It’s been 68 years since independence and still many aspects of our life have hints of colonial hangover. So it doesn’t come as a surprise that free India’s policies in its early years were influenced by 250 years of colonial rule.
India’s labour laws are over-protective of the workers is anybody’s wisdom. However, it finds its genesis in the fact that labour rights and trade unions were all suppressed under the British rule. Hence, as we got independence in 1947, India’s labour law went under a major update correcting the wrongs of centuries. A series of fundamental labour rights were embedded in our Constitution in 1950.
The ambit of our labour laws is from regulating the height of urinals in workers’ washrooms to how often a work space must be lime-washed.
The ill of such overreach by the State was well illustrated in Bharat Forge Co Ltd v Uttam Manohar Nakate:
In Uttam Nakate case, the Bombay High Court held that dismissing an employee for repeated sleeping on the factory floor was illegal – a decision which was overturned by the Supreme Court of India. Moreover, it took two decades (1984-2005) to complete the legal process.
Being on Concurrent list was another setback?
Desiring uniformity, the matters related to Trade unions; Industrial and Labour disputes, and Labour welfare was put on the Concurrent list. It may have been a need then in immediate post-independence India, but gradually it only made matters worse.
In India, the legislative power distribution between the Centre and the States is divided in three categories – Union list, States list and Concurrent list. The Parliament has the exclusive power to legislate on items in the Union List – Defence, Foreign Affairs, Railways, etc. States have exclusive powers to legislate with regards to items on the State list (Law & Order, Transport) with few clauses. With regards to items on the Concurrent list, Centre and State both have the power to legislate, with Centre having the last say. Hence, the labour disputes and welfare are often mired in legal tangles, making it difficult for small and medium business set-ups.
As the works are different in different parts of our diverse country, had it been better if the States were entrusted with the formulation of labour laws fit for their geography?
India’s labour laws and the world
In 2008, the World Bank criticised the complexity, lack of modernisation and flexibility in Indian labour regulations. However, we don’t set World Bank’s view as a benchmark.
Let’s compare our laws with that of two political ideologies – Communist China and Democracy America.
| Practice required by law | India | China | USA |
| Dismissal due to redundancy | Yes, if approved by government | Yes, without approval of Govt | Yes, without approval of Govt |
| Maximum overtime limit | 200 hours/year | 432 hours/year | None |
| Premium pay for overtime | 100 per cent | 50 per cent | 50 per cent |
Union labour secretary Shankar Agarwal says the country’s labour laws were framed keeping only employees’ interests in mind and must change with time to encourage entrepreneurship as well.
To achieve the same, Centre and many States have kick-started labour reforms. Rajasthan has already effected the changes while Madhya Pradesh and Gujarat’s amendment Bill are pending with the President.
Salient features:-
Centre, Rajasthan and Madhya Pradesh have amended the Industrial Disputes Act that will raise the limit of number of employees (from 100 to 300) up to which an industry could lay off without prior permission from the Government.
Rationale –The public policy think tank Centre for Civil society suggests that because of the old norms promoters, who wanted to exit loss-making businesses or lay off workers due to tough market conditions, were not able to do as seeking permission involved lengthy process. Also, because of the restrictive cap, employers tried to keep the workforce within 100. Raising the limit to 300 will encourage them to hire more workers, hence more employment opportunities.
“If there is no work, how can a company survive with 200, 300 or 500 employees? If you get a large order, you engage many people. Tomorrow that order is not there, what will you do with the employees? If we implement a restriction that says an employer must carry these employees come what may, then he will never set up a business,” Union labour secretary Shankar Agarwal rightly added.
Gujarat has eased “hire and fire” provisions in special investment regions like the Delhi Mumbai Industrial Corridor (DMIC), National Investment and Manufacturing Zone (NIMZ), export-oriented industrial establishments and some other economic zones.
Rajasthan – A manufacturing unit running with the aid of power will only be called a factory, if 20 (previously 10) or more workers are working in the factory. In case of a manufacturing unit running without the aid of power, it will called a factory only if 40 (previously 20) or more workers are working.
Rationale – Earlier even small manufacturing units were covered under the definition of ‘factory’, requiring several compliances which hurt their expansion and growth and discouraged many small entrepreneurs from establishing a manufacturing unit. This amendment will promote and encourage establishment of small manufacturing units, resulting in increased employment opportunities.
Staying true to his promise of limited government and economic freedom, within a few months of assuming office at the Centre, PM Modi unveiled nearly half-a-dozen schemes, including a Shram Suvidha Portal where employers can submit a single compliance report for 16 labour laws, unique account numbers for members of the EPFO, a revamped Rashtriya Swasthya Bima Yojana as well as a new skill development and apprenticeship scheme.
One of the most important aspects of these reforms is decentralization of executive and legislative power. For example, Rajasthan has given itself more say in prescribing the norms for apprenticeship training.
These reforms also curtail the scope of Unionbaazi which has for long hindered the labour welfare in the name of labour welfare. In Rajasthan, forming a labour union will be difficult now. It will require membership of 30 per cent of the workforce as against the 15 per cent earlier. Too many unions often increase inter-union conflicts.
These reforms at the Centre and in the States will go a long way in ensuring ease of doing business, which in turn will strengthen ‘Make in India’ campaign, attracting investments across the country.
Those who oppose labour reforms in the name of protecting workers hardly have any knowledge of present labour laws. Our laws explained above don’t help workers. Because of the current labour laws, there is too little manufacturing employment and job creation.
Nobody disagrees with the need for strict labour laws for health and safety, employee benefits, minimum wages, and leave or timing, the argument here is for better enforcement of those workers.
Read the story on NITI Central website.