The labour ministry won’t be pressing forward with the draft small factories legislation as it wants to make sure that workers’ rights are protected, said officials. Stalling the policy could affect the government’s efforts to enhance ease of doing business for small and medium enterprises.
Under the draft Small Factories (Regulation of Employment and Conditions of Services) Bill, 2014, all factories employing less than 40 workers were to be brought under a common regulatory regime to exempt them from 14 central labour laws. The relaxation of strict labour laws is seen as a key structural reform that will help boost economic activity and job creation.
The bill was floated by the labour ministry in October 2014 on the recommendation of the Second National Commission on Labour in 2000.
More than three years later, the ministry has decided that no special concessions should be given to micro, small and medium enterprises or MSMEs at the cost of workers’ rights, officials said.
“We don’t need a dedicated bill for small factories. Why do you want small factories to be exempted from all key central labour laws?” said a senior government official. “It would have led to unnecessary harassment for our workers who could have been exploited either through longer work hours or lesser than minimum wages, besides being devoid of other social sector benefits.”
Small and medium enterprises account for 30% of India’s total industrial production.
A dedicated legislation could have given a push to the government’s massive drive to improve the country’s performance in the World Bank‘s ease of doing business ranking.
India entered the top100 last year following various policy changes. The government aims to enter the top 50 as part of efforts to woo investment.
Although the ministry had made provisions to ensure the basic rights of workers, it wasn’t sure if employers would abide by these in the absence of some kind of monitoring, the official said.
Trade unions were resisting the bill’s proposal to shift workers from the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, to provident fund schemes approved by the Insurance Regulatory and Development Authority, but were not totally opposed to the legislation.
“The Small Factories Bill was an outcome of an agreement between all stakeholders at the Indian Labour Conference,” said Virjesh Upadhyay, general secretary of RSS-affiliated trade union Bharatiya Mazdoor Sangh. “We had some reservations about the bill but the ministry cannot unilaterally decide to abandon the legislation.” He said the ministry should revive the legislation and pursue it aggressively to take it to its rightful conclusion.