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Mainstream, VOL LIII No 30 New Delhi July 18, 2015

MNCs Mar India (ns)

Monday 20 July 2015

by A.V.V.S.K. Rao

“Two things are infinite:The Universe and human stupidity andI’m not sure about the Universe.”—Albert Einstein(1879-1955)


When India attained independence in 1947 the then Prime Minister, Jawaharlal Nehru, wanted to make the country wealthier by encouraging development of modern heavy industries. He had strong support from elite groups in the Indian National Congress and some leading industrialists coming from feudal background. The new political elite brought to task a set of beliefs about economic policy that sought a middle way between heavy reliance on private enterprise and central planning of the whole economy. This is the combination of the Welfare State and mixed economy developed on the basis of the Fabian Socialistic ideas of George Benard Shaw (UK). A mixed economy where state owned enterprises operate major sectors of the economy and private enterprise is guided by considerable government regulation, it was felt, would successfully meet the economic challenges facing the country. The Government of India, in its Industrial Policy Resolution of 1948, expressed a strong preference for Indian enterprise, but indicated willingness to allow some collaboration with foreign firms.

Diabolic Designs Union Carbide

A new type of dependence has emerged from the 1950s based on the multinational corpo-rations which began to invest in industries geared to the internal market of the developing countries. This opened a new chapter in technological-industrial development of many developing countries, including India, aspiring to achieve development by taking the mixed economy route.

The Union Carbide (India) Limited (UCIL) operated in India much before independence, primarily as a maker and seller of dry batteries under the “Eveready” trade mark also used in the USA by the Union Carbide. The UCIL expanded into making fertilisers and pesticides in the 1960s as the Indian Government encouraged indigenous production to supply farmers with the chemicals needed to raise the new hybrid types of rice, wheat, and cotton. India could achieve a breakthrough in agricul-tural production within a few years. This has been popularly described as the “Green Revo-lution”. When the UCIL established its agri-culture products division in the mid-1960s, the largest concentration of Indian chemical plants was located in Chambur near Bombay, an area called “Gas Chamber” by local residents because of extensive pollution. There was relatively little industry in Bhopal, but both the Central Government and Madhya Pradesh Government were eager to bring industry to the area. Thus, the UCIL’s plans for a chemical plant and agricultural products R&D centre met with favourable reception, and the State Government even supplied land for the proposed chemical plant for 99 years on favourable conditions.

The UCIL constructed its first plant in 1968-69. In October 1975 it secured a licence from the Central Government to produce up to 5000 tonnes of “SEVIN”, a carbaryl pesticide, using a methyl isocyanate-based process. This would require adding new facilities in the existing compound and undertaking more complicated production processes. Even so the State Planning Board classified the plant as a “general” industry, rather than “hazardous industry”. By 1982, the UCIL and Union Carbide both realised that the new plant was not economically viable because of changes in the market. By February 1984 the plant was operating at about one-fifth of its capacity. Initially, the managing and supervisory staff for the Bhopal units were trained in the Union Carbide’s West Virginia plant in 1981-82. As the plant capacity declined, they began leaving for more attractive jobs and were replaced by less-skilled employees. Low production volumes seemed to justify reductions in the work force though the local labour unions insisted that the company was going too far. In the methyl isocynate unit, the work force reduced from three supervisors and 12 workers on each shift to one supervisor and six workers.

During the night of December 2 (1 am)-3, 1984, a leak of some 40 tonnes of methyl isocynate (MIC) gas caused one of the highest- casualty industrial accidents of the 20th century. At least 2000 people died immediately and another 200,000 to 300,000 suffered respiratory and other injuries of varying severity. The property damaged consisted mainly of contami-nation to nearby areas by various chemical residues. The defoliation of tress immediately and afterward is clearly attributable to the gas leak. Contamination in the nearby settlements might have had multiple sources.

 Locally and globally, the blame for the accident was quickly assigned to the Union Carbide. Victims filed law suits against both the company and the Indian Government— citing its failure to regulate effectively—in India and the USA during early 1985. After a great deal of efforts to negotiate a settlement, the Supreme Court of India pressed the sides to come to a global settlement of all cases. They agreed on a compensation of $ 470 million, a settlement penal of the Indian Supreme Court approved and ordered the parties to carry it out. For the anti-corporate and anti-capitalism activists the “Bhopal tragedy” has become synonyous with corporate greed and callousness.

Enron—Dabhol Power Company

Began in 1992, the Dabhol power plant near India’s financial capital Bombay was to have gone online by 1997. It was supposed to supply energy-hungry India with more than 2000 megawatts of electricity, about one-fifth of the new energy needed by India every year. The Dabhol Power Company was company based in India, formed to manage and operate the power plant. The Dabhol plant was built through the joint effort of Enron, GE and Bechtel. GE provided the generating turbines to Dabhol, Bechtel erected the plant, and Enron was to manage the Dabhol project through Enron International.

Phase-I of the plant was set to burn naphtha, a fuel similar to kerosene and gasoline.
Phase-I would produce 740 megawatts and help to stabilise the local transmission grid. The Phase-I project of the plant started in 1992 and was finally completed in two years behind schedule. Phase-II would burn liquefied natural gas (LNG). The LNG infrastructure, associated with the LNG terminal at Dabhol, was going to cost around $ 1 billion. In 1996, the Government of India assessed the project as being excessively expensive and refused to pay for the plant. As a result the Phase-II construction came to a grinding halt. The Maharashtra State Electricity Board (MSEB) decided that it could not afford to purchase power—at Rs 8 per unit kwh— charged by Enron. Enron had to face bank-ruptacy. Efforts to revive the project failed with costs climbing to $ 3 billion. The power plant’s Phase-I was taken over by the Ratnagiri Gas and Power Private Ltd (RGPPL) in July 2005 and it was renamed as the RGPPL. However, the plant ran into problems due to shortage of naphtha supply. The RGPPL ultimately closed down the plant in July 2006.

The Enron Dabhol Power Project was widely criticised for excess costs and deemed a white elephant. Socialist groups cited the project as an example of corporate profiteering over public good. As far back as April 1993, the World Bank evaluated the Dabhol project and concluded that it was not economically viable, and thus could not be financed by the Bank. For many on the Asian subcontinent, Enron epitomised the downside of the modern global economic system where powerful corporations from the West often bully their way into development projects that fail to live up to shiny promises.

Monsanto—Bt Brinjal

India’s leading seed company, the Maharashtra Hybrid Seeds Company, better known as Mahyco, licensed and used the gene obtained from an American seed giant, Monsanto. The first agreement to develop Bt Brinjal was signed in 2005 between Mahyco and two agricultural Universities, University of Agricultural Sciences (UAS) in Dharwad (Karnataka) and Tamil Nadu Agricultural University (TNAU) in Coimbatore. Following concerns raised by some farmers, the anti-GMO(Genetically Modified Organisms) activists and some scientists, the Government of India officially announced on February 9, 2010 that it needed more time before releasing Bt Brinjal. An irregularity was also brought to the notice of the Karnataka Biodiversity Board by the Environment Support Group, a charitable trust in Bangalore, in February 2010. It found that agencies had accessed at least 10 brinjal varisties from Karnataka and Tamil Nadu without seeking prior consent of the National Biodiversity Authority and State Biodiversity Boards. Mahyco became India’s first commercial entity to be accused of bio-piracy, or misappro-priation of local germplasm.

 Monsanto’s seeds in India did not produce what the company had promised and farmers hoped. The expensive seeds piled up debts and destroyed the farming fields. In many cases, the crops simply failed to materialise. The farmers were not aware that the GM seeds required more water than the traditional seeds. Besides this, frequent monsoon failure in different parts of India worsened the crop failure. With no harvest, the farmers could not pay back the debts. Burdened with debts and humiliation, the farmers in many parts of the country committed suicide. To date an estimated 200,000 farmers have committed suicide all over India.

Many controversies surround the develop-ment and release of genetically modified foods, ranging from human safety and environmental impacts to ethical concerns such as corporate control of the food supply and intellectual property rights. Brinjal is an important food crop for India, and the potential commercia-lisation of the genetically modified variety has drawn support and criticism. Although it is a major crop in India, brinjal production is relatively low with fruit and shoot borer infestation a major constraint to yield. The Parliamentary Committee on Agriculture on August 9, 2012 asked the government to stop all field trials and sought a ban on GM food crops like Bt Brinjal. It also sought a thorough probe as to how permission was given to commercialise Bt Brinjal seed when all the evaluation tests were not carried out.

Bt Cotton

In 1995, Monsanto introduced the Bt techno-logy in India through a joint venture with the Indian company, the Maharashtra Hybrid Seeds Company (Mahyco). In 1997-98, Monsanto started open field trials of its GMO Bt Cotton illegally and announced that it would be selling the seed commercially the following year. Monsanto seed monopolies, the destruction of alternatives, the collection of super profits in the form of royalties, and increasing vulnerability of monoculture have created a situation of debt, suicides and agrarian distress driving the farmer suicide epidemic in India. The farmers, who took to this extreme step, usually cultivated cash crops such as cotton and chilies, which are either not part of the government’s procurement system or inadequately covered by it. Usually, they are marginal farmers working on small, unirrigated landholdings and part of their borrowings are from private sources. This systemic control has been intensified with Bt Cotton. That is why most suicides are in the cotton belt.

According to P. Sainath, who has covered the farmer suicide extensively, “The total number of farmers who have taken their own lives in Maharashtra since 1995 is closing in on 54,000. Of these 33,752 have occurred in nine years since 2003, at an annual average of 3750. The figure for 1995-2002 was 20,066 at an average of 2508. Suicides have increased after Bt Cotton was introduced. The price of the Bt Cotton seed from 1995 jumped 8000 per cent.” According to a latest study (2014) published by the Centre for the Analysis of Sustainable Agricultural System, California (USA), the annual suicide rates of farmers in rain-fed areas are directly related to increase in Bt Cotton adoption. Revising the raw annual suicide data for Andhra Pradesh, Gujarat, Karnataka and Maharashtra during 2001-2010, the study found 86,607 of 549,414 suicides were by farmers, and 87 per cent were men with numbers peaking in the 30-44 age-group. The study is significant for two reasons. First, most cotton cultivation in India is rain-fed; second, between 2002-2010 the adoption of Bt Cotton hybrid went up significantly to 86 per cent of the total cultivated area of cotton in India. Monsanto’s royalty extraction and high cost of purchased seed and chemicals created a debt trap. The Research Foundation for Science, Technology and Ecology sued Monsanto in the Supreme Court of India. The panel of technical experts appointed by the Supreme Court recommended a 10-year moratorium on field trials of all GM food and termination of all ongoing trials of transgenic crops.


“If rational men cooperated and used their scientific knowledge to the full, they could now secure the economic welfare of all.”—Betrand Russell(1872-1970)

Instant Foods — Slow Poison

Recently Maggi instant noodles of Nestle Brand of Swiss manufacturers has become the centre of controversy. Before going into details, one needs to take a look at the global situation. Instant noodles cleared the 102.7 billion mark in 2014. China accounts for 44.4 billion units sold and Canada is in the 26th place in the top noodle-ardent countries. India occupied the fourth place in 2010 and also 2014 accounting for 5.34 billion units. (Table-1)

As per Table-2, Canada competed with Ireland for the first place in the study of 17 developed countries ranked for their Food Safety Systems. The overall world ranking of food safety performance is illustrated in Table-2. Mean values of 3 are attributed to progressive responsive and superior outcome scores; 2 to moderate responsive and average outcome scores; and 1 to regressive responsive or poor outcome scores.

Maggi India case

Instant noodles are cheap, easy to make and even sometimes tasty. They come in all sorts of synthetically delicious flavours. Nestle intro-duced Maggi noodles to Indian consumers for the first time in 1983. It is estimated that the total sales of all the nine variants of Maggie exceeded Rs 15 billion. A brand having such a vast market suddenly faced crisis for the simple reason that tests conducted in laboratories of various States found that Maggi noodles contained lead in excess of the approved limit. The approved limit of 2.5 PPM (Parts Per Million) lead should not exceed in fast foods. Nestle claimed in 2012 that the content of lead in all variants of noodles was just 0.0155 PPM. The tests conducted in laboratories in Uttar Pradesh revealed a startling figure of 17.2 PPM lead in Maggi noodles. In other words, it contains a very high level of lead content, almost more than seven times the permissible limit. Besides this, on Maggi noodle packets it is clearly mentioned that for taste no monosodium ghutamate (MSG) or preservative salt is added. However, tests conducted in labs revealed sodium (salt) content is also six grams, whereas the permissible limit is only three grams.

The order by the Food Safety and Standards the Authority of India (FSSAI), New Delhi directing the Nestle Company to recall the product, while referring to reports from various States, clearly underlines the overwhelming evidence of Maggi being unsafe and hazardous for human consumption. For that matter, some time ago, it was found that Maggi noodles consisted excess doses of MSG and Nestle Corporation had to face trial in a Jamshedpur (Jharkhand State) court. At that time, the MNC managed to get away by stating that the problem would not assume greater proportions and subside immediately. As soon as the FSSAI directed Nestle to recall all the nine variants of the instant noodles sale, distribution and display terming the product “unsafe and hazardous”, for fear of losing consumer confidence Nestle readily agreed to withdraw its products.

 As of June 12, 2015, 18 States, including Maharashtra, Tamil Nadu, Karnataka, Kerala, West Bengal, Odisha, Madhya Pradesh, Bihar, Gujarat, Jammu & Kashmir and Andhra Pradesh, have banned Nestle noodles. The Future group’s 700 food outlets, including Big Bazaars, have also taken them off their shelves. In 2014, Nestle had spent just Rs 19 crores for quality testing of instant foods. On the other hand, for sales promotion of Maggi noodles, Nestle had spent Rs 445 crores on advertisement. It shows that the attitude of the MNC is aggressive in sales promotion and passive in quality control. In the 1970s when the WHO was campaigning for benefits of “mother’s milk”, Nestle introduced the baby milk powder. It has sent sales girls, dressing them in white gowns claiming them as “nurses”, for door-to-door campaign and increasing sales promotion. This strategy was exposed and in 1977 a booklet on Nestle had come out with the title “Baby Killer”. Food products with high lead content cause health hazard because lead poisoning affects brain, heart, and other important organs. It is also dangerous for life and all the more dangerous in the case of children. Through food if lead enters into blood, nerves, and bones in the long run it weakness the human body. On the other hand higher content of MSG in food products has deleterious effect on brain, liver and leads to obesity and diabetes. In some cases it may also result in blood pressure problems. In the case of children it may cause behavioural problems and affect cognitive development.


The Maggi controversy has opened a Pandora’s box on the legal liability of celebrities who endorse food products. It exposed ambiguities in the Food Safety and Standards Act of 2006, making the current debate an opportunity to judicially interpret the role and liability of brand ambassadors. One of the primary statutory objectives of the 2006 FSSA is to ensure availability of safe and wholesome food for human consumption and it makes the promoter, manufacturer, packer, wholesaler, distributor, seller and even the manager of food business outlet liable for violation including “unfair trade practice” in several instances. But there is no specific word in the Act about the extent or lack of liability or duty of care of the brand ambassador, who signs on to promote the brand as its “face” and takes on the role of a marketing representative. Section 24 [ attack on rural poverty;] sub-section [strategy for rained agriculture;] says: “No person shall engage himself in any unfair trade practice for purpose of promoting sale....” This clause does not specify who the “person” mentioned in it is, thus making the ambit of the provision pliable. Clauses (a)(b) and (c) of sub-section (2) holds this “person” legally responsible for falsely representing the standard and quality of the food product, its need and usefulness and also for giving the public “any guarantee of the efficacy that is not based on an adequate or scientific justification”.

If any defence of such guarantee is raised in a court of law, the burden of proof lies on the person doing so. If the definition of the term “person” used in this provision includes a brand ambassador, he has to provide the scientific justification in his defence. Besides, it is reasonably assumed that a person must have applied his mind about the quality and standard of a brand before agreeing to promote it. Whether this means brand ambassadors will be held responsible for every single thing that goes into the making of the product they endorse is not spelt out but it is this very ambiguity that has left actor Amitabh Bachchan, Madhuri Dixit and Preity Zinta in the dock.


Maggi noodles, or for that matter any instant noodles, are not healthy for children with or without lead and MSG. Limited consumer awareness is a big issue in a developing country like India. Big companies, therefore, do not have a compelling reason to disclose adequate and appropriate information. In this context labelling laws in the country need much improvement. This gives authority to the FSSAI to recommend certain labelling design for fast foods. It is time we move to a simple labelling for classifying foods particularly those marketed by MNCs. In the case of other products, in many countries, including India, the labelling is altogether different. For instance, on cigarette packets a warning advisory is given. So also for alcohol products. On the same lines food items can be classified into different types and can be assigned a particular colour mark.

Here it is suggested four types of coloured dots — Amber, White, Yellow and Green as classificatory signs on labels. The amber colour dot on a label indicates that the item comes under junk food and needs testing once a year in the FSSAI Laboratory, New Delhi for quality testing. For instance, aerated drinks, hydrogenated oil, energy drinks, cookies, pastries and other snacks come under this category. These are high in calories and low in nutritional values. The white colour dot on labelling denotes that the product is mostly junk but not high in fat content such as instant noodles, bread, juices made from concentrates with added sugar, kechups, sauces, curd, ice cream, chocolates. Curry powders, masala powders, pickles can also be included in this category.

The yellow colour doting on the label implies that the foods are healthy but still processed foods such as skim milk packs. Low sugar juices, tetra pack juices belong to this category. Finally, allotment of the green dot on a label signals that the ingredients are fresh, healthy and unprocessed foods such as low calories rice flakes, corn flakes, wheat flour, suji, ragi flour, vermicelli and so on. This type of labelling warrants to secure higher levels of food safety on par with Western countries.


The multinational corporations intruded into the developing countries in the first development decade (1960-70) when these economies, adopting planning, emphasised to achieve a kind of “revolution” in agriculture. Simultaneously their economies were aiming at development of industries requiring huge investments. For this they needed foreign collaboration. Slowly the MNCs entered the segment of fertilises and pesticides; later power generation and food crop seeds (GMO) in India. Though initially there appeared to be certain economic gains, no Third World country is happy with the MNCs’ presence. By creating conducive environment and adhering to policy consistency, the Indian Government can encourage its own entrepreneurs to develop giant enterprises and send Indian MNCs abroad. For instance, we have the Tata group which developed an iron and steel plant as early as in 1913. Similarly during the independence movement when Mahatma Gandhi gave a call for boycott of foreign goods, particularly textiles, Godraj questioned him saying that we have to show an alternative. Then he developed “padlocks” which are useful to all households and got patents in England. Likewise there are many great entre-preneurs who can be prompted to develop giant corporations for exporting. Otherwise, there is a danger of the MNCs devitalising the economy for the simple reason that India is a pluralistic society and the country is ridden with political instability, regional problems and increasing terrorism. There is the possibility of the country sliding into the “failed state” category as happened in the African continent three decades ago. This has to be averted.

By 2014, in India there are around 35 crore people in the age-group of 14 and below. This is more than the combined population of the US and Malaysia. The population in the age-group 15-24 comprises 22 crores which is more than the population of Brazil. Together there are nearly 58 crore people below the age of 24 years. This constitutes 46.6 per cent of India’s population. And this age-group is habituated to taking fast foods. This large group belongs to the productive age-group and will contribute to India’s wealth generation in the next 50 years. For this, food safety is more important.

Another dimension is India positioned on a low rank of 135 with the Human Development Index (HDI) value of 0.586 in 2013 compared to Norway at 0.944 (Rank 1), and Australia, Switzerland, Netherlands and the USA occupying the next four positions. Out of 133 countries rated on indicators of well-being such as health, water and sanitation, personal safety, access to opportunity, tolerance, inclusion, personal freedom and choice, India has secured the 101th place. This is lower than India’s rank of 93 for GDP per capita income. Even Nepal and Bangladesh rank higher than India in the social progress index (SPI) ratings.

For the last one-and-a-half decades govern-ments, irrespective of their political leanings, have not done anything substantially for sustainable development. People in any economy with higher food safety, better health and training can contribute to improved productivity and production in major segments of the economy, namely, agriculture and industry. This will lead to a better quality of life for all people enabling the country to achieve the ideal of welfare in a liberal, mixed economy.


1. Peterson, M.J. (2008), “Bhopal plant disaster”, International Dimension of Ethics Education in Science and Engineering (available at www.umass/edu/str/ethics)

2. Parry, Sam, “Enron’s India Disaster”, December 30, 2001, consortiumnews.com

3. Dhabol Power Company—https://en/wikipedia.org/wiki/Dabhol_power_company

4. Shiva, Vandana, “The Seeds of Suicide: How Monsanto Destroys Farming”, Global Research, March 13, 2014

5. The Hindu, June 21, 2015.

6. World Instant Noodles Association, Japan.

7. Atkins, Eric, “Report of Conference Board of Canada on Food Safety”, The Globe and Mail, November, 20, 2014.

8. The Hindu, June 5, 2015.

9. UNDP, Human Development Report, 2014.

10. The Hindu, April 9, 2015.

Prof Rao is an economist and analyst. He was formerly Senior Professor and Head, Department of Economics, Osmania University, Hyderabad.