Workers chanted ``Indians go back'' and manhandled one of the officials after rejecting an agreement for a wage hike arrived at the previous day between 22 union representatives and the management under the supervision of labour minister John Seneviratne.

Under the agreement, all workers were to be given a raise of Rs 1000 from June 1, 1999. It was also agreed that a normal three-shift system would be introduced. At present, workers in the three factories do just one or two shifts, and are paid overtime when they come on the remaining shifts.

The agreement was reached on Wednesday after 18 days of a work-to-rule agitation. But a meeting on the factory floor called by the union leaders the next day to inform all workersabout the agreement turned into a renewed agitation against the management, forcing their hasty exit.

The agitation is only the latest in a long list of troubles for Kiriya, whose operations seemed to be jinxed by one or another problem from day one of the joint venture two years ago.

``All we know is that we are up against very powerful forces. The stakes are high,'' said a dejected Kiriya official. Sri Lanka annually imports milk products, including 40,000 tonnes of milk powder, worth roughly 7 billion Sri Lankan rupees. Multinational companies manufacturing milk products are household names here, and caring mothers give their children powder milk ``manufactured and packed in Australia'' rather than fresh milk.

It was against this background that two years ago, invited by President Chandrika Kumaratunga, Kurien came here with a plan to cut down Sri Lanka's milk import bills.

The two governments announced a 10-year joint venture, with the NDDB holding 51 per cent of the shares in the newcompany.

Making an inspired speech before an appreciative audience, Kurien announced that within a few years, Sri Lanka would not become just self-sufficient in milk and milk products, but would begin exporting milk.

However, if Kiriya does not work, that dream will not come true. At the moment, 75,000 farmers supply over 1.5 lakh litres of milk everyday to Kiriya but there is not much headway in turning around the three loss-making milk plants which earlier belonged to the state-owned MILCO and which are crucial to all operations.

With long-entrenched and powerful vested interests at work, Kiriya had major problems with its inherited labour force from the beginning. In a country which remains deeply suspicious of India, interested parties predictably painted Kiriya as another instance of big brother's interference in Sri Lanka.

The plant located in the capital has been utilised only from 20 to 40 per cent of its installed capacity. Three times overstaffed, the salary bill of Kiriya is a whopping 14per cent in a country where the norm is 4 per cent, and it does one-third the business of other privately owned plants.

Used to success back home, the inability to take off in Sri Lanka has left the management disappointed.

``Our expertise is in managing much larger projects. The dairy plant is only a tool for a greater project that will transform Sri Lanka's agricultural sector. But if it cannot be converted into an efficient factory, the larger project too will not work,'' another official argued. If Kurien's vision for Sri Lanka can be implemented, it will spell the end of the captive market that multinational dairy companies have enjoyed in Sri Lanka so far. It will also badly hit a large number of local trading houses that handle the imports.

Despite the gloom, the message from the NDDB camp is: ``We are certainly going to stay on''. No stranger to powerful lobbies, NDDB believes it can win this battle too even though this is foreign soil and it is dealing with a foreign government.

``When youare up against formidable forces, these things are bound to happen. It will take some education and some time before we can make things work. But it holds great scope for Sri Lanka,'' said a senior official.