Ease of doing biz has little to do with labour reforms

The Maharashtra government, as part of its efforts to make the industrial state more attractive for
investment, has been pushing for labour reforms that will make closure of loss-making factory and service units easier. The trade unions, including the Bharatiya Janata Party-led Bhartiya Mazdoor Sangh, have strongly opposed these measures.

Seeing the growing controversy, the plan to push through amendments to the Industrial Disputes Act, 1947 in the winter session of the Assembly was deferred. However, it is only a matter of time before the changes are made.

Tackling Pesky Laws

At the Centre of the controversy is Section 25(O) of the Industrial Disputes Act that requires companies employing 100 or more workers to seek government permission in case they want to shut shop. The state government wants to raise the ceiling to units with 300 or more. Another amendment that will make it a hire-and-fire regime is to allow closure where the employer is willing to pay 60 days wages for every year served to the retrenched employee.

Maharashtra has already amended the law for contract labour. The Contract Labour (Regulation & Abolition) Act, 1970 ensures contract workers are provided with minimum standards including timely payment of wages, weekly holidays, and the provision of canteen and creche facilities. In February last year, the Maharashtra government notified an amendment that limited the scope of the Act to units employing 50 or more workers from the earlier level of 20 or more. This has given a carte-blanche to owners of very small units to do as they please in respect of employment norms.

Rajasthan cast the first stone. As far back as November 2014, the President notified amendments to three sets of protective laws – the Industrial Disputes Act, the Factories Act and the Contract Labour Act which made shutting of units and laying-off employees easier. Madhya Pradesh followed in November 2015 amending as many as 15 labour laws that removed much of the protective net around employees’ rights.

Our case is fairly straight forward: Labour is an easy scapegoat to beat. Growth of investment has little to do with union unrest and labour laws. Capital investment moves on global cues and market signals; and sometimes on macro-economic policies adopted by the government. The global market crash of 2007-08 had nothing to do with militant trade unions. Foreign investors moved money out of India to salvage their over-extended positions back home. In the last year, lakhs of jobs in India have been lost and thousands of small units shut not because of labour unrest but due to the direct impact of demonetisation and the sloppy implementation of GST.

Whining about harsh labour laws has always been a bargaining chip used by corporate houses to extract concessions from government.

Unions As Scapegoats

One can understand the labour militancy of the days of Datta Samant in Mumbai in the early 1980s or George Fernandes a decade earlier, had crippled sections of organized industry. However, those days are long gone. The Narasimha Rao Liberalisation from 1992 changed the script. Corporations and industrial growth got right of way, and labour unions went on the back foot. Today, trade unions have been broken, and labour court judges have no work.

Government data conclusively proves that industrial disputes – both lockouts imposed by managements and strikes by workers – have drastically declined to a level that they have stopped posing a threat to industrial activity. From calendar 2007, which saw 389 lockouts and strikes and 27.17 million man-days lost, 2014 was an oasis of calm with just 143 lockouts and strikes involving a loss of 3.6 million man-days.

In the early years after Independence, there was a boom in labour unrest and demand for workers rights. Workers in the traditional sectors like composite textile mills in Mumbai, and the jute industry in Kolkata went on a warpath. To restore the rule of law and dispense social justice, the Nehruvian socialist government passed laws like the Industrial Disputes Act.

But, corporate groups learnt to deal with these pesky regulations. Laws never stopped companies wanting to shut down and retrench workers. Mumbai’s composite textile mills, that once employed 2.5 lakh workers in the 1970s, disappeared to make way for lucrative real estate in south Mumbai.
But for whatever they are worth, labour laws are a deterrent for aggressive managements; at the very least, they help workers get better severance packages. If we let go of the few safety nets we have, industrial relations may be thrown back to the violence of the Law of the Jungle.

gurbir@newindianexpress.com