LABOUR LAWS AMENDMENTS: Part 2

Narendra Modi govt is right to back labour reform measures 

N Madhvan Last Updated: August 1, 2014 

To say Indian labour laws are archaic is an understatement. 

To say Indian labour laws are archaic is an understatement. They have remained so for more than three decades. Instead of protecting the welfare of workers, they have hurt them by leading to lesser job creation in the organised sector. 

Between 2004/05 and 2011/12 data suggests that 5 million jobs were created in the organised sector. But this pales into insignificance if one considers the fact that 12 million jobs are needed for the country to employ the youth coming out of colleges every year. These laws have also pushed workers into the unorganised sector where their pay and rights were terribly compromised. 

It is not that no attempts were made before to amend the 100-odd labour laws in the past three decades but every attempt was met with strong opposition by labour unions. The fact that no party had a majority in parliament during this period did not help either. 

On Wednesday, the Union Cabinet approved amendments to the Apprentices Act 1961, Factories Act 1948, and Labour Laws (Exemption from furnishing returns and maintaining registers by certain establishments) Act, 1988. This was the Narendra Modi government's first step in reforming the labour laws. The amendments will now be placed before parliament for approval. Will this move succeed or meet the same fate as the many previous attempts? 

Two reasons offer hope. The government has a comfortable majority in the Lok Sabha and the passage of the amendments in the lower house is a forgone conclusion. The second reason is that the government has been careful in not rushing through with the reforms blindly but choosing the amendments in a manner that makes its acceptance (and its passage in Rajya Sabha where it lacks majority) better. 

The amendments are loaded in favour of workers. The changes to the Factories Act will improve safety of workers, doubles their overtime, relaxes norms for female workers like enabling them to do night shifts in select industries, and reducing to 90 days from 240 that employees need to work before becoming eligible for benefits such as leave without pay. It also proposes higher penalty on establishments that violate the Act. All these measures clearly enhance the welfare of workers. 

The amendments to the Apprentices Act drop the provision that mandates imprisonment of directors of companies that do not implement the Act. Also, the changes proposed by the previous UPA government that stipulated that 50 per cent apprentices should be absorbed by the company have been dropped. At the same time, the apprentices scheme has been extended to 500 new trades/vocations. 

These measures will help industry take in more apprentices without the fear of having to employ them even when they have no need. Getting apprentice training will help workers enter the organised sector.

Also, the success factor is enhanced in what the government has not done. It was expected that the government will relax the retrenchment norms. More so, after the BJP government in Rajasthan recently amended its Industrial Disputes Act to allow establishments to retrench up to 300 employees without government consent (it was 100 earlier). 

But the Modi government at the Centre has kept such changes, which is sure to create heartburns, for a later time. The government's move is aimed at kick-starting the labour reform process in the right earnest, getting the stakeholders to accept it and then bringing in the contentious issues later. 

Reforming the labour laws is critical if the government wants to increase the share of manufacturing in India's GDP from 12 per cent to 25 per cent in next 10 years. For this to be achieved, 100 million jobs need to be created during this period. This, the government is clear, cannot happen under the current labour laws. The challenge is to get all stakeholders accept this fact and work with them to bring about a change. In this direction, the Modi government's first step in labour reform is pragmatic.