Grasim Industries started the plant at Mavoor following an agreement in 1958 between Kerala government and the Birlas. The factory became operational in 1963.
Following the expansion of factory with the setting up of the fibre division in 1968, pollution became acute, rendering Chaliyar water into "foul smelling black soupy liquid'. Intense protests made Kerala government constitute an expert committee. On the basis of the committee report in 1972, the National Environment Engineering Research Institute came out with a programme to curb pollution.
In the meantime, pulp production was increased from 100 tonnes per day (tpd) in 1963 to 200 tpd, which meant that the factory needed 800 to 1,000 tonnes of woodpulp daily. About 600 tonnes of wood waste was being dumped into the river along with improperly treated effluent. By their own admission, the factory then required 48 million litres per day (mld) of water for the pulp division and 20 mld for the fibre division. The water requirement of Kozhikode municipal corporation, which had a population of 500,000 at the time, was only 45 mld. Today, the factory, with an annual turnover of 200 crores, draws 140,000 cubic metre (cum) water daily from the river without paying anything, and in turn lets over 40,000 cum of effluent into the river.
The government has been providing bamboo, eucalyptus, and other wood at subsidised rates to Grasim Industries right from its inception. When the factory was set up, the state government had agreed to supply 160 lakh tonnes of bamboo annually at the rate of Rs 1 per tonne. In 1974, the price of eucalyptus was fixed at Rs 22.50 per tonne and other soft wood at the rate of Rs 15 per tonne.
In 1986, the price of bamboo was raised to Rs 400 per tonne. The management closed down the factory, alleging labour dispute for nearly two years. Meanwhile, it used the suicide committed by some factory workers to strike a bargain with the government, forcing it to reduce bamboo price to Rs 250 per tonne. Government rates were Rs 1,079 per tonne in Maharashtra and Rs 1,170 in Assam.