States put freeze on labour laws to get busi­ness go­ing

Ut­tar Pradesh and Mad­hya Pradesh sus­pend ma­jor labour laws to boost econ­omy, cre­ate jobs; Oppn warns of pit­falls

Hindustan Times (Jalandhar) - - FRONT PAGE - Zia Haq, Saub­hadra Chat­terji and Sm­riti Kak Ra­machan­dran let­ters@hin­dus­tan­times.com

NEWDELHI: Un­der­tak­ing a rad­i­cal set of po­lit­i­cally con­tro­ver­sial eco­nomic re­form mea­sures, the BJP-ruled Ut­tar Pradesh and Mad­hya Pradesh, two states with sub­stan­tial work­forces, have frozen ma­jor labour laws, ex­cept ba­sic ones, in the hope that busi­nesses will re­coup from the blow of the Covid-19 pan­demic and cre­ate more jobs on a net ba­sis.

The changes give in­dus­tries more flex­i­bil­ity in hir­ing and fir­ing em­ploy­ees, de­ter­min­ing their wages, and re­duce their li­a­bil­i­ties in terms of pro­vid­ing em­ployee ben­e­fits. Some economists wel­comed the move for clear­ing struc­tural bot­tle­necks, pos­si­bly lead­ing to greater in­vest­ment, cre­at­ing em­ploy­ment op­por­tu­ni­ties for mi­grant work­ers re­turn­ing home, and po­si­tion­ing In­dia to be able to take ad­van­tage of dis­rup­tions in global sup­ply chains.

The move, how­ever, also sparked in­tense crit­i­cism from the Op­po­si­tion, par­tic­u­larly the left par­ties, trade unions in­clud­ing those af­fil­i­ated to the RSS, and civil so­ci­ety ac­tivists for un­der­min­ing worker rights, re­mov­ing pro­tec­tive mea­sures and dis­man­tling the wel­fare ar­chi­tec­ture.

To be sure, 90% of In­dia’s work­force, which is em­ployed in the in­for­mal sec­tor, won’t be af­fected by th­ese changes. Th­ese ap­ply to those who are in the or­gan­ised work­force.

While UP sus­pended key labour laws for three years through an or­di­nance, MP said it was tak­ing a sim­i­lar course to put most labour laws on hold for 1,000 days. Gu­jarat and Ut­tarak­hand are likely to fol­low suit.

NEWDELHI: Un­der­tak­ing a rad­i­cal set of po­lit­i­cally con­tro­ver­sial eco­nomic re­forms, Bharatiya Janata Party (BJP)-ruled Ut­tar Pradesh (UP) and Mad­hya Pradesh (MP), two states with sub­stan­tial work­forces, have frozen ma­jor labour laws, ex­cept ba­sic ones, in the hope that busi­nesses will re­coup from the blow of the pan­demic and cre­ate more jobs on a net ba­sis.

The changes give in­dus­tries more flex­i­bil­ity in hir­ing and fir­ing em­ploy­ees, de­ter­min­ing wages, and re­duce their li­a­bil­i­ties in terms of pro­vid­ing ben­e­fits. Some economists wel­comed the move for clear­ing struc­tural bot­tle­necks, pos­si­bly lead­ing to greater in­vest­ment, cre­at­ing em­ploy­ment op­por­tu­ni­ties for mi­grant work­ers re­turn­ing home, and po­si­tion­ing In­dia to be able to take ad­van­tage of dis­rup­tions in global sup­ply chains. The move, how­ever, also sparked in­tense crit­i­cism from the Op­po­si­tion, par­tic­u­larly Left par­ties, trade unions, in­clud­ing those af­fil­i­ated to the Rashtriya Swayam­se­vak Sangh (RSS), and civil so­ci­ety ac­tivists for un­der­min­ing worker rights, re­mov­ing pro­tec­tive mea­sures and slowly dis­man­tle the wel­fare ar­chi­tec­ture.

To be sure, a sig­nif­i­cant sec­tion of the work­force won’t be af­fected as they are em­ployed in the in­for­mal sec­tor. Th­ese ap­ply to those who are in the or­gan­ised work­force and reg­is­tered firms.

While the Cen­tre has at­tempted a de­gree of changes in labour laws, there have been no moves with as wide rang­ing an im­pact as those brought about in UP and MP.

UP sus­pended key labour laws for three years on May 6 through an or­di­nance, even as MP an­nounced on May 7 it was tak­ing a sim­i­lar course to put all labour laws on hold, bar­ring some pro­vi­sions of the Fac­to­ries Act, 1948, for the next 1,000 days.

The UP govern­ment passed the Ut­tar Pradesh Tem­po­rary Ex­emp­tion from Cer­tain Labour Laws Or­di­nance, 2020, that ex­empts busi­nesses, man­u­fac­tur­ing mostly, for three years from a gamut of labour laws bar­ring four: the Build­ing and Other Con­struc­tion Work­ers Act; Work­men Com­pen­sa­tion Act; Bonded Labour Sys­tem (Abo­li­tion) Act; and sec­tion 5 of the Pay­ment of Wages Act, which man­dates em­ploy­ers to pay timely wages, and the Ma­ter­nity Ben­e­fits Act.

This means that a broad range of laws will not ap­ply. Th­ese in­clude the Fac­to­ries Act, which man­dates work-hours pro­vi­sions. In UP, this stood at eight hour daily shifts and 48 hours a week. The In­dus­trial Dis­putes Act, 1947 too now re­mains sus­pended in both states. In UP, the Act cov­ers 12 sec­tors that ac­count for four-fifths of man­u­fac­tur­ing out­put. The law re­quires 30- to 90-day no­tice pe­riod be­fore re­trench­ing “work­men”, a class of mainly floor work­ers. In the case of man­u­fac­tur­ing units, plan­ta­tions, and mines with 100 or more work­men, lay-offs also re­quired govern­ment ap­proval. Th­ese will no longer be re­quired.

The moves could be a model for other BJP-ruled states, as thou­sands of mi­grant work­ers head back, cre­at­ing a bur­den­ing sur­plus labour force. Gu­jarat and Ut­tarak­hand are likely to fol­low suit, an of­fi­cial said.

“A to­tal of 3000 hectares in the in­dus­trial es­tates of Gu­jarat will be made avail­able from the state’s land bank and also dif­fer­ent nodal of­fi­cers will as­sist in­com­ing in­dus­tries from other coun­tries. New in­dus­tries will be ex­empted from labour laws other than the Min­i­mum Wages Act, In­dus­trial Safety and Health Act, Labour Com­pen­sa­tion Act for 1,200 days from the start of pro­duc­tion in the state,” a Gu­jarat govern­ment of­fi­cial said.

Ut­tarak­hand labour min­is­ter Harak Singh Rawat said his state too was con­tem­plat­ing “sim­i­lar moves”.

Be­tween April 3 and 10, the BJP held dis­cus­sions with four groups of stake­hold­ers on the econ­omy and re­forms. “There are many bot­tle­necks we need to re­move. Cost of ac­quir­ing land, and the le­gal and pro­ce­dural de­lays are is­sues. Sim­i­larly, we need re­forms in the labour sec­tor,” Gopal Agarwal, BJP spokesper­son on eco­nomic is­sues said.

The move has di­vided economists as well as the po­lit­i­cal spec­trum. On one side are those who be­lieve that the ar­chaic laws had crip­pled In­dia’s eco­nomic story mak­ing it vir­tu­ally im­pos­si­ble to fire em­ploy­ees, let­ting in­ef­fi­cient firms sur­vive at the cost of ef­fi­cient ones. Strin­gent labour laws that ap­ply to firms em­ploy­ing over 100 em­ploy­ees act as an in­cen­tive for smaller firms to stay small so they can es­cape the rules. Ac­cord­ing to the World Bank, with less re­stric­tive laws, In­dia could ap­prox­i­mately add on an an­nual ba­sis “2.8 mil­lion more good qual­ity for­mal sec­tor jobs”. Ac­cord­ing to a State Bank of In­dia Re­search re­port, the coun­try’s labour productivi­ty was also sig­nif­i­cantly lower than its global peers. “Even in the next decade, i.e., by 2021 it is es­ti­mated that In­dia’s out­put per worker will rise to just $6,414 com­pared to China’s $16,698,” it said.

The changes give mar­kets a much freer hand to reg­u­late labour de­mand and sup­ply, and en­hance productivi­ty and size. They, ac­cord­ing to one of­fi­cial re­quest­ing anonymity, aim to in­crease com­pet­i­tive­ness and im­prove ex­ports, while in­creas­ing labour de­mand. “All along we have ar­gued for labour re­forms. We know ex­ist­ing laws have not helped the econ­omy. We also eas­ily as­sume that ex­ist­ing laws are good for work­ers and pro­tect them. There is no way there can be busi­ness as usual. We will have to see what are the out­comes af­ter a year or so,” said NR Bhanu­murthy of the New Delhi-based Na­tional In­sti­tute of Public Fi­nance and Pol­icy, adding the cau­tion he would ap­ply is not to hop from “one ex­treme to an­other”.

Crit­i­cism comes from those who be­lieve that it is this “other ex­treme” that has been adopted.

The core con­cern is that the changes di­lute pro­tec­tions, such as floor wages and work shifts. This ef­fec­tively brings the “north Amer­i­can hire-and-fire model to the In­dian hin­ter­land econ­omy”, said econ­o­mist KR Shyam Sun­dar of the Xavier Labour Re­la­tions In­sti­tute, Jamshed­pur.

The govern­ment has ap­proached the prob­lem from the wrong end, he said. “Labour law changes giv­ing flex­i­bil­ity of labour to em­ploy­ers will be mean­ing­less un­less sup­ply-side mea­sures are de­signed, such as wage sub­si­dies, cheaper cap­i­tal and more ac­cess to mar­kets be­cause of piled-up inventory due to the lock­down. Th­ese changes will ex­pose work­ers to liveli­hood vul­ner­a­bil­i­ties.”

Left par­ties, led by the Com­mu­nist Party of In­dia (Marx­ist) gen­eral sec­re­tary, Si­taram Yechury, wrote to Pres­i­dent Ram Nath Kovind for his ur­gent in­ter­ven­tion to stop “such naked sav­agery against the work­ing class and the work­ing peo­ple”.

Work­ers are an­gry and trade unions have crit­i­cised the moves. “This is the worst time to amend labour laws,” said CK Saji Narayana, pres­i­dent of the Bharatiya Maz­door Sangh, which is af­fil­i­ated to the RSS, the BJP’s ide­o­log­i­cal par­ent. Gen­eral sec­re­tary of the Left-lean­ing CITU Ta­pan Sen said the govern­ment had “pounced upon the work­ing class”.

The coun­try how­ever has been eas­ing many labour rules over time. In 2014, Prime Min­is­ter Naren­dra Modi took steps to re­strict power of fed­eral labour in­spec­tors by in­tro­duc­ing ran­dom in­spec­tions as­sign­ments to them and set­ting time lim­its for re­ports. Some busi­nesses were al­lowed to self-au­dit. Ra­jasthan, un­der a BJP govern­ment, also pushed re­forms in labour laws. The govern­ment’s am­bi­tious plan to take the 40 dif­fer­ent cen­tral labour laws and 100 state laws and merge them into four codes is still in­com­plete. While the code on wages was cleared by Par­lia­ment, three oth­ers —on oc­cu­pa­tional safety and health, in­dus­trial re­la­tions and so­cial se­cu­rity -- are yet to be cleared.

Ac­cord­ing to ex­perts, In­dia will have to bal­ance the need for busi­nesses to grow along with main­tain­ing labour safety nets.

Bib­has Saha of Durham Univer­sity Busi­ness School ar­gued that re­forms have been a long time com­ing. He how­ever said job se­cu­rity needs to be re­placed with the con­cept of in­come se­cu­rity. This im­plies state’s pro­vi­sion­ing of ben­e­fits such as un­em­ploy­ment al­lowances.

AMAL KS/HT PHOTO

With thou­sands of peo­ple re­turn­ing, states are un­der pres­sure to pro­vide them jobs.

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