet basic deadlines of production. And the more they will produce over this deadline, the more they will get according to their daily basic wage. Administrators thought that this will encourage the workers to produce even more than 70 units, but this lead to no more than 60 units’ production due to very low basic wages. To compensate for this, Administrators then had to open on Sundays too and pay the wages for Sundays at 33% more rate which was a great loss and a total failure of Scientific Management due to foolish implementation.

Not only the Textile Mills under head of BIC and NTC had to close, but private sector mills such as all the mills of JK Group and Maheshwari Devi Jute Mills (Tat Mill) closed down due to some of these issues and family matters.



In labor economics, the efficiency wage hypothesis argues that wages, at least in some markets, are determined by more than simply Supply and demand. Specifically, it points to the incentive for managers to pay their employees more than the market-clearing wage in order to increase their productivity or efficiency. This increased labor productivity pays for the relatively high wages. There are several theories of why managers pay Efficiency Wages (wages above the market clearing rate):

Avoiding Shirking: If it is difficult to measure the quantity or quality of a worker's effort and systems of piece rates or commissions are impossible, there may be an incentive for him or her to shirk (do less work than agreed). The manager thus may pay an efficiency wage in order to create or increase the cost of job loss, which gives a sting to the threat of firing. This threat can be used to prevent shirking (moral hazard).

Minimizing Turnover: By paying efficiency wages, the employees' incentive to quit and seek jobs elsewhere is minimized. This strategy makes sense because it is often expensive to train replacement workers.

Adverse Selection: If job performance depends on workers' ability and workers differ from each other in those terms, firms with higher wages will attract more able job-seekers. An efficiency wage means that the employer can pick and choose among applicants to get the best possible.

Sociological Theories: efficiency wages may result from traditions. Karloff’s theory (in very simple terms) involves higher wages encouraging high morale, which raises productivity.

Nutritional Theories: In developing countries, efficiency wages may allow workers to eat well enough to avoid illness and to be able to work harder and more productively.




At 5:09 AM, Blogger Unknown said...

Thanks for a wonderful piece of information . Is there a possibility of restarting the mills ?


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