CORPORATE RESTRUCTURING OF GUJARAT STATE ROAD
TRANSPORT CORPORATION

Professor Shubhabrata Basu wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2012, Richard Ivey School of Business Foundation Version: 2012-01-26

“All our efforts, exercises and future projections, so far, have come to not. We have to think it all over again. This new wage demand is a coup de grace for the corporation. I do not intend to preside over its demise.”
- Rajgopal Raj Gopal (Rajgopal), IAS,
1
the vice-chairman and managing director of Gujarat State Road Transport
Corporation
2 (GSRTC), was leaving the Sachivalaya
3
at Gandhinagar. In a rare display of solidarity, all of the registered trade unions (TU) of GSRTC gave a call for strike on August 23, 2010. For about two years, the unions were demanding wages as per the 6th Pay Commission,
4
implemented by the
Government of India in 2006. The recommendations of the commission were subsequently adopted by all state governments and the majority of state-owned enterprises. Time-consuming wage negotiations began between the management and TUs but yielded no results. The TUs broke the stalemate by calling a strike, thereby disrupting a public utility service.
5
In the presence of the State’s Chief Minister (CM), Rajgopal conceded to the TU demands in principle. The CM also requested that Rajgopal present a revival plan for GSRTC reflecting the impact of the wage revision.
While this intervention by the CM averted a transport strike that would have affected about 2.2 million passengers, Rajgopal faced a larger problem. Pay Commissions had been implemented in India with retrospective effects: this implied that Rajgopal had to pay arrear wages to his present and retired 1 IAS — Indian Administrative Services — was the administrative bureaucracy of the Central Civil Services of the Union of
India. IAS officers occupied the administrative positions in the states as well as in the Central Government of India.
2
GSRTC was the state transport organization of the State of Gujarat in India.
3
Sachivalaya (Sanskrit) was the State Secretariat of Government of Gujarat, located in the state capital.
4
The Central Government of India constitutes pay commissions from time to time to revise the salaries of all Central
Government employees and offset inflationary pressures.
5
As per the Industrial Disputes Act (1947), no trade union or employer could call for a strike or a lockout of work, respectively, without serving 14 days notice. On receipt of the notice, conciliation meetings had to be called by the officials of the concerned (state or central) labour department to amicably resolve the issue(s).