Labour reforms still a perennial hot potato in India – The Financial Express

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The Narendra Modi regime hasn’t made much headway either, although at the very beginning of Modi 1.0, it embarked on the reform path by proposing to amalgamate numerous labour laws to four distinct Codes.

Labour reforms have been a political hot potato in India, even when over 85% of the county’s over 50-crore workforce have little to gain or lose from it, as they work in the ‘unorganised sector’. The Narendra Modi regime hasn’t made much headway either, although at the very beginning of Modi 1.0, it embarked on the reform path by proposing to amalgamate numerous labour laws to four distinct Codes.

Reforms of India’s labour market were not part of the economic liberalisation measures unleashed in early 1990s; the first serious attempt at labour reforms was the report of the second National Commission on Labour (NCL) that proposed major changes in labour laws.

The second NCL report had twin objective — promoting ease of doing business and cutting industry’s wasteful labour costs and bolstering workers’ rights and welfare. In 2002-2003, then prime minister Atal Bihari Vajpayee used the sessions of the Indian Labour Congress and industry body Ficci to drive home the point that these reforms can’t wait. Addressing the 38th India Labour Congress in September 2002, Vajpayee said: “I would like to use this forum to once again make a strong appeal to one and all, both in and outside Parliament, for support to the government’s agenda of labour reforms…

To appreciate the urgency of this appeal, consider the context which has made labour reforms the need of the hour.” Alas, he could act on the second NCL report till he demitted office in 20024 and the subsequent two UPA governments have turned a blind eye to the commission’s recommendations on the table.

In 2014, the Modi 1.0 government announced a plan to amalgamate 44 central labour Acts into four codes; in 2020, the plan is still hanging fire. Only the code on wages, which proposes universalisation of minimum wages, has been passed by Parliament so far, and even the Code is not under implementation as the relevant rules haven’t yet been notified. The three other codes — on industrial relations (which contains reform proposals including easier hiring and retrenchment freedom for employers and redefining of trade unions’ role), social security and operational safety, health & working conditions (OSH) — have been introduced at least once in the past one year in the lower House, though none of them could be passed.

The OSH code has been lately redrafted and the modified version is to be taken up by the Cabinet for introduction in Parliament again.

To Modi’s credit, fixed-term employment was brought in first in all sectors by March 2018 (it was first introduced in the garment industry in October 2016), allowing industries prone to seasonality of demand to cut costs and rationalise their production schedules.

Responding to crisis faced by industries due to lockdown, some states as Uttar Pradesh, Madhya Pradesh, Gujarat, Karnataka, Rajasthan and Punjab have sought to amend their existing labour laws, in some cases suspending them altogether or taking steps to increase working hours, etc. But with the courts and the central labour ministry finding legal incongruities in these proposals, most of these have been rolled back/withdrawn.

The latest to withdraw the changes proposed in labour laws is the Karnataka government; last week, it revoked its May 22 notification that allowed all factories, registered under the Factories Act, 1948, to extend working hours from eight to ten hours and 60 hours a week for three months till August 22.

Following a rap from the Allahabad High Court, the UP government had so earlier withdrew its order exempting factories from the 8-hour shift per day and allowing them to extend the shift to 12 hours for a period of three months, beginning from April 20. The UP had in fact proposed eliminating nearly all worker protection laws for a period of three years.

At the Centre, the Parliamentary Standing Committee on labour has given its recommendations on the IR Code, the most important initiative of the Modi government to improve ease of doing business. The government had to defer its third round of meeting among members on the social security code, previously scheduled on June 5, before preparing the final report. Now, the meeting has been rescheduled for June 17, but chances are it may be postponed further.

Clearly, there is a lack of firm resolve on the part of the government to complete the entire process in a time-bound manner.

Meanwhile, some industry-friendly provisions, mainly in the IR Code, have also been whittled down on anticipations of backlash. The original draft IR code had ambitious proposals like allowing firms employing up to 300 people, against 100 now, to retrench/lay off workers and/or close down without government permission. However, the one which was tabled in the Lok Sabha in 2019 mellowed it, keeping the present threshold, but gave the states flexibility reduce or increase the threshold.

Since labour is in the concurrent list of the Constitution, some states have already raised the threshold taking the cue from the Centre, but foreign investors take cue from the federal laws rather than the state laws.
The IR Code has proposed to tighten trade unionism in the industry. Under a new feature on “recognition of negotiating union”, it has been proposed that a trade union will be recognised as sole “negotiating union” if it has support of 75% or more of the workers on the muster roll in an establishment. If no such trade union has support of 75% or more of workers on the muster roll of that industrial establishment, then a negotiating council will be constituted for negotiation. The provision for workers resorting to strike has also been tightened.

Saji Narayanan, president, RSS-affiliated Bharatiya Mazdoor Sangh (BMS), said the three codes, still pending to be cleared, were not drafted in consonance with the international labour standards and thus, facing objections from the trade unions. Labour expert KR Shyam Sundar, a professor at XLRI, says big-ticket labour reforms remained a non-starter because of the complexities created in the codification process and absence of application of mind. As a result, the government is neither appreciated by the employers’ body nor the trade unions.

At the same time, he said, in view of the lessons learnt from Covid-19, the direction and content of labour reforms have to be substantially changed. The pandemic has exposed huge legislative and governance deficits concerning non-standard workers, he said.

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