Print edition : June 17, 2011


Skewed labour policies in the proposed National Manufacturing Investment Zones attract wide criticism.

AN attempt by the Union Ministry of Commerce and Industry to get the labour laws diluted as part of its initiative to boost manufacturing and increase the share of the manufacturing sector in the gross domestic product (GDP) has not gone down well with trade unions and, more significantly, the Union Ministry of Labour and Employment.

A proposal to create several National Manufacturing Investment Zones (NMIZs), a brainchild of the Commerce Ministry's Department of Industrial Policy and Promotion, was mooted last year in a discussion paper on the National Manufacturing Policy. The draft policy envisages good physical infrastructure, a progressive exit policy, green technologies, appropriate investment incentives and business-friendly approval mechanisms as the basic features of the initiative.

While on the face of it the policy sees manufacturing as a major employment generator, it has several proposals that are not labour-friendly. It is generally feared that labour laws in NMIZs will be akin to those in Special Economic Zones (SEZs) and Export Promotion Zones (EPZs), where labour inspections are not freely allowed and hire-and-fire policies are rampant.

Just as SEZs and EPZs, NMIZs will combine production, or processing and non-processing areas, which include residential, commercial, social and institutional infrastructure. The processing areas will have one or more SEZs, industrial parks and export-oriented units. All the benefits available to SEZs under the existing legislation and policy will be extended to NMIZs too. They include duty-free import, 100 per cent tax exemption on export income under Section 10AA of the Income Tax Act for five years, and so on. But the problem lies in the exit policy suggested for units in NMIZs.

The policy document proposes that the closure of a unit in an NMIZ should be made easier by settling the dues of the workers in time. For this, it suggests the creation of a sinking fund for each NMIZ to be maintained by a special purpose vehicle (SPV), which will be built from a contribution out of the profits of all the units in the NMIZ. The policy suggests that labour laws be made more flexible. There should also be, it says, a fast mechanism to settle the assets of a sick company so that they are redeployed for production.

Other recommendations include a review of issues such as employment of women in three shifts, temporary status of employees, flexibility to downsize staff, non-applicability of the Contract Labour Abolition Act to units in NMIZs, the number of hours per shift, a social security scheme to be crafted by the SPV, and limiting the right to join unions to those drawing salary below a certain level.

The draft also suggests that wherever the application of labour welfare legislation is suspended or diluted assuming that employers will be given this right to do so an alternative safety net will be put in place by the SPV to take care of the interest of labour. Clearly, labour or organisations representing labour will not have a choice in the matter. This is where trade unions and the Labour and Employment Ministry find a problem.

While the reaction of trade unions has been more or less on predicted lines, the rejection of the section on labour laws in the proposed document by the Labour Ministry is significant. Union Labour Secretary P.C. Chaturvedi told Frontline that his Ministry had given its opinion on various issues, but three areas were very significant. One, no unit could be exempted from labour laws, he said, adding that the laws of the land applied equally to everyone. He said labour laws were fully applicable to SEZs too as of today.

A diamond processing unit in the Visakhapatnam Special Economic Zone. It is feared that labour laws in NMIZs will be akin to those in SEZs, where labour inspections are not freely allowed and hire-and-fire policies are rampant.-C.V. SUBRAHMANYAM

Another area of contention is the proposal to have third-party inspections. The Labour Ministry rejects this on the grounds that the inspection and enforcement of labour laws is a sovereign function of the government and cannot be outsourced. The Ministry, however, agrees with a proposal to simplify the administrative costs of labour compliance and feels that trade unions too support such measures.

Sources in the Labour Ministry say there is no country where labour laws has been simplified and inspections done away with. Apparently, the Ministry has time and again been asking employers and industry to be specific about labour laws that hamper production, but they prefer to speak in general terms rather than give concrete examples.

Chaturvedi pointed out that strong safety nets were in place in all countries that had hire-and-fire policies. The Industrial Disputes Act (IDA), he said, gave employers the right to follow the course of natural justice and laid down procedures for layoff and retrenchment. He said the Ministry had recommended that as in the case of SEZs a format where the chief executive officer had the powers of a Labour Commissioner could be deployed in NMIZs. The CEO should be a senior official of the Indian Administrative Service and not someone from the private sector, said Chaturvedi.

Other informed sources in the Labour Ministry pointed out that the argument that labour laws impeded growth was untenable and unconvincing. The present growth rate of 9 per cent has been achieved with the existing labour laws. These are the same labour laws that have helped growth, said an official.

Strangely, not one but three blueprints regarding a manufacturing policy are under way. One is being prepared by the Planning Commission (National Manufacturing Plan), which believes that manufacturing cannot be confined to zones. Another proposal is being worked out by the National Manufacturing Competitiveness Council. The third one is by the Ministry of Commerce and Industry.

Mere posturing'

M.K. Pandhe, vice-president of the Centre for Indian Trade Unions (CITU) and Polit Bureau member of the Communist Party of India (Marxist), feels that the Labour Ministry is just posturing. He said that despite that Ministry's claim that labour laws were applicable in SEZs and EPZs, the experience of the CITU and other unions was that in half the area in these zones, not even the State Labour Departments were permitted entry. The CEO of the EPZ officiating as the Labour Commissioner should be an independent authority as suggested by the International Labour Organisation (ILO), he said, differing with the Union Labour Secretary.

He asked why the government was giving so many concessions to industry, including the obnoxious suggestion of self-certification where an employer was needed only to declare that he or she implemented labour laws. Even though the factory inspectors are amenable to corruption, there is some pressure exerted on them to do their duty, however minimal, under the IDA. With self-certification, even this will disappear, he said.

Also, according to Pandhe, industries that came outside the ambit of NMIZs would be discriminated against, causing a mad scramble by all to be part of the zones just to avail themselves of the various concessions. He said that at present, in areas where trade unions were weak, workers were putting in 12 hours of work each day. He added that if all manufacturing was to take place within zones where no labour laws applied, collective bargaining would be wiped out. He recalled an incident where a trade union delegation was arrested in an EPZ at Visakhapatnam for submitting a charter of demands to the employer.

Pandhe pointed out that the idea of a zone was inimical to balanced economic development as well. With more and more industries concentrating in areas with developed infrastructure, backward areas were likely to get neglected by industry. This, he said, had the potential to create discontent and unrest.

Pandhe felt that the Labour Ministry's objections to the proposal were just wishful thinking. He cited several instances where the Labour Ministry had been rendered ineffective. For instance, he said, though a few years ago the Indian Labour Conference had passed a resolution giving trade unions the right of access to EPZs and SEZs, nothing had happened. He also referred to a report by the National Labour Institute (NLI), which compared the working conditions in an EPZ with that in a slave ship. Another study, commissioned by the Prime Minister's Office and prepared by the NLI on road transport workers, had many revealing facts, he said.

According to the Provident Fund Act, Pandhe said, employers could be jailed if they failed to pay the Provident Fund. But Provident Fund dues payable by employers come to Rs.1,700 crore today. How many employers have been imprisoned? he asked. The Central Board of Trustees of the Employees' Provident Fund, a tripartite body consisting of representatives of employers and employees and the government, had only 10 employee representatives, he said.

The government issues advertisements exhorting employers to pay PF and ESI [Employees' State Insurance] benefits. Why should the government do this? Employers knowingly violate the law. There is no need to issue ads at the cost of the public exchequer. What is needed is a crackdown on defaulting employers, he said, adding that employers jokingly referred to the Employees' State Insurance Scheme (ESIS) as Extra Source of Income Scheme' because under this if a worker fell sick, he was entitled to paid leave.

Another example of apathy to labour issues is the virtual non-participation by other Ministries, such as Steel, Oil, Power and Defence, which are big employers, in the sessions of the Indian Labour Conference. The Labour Ministry has become irrelevant today. The ILC has got reduced to a debating society. No major decisions are taken, nor are action taken reports placed and scrutinised, he said.

The Bharatiya Mazdoor Sangh (BMS) has opposed the anti-labour proposals in the draft National Manufacturing Policy (NMP). According to its national president Saji Narayanan C.K., the proposals include non-applicability of the Contract Labour Abolition Act to units in NMIZs, flexibility to downsize staff, restrictions on the right to join unions, and so on. He said that the declaration by the Union Commerce Minister that all stakeholders were consulted was a lie. In a statement released to the media, he said that such anti-labour proposals had not been discussed by the Ministry of Labour with social partners, including trade unions. The act itself was a clear encroachment on the domain of the Labour Ministry, he said.

The NMP, the BMS release said, stood in violation of the Ministry's own declared Industrial Policy of 1991, which said that no small section of society could corner the gains of growth. The BMS said that any comparison with China regarding relaxed labour laws in manufacturing zones was erroneous in the light of the fact that the Second National Commission on Labour had pointed out that no labour law had been relaxed in SEZs or other manufacturing sectors in China. Industrial sickness, the BMS said, was because of the failure of managements. The NMP had to be reworked and made labour friendly, it said. It is clear that the approach to labour prevalent in SEZs will not be allowed to take off that easily in the new manufacturing zones. And for now, all unions seem to be unanimous on this issue.

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