Case Study 3

[Prathmesh]

Raghu is a managing partner of a textile company (KTex). The company
is three years old. It made a profit of Rs. 90,000/- in the first
year, but has suffered losses in the past two years. The earnings of
the company are through a conversion charge paid by the export
consortium per metre of cloth produced. This amount used to be Rs. 8/-
in earlier times, but now it has come down to Rs. 5/-. There is a
public outcry against the pollutants from the company harming the
environment. Also there is a labour unrest as the workers are
demanding advance wages. There are competitors, who under similar
conditions are making profits, and are meeting the workers' demands.
As a result some of the workers of Raghu's company have left him and
joined the competitors.

There are ten mills in Raghu's company, each can work for a maximum
time of 16 hours per day. Each mill produces 80 m of cloth per day,
for which 22 workers and 2 supervisors are required. These workers are
paid Rs. x/- per day. Some 6-7 children also work in each mill. Raghu
also has to meet certain timing constraints before which the final
product is to be delivered. Now an export consortium has offered Raghu
an offer to upgrade three of his mills. They will be providing better
quality yarn to him; and will pay him a conversion charge of Rs. 10/-
per m of cloth per day. Also now each mill can produce 84 m of cloth.
But the timing constraints now are very stiff, and if they are not
met, then a stiff penalty would be imposed. Also an investment of Rs.
5,000/ per mill is required for all is required for all this. Raghu
can take a bank loan to get this money. What should Raghu do?