The report of the Second National Commission on Labour draws flak from across the political spectrum for its attempts to dilute labour rights citing a changed economic situation.
"One has to accept the fact that we have travelled quite some distance along the road to full-scale globalisation. It is technology that has made globalisation possible. It has generated new hopes and given rise to new dangers and temptations. Its impact can already be seen in many fields of human activity. Old mind-sets may prove a handicap in responding to the new situations and factors that have emerged."
- The National Commission on Labour Report, 2002.
ON June 29, in an event of great economic and political importance, Ravindra Varma, Chairperson of the Second National Commission on Labour (NCL), presented the Commission's report to Prime Minister Atal Behari Vajpayee. Reconstituted in 1999 by the National Democratic Alliance (NDA) government, the NCL had a clear mandate - review the existing labour laws in the organised sector in the changing economic context and suggest comprehensive legislation to ensure a minimum level of protection to workers in the unorganised sector.
While the working class generally welcomed the latter part of the mandate, it greeted the former with much trepidation. It was felt that hire-and-fire policies would become the norm. Although all major trade unions except the Indian National Trade Union Congress (INTUC) and the Bharatiya Mazdoor Sangh (BMS), affiliated to the Congress(I) and the Bharatiya Janata Party respectively, protested against the terms of reference, the government refused to reconsider them. The Centre of Indian Trade Unions (CITU), the All India Trade Union Congress (AITUC) and the Hind Mazdoor Sabha (HMS) took the lead in taking up cudgels against the NCL's mandate. They were not consulted over the terms of reference; neither were they to be involved in the Commission's proceedings. Only the BMS and the INTUC were represented in the Commission.
THE three-year-old exercise of the NCL can be described as path-breaking. The overall approach seems to have been one of accepting globalisation and liberalisation as processes that cannot be wished away. Hence the report said labour had to adjust itself to changes at all costs. The government resolution, containing the decision to appoint the Commission, mentioned the factors that led to the decision. The factors identified in the resolution were the globalisation of the economy; the liberalisation of trade and industry; rapid changes in technology and their consequences and ramifications; the effects such changes were likely to have on the nature and structure of industry, on methods and places of production, on employment and the skills necessary to retain employability; and mobility and the responses that were necessary to acquire and retain economic efficiency and international competitiveness.
On the rationalisation of labour laws, the NCL recommends the "judicious" consolidation of all laws, including the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and other Acts governing industrial relations into a single law called the Labour Management Relations Law or the Law on Labour Management Relations. One of the factors behind the proposed law is the Commission's viewpoint that trade unionisation is at a low ebb and therefore collective bargaining should be encouraged. This will be a bitter pill for the trade unions to swallow; even the suggestion that trade unionism has ebbed away is incorrect. Even if it has, the reasons are to be found in the economic hardships faced by the working class in the last few years. In fact, trade union activity has intensified in the wake of the government's disinvestment policies and privatisation of public sector enterprises.
However, the most hard-hitting recommendations pertain to the option given to employers with regard to closures. The report almost guarantees unfettered right to close establishments that employ up to 300 workers. Currently, according to chapter V B of the Industrial Disputes Act, establishments employing up to 100 people should secure prior permission from the government concerned before resorting to closures. The report suggests that in the case of closure of establishments employing more than 300 workers, the employer shall apply for permission to the appropriate government 90 days before the closure and also serve a copy of the application to the recognised negotiating agent. If the government does not respond within 60 days of receipt of such an application, permission will be deemed to have been granted.
In the Commission's viewpoint, experience has shown that governments did not want to take quick decisions on such applications and that permission for closure remained pending for years. The Commission has said that a more honest and equitable course of action would be to allow closure, provide for adequate compensation to workers and, in the event of an appeal, leave it to the Labour Relations Commission to find ways of redress - through arbitration or adjudication. This more or less removes any scope for government intervention in the matter of closure of establishments. The majority of industries come under this category. In what may be a shot in the arm for employers, the Commission has recommended that prior permission not be made necessary for layoffs and retrenchment in establishments of any size. The only solace is that workers would be entitled to two months' notice, or notice pay in lieu of notice, in case of retrenchment.
As feared by representatives of workers, a distinction is drawn between core and non-core activities. Contract labour, recommends the Commission, shall not be engaged in core production or services or activities. However, to meet sporadic seasonal demand, the employer may engage temporary labour for such activities. In essence, it legitimises the use of contract labour even in core activities. The Commission states categorically that in view of the fast-changing economic situation and changes in technology and management, the number of posts in an organisation cannot be fixed permanently. The report said: "Organisations must have the flexibility to adjust the number of this workforce based on economic efficiency."
The Commission recommends three gazetted holidays, with two more days to be added by States according to their specific traditions, and 10 restricted holidays in a year for each employee, and Saturday as a working day if there is a holiday in a five-day week. More significant is the suggestion that the approach to working hours should not be rigid. The Commission recommends that while the total number of working hours a day should not exceed nine, it should not exceed 48 in a week. No corresponding increase in wages has been suggested. The report has also recommended that each establishment should have a Grievance Redressal Committee consisting of an equal number of representatives of workers and employers.
It is clear that the basic approach of the report is to wean trade unions from adopting confrontationist tactics. It mentions negotiating agents and has recommended that provisions be made in the law for determining such agents, particularly on behalf of workers. The negotiating agents will adjudicate disputes and may take the shape of labour courts and labour relations commissions to be set up at the State and Central levels. A trade union too can be the negotiating agent, but only if 66 per cent of the workforce endorses its authority. It also suggests that where bilateral agreements are not possible, a third party other than the government be brought into the adjudication process.
The general tenor of the report is against strike action. It recommends the much-abhorred system of strike ballot in the case of essential services such as water supply, medical services, sanitation, electricity and transport in the event of an unsettled dispute between employer and employee. Strikes, as a rule, can be called only by the recognized negotiating agent, that too only with the support of 51 per cent of the workers in a strike ballot. The trade unions have opposed the concept of a strike ballot because it can be used by managements to divide employees. It would also make employees vulnerable to victimisation or even persecution by rival employees.
The formation of unions will also be difficult as the Commission has recommended that only a union that has at least 10 per cent of employees in a unit as its members would have the right to represent the workers in various forums. The Industrial Disputes Act will be suitably amended to incorporate this provision.
In the section on workers in the unorganised sector, the report recommends, among other things, the implementation of social security measures such as healthcare, maternity and childcare, provident fund benefits, family benefits and post-retirement benefits. However, it does not mention the nature of funding of the schemes, that is, whether they would be funded by the government, the employers or the already ill-paid employees.
THE first protests against the report have come, interestingly, from the BMS. A 15-page dissent note was appended to the report by C.K. Saji Narayanan, the BMS representative in the NCL. On July 2, the AITUC demanded that the NCL report be made public. In fact, curiously, even a week after the report was released, the AITUC, the CITU and the HMS did not have access to it.
Saji Narayanan, in his note, said that Indian industrial units wanted to shift onto the workers the blame for their failure owing to mal-administration. The note said that flexibility meant the right of the management to adjust its labour force from time to time in the name of "changing needs of industry". The BMS representative described as devoid of any rationale the proposals pertaining to prior permission for layoffs and retrenchment; the raising of the limit applicable for closures from 100 to 300 workers; the eventual repeal of Chapter V B of the Industrial Disputes Act; post facto permission after one month for layoffs in establishments with more than 300 workers; varying scale of compensation given to workers in sick and profit-making units and complete freedom for closure in the absence of government permission for the same. He commended the Commission for recommending permanent job status for a worker after two years of employment and for rejecting the demand of employers for exempting export processing zones and special economic zones from the purview of labour laws. However, the BMS representative criticised the Commission's suggestion to shift any form of regular work into the contract system and rejected the proposals for a strike ballot, an increase in the number of working hours, a decrease in the number of holidays and the observations on people not employed in a unit heading trade unions.
It is clear that the objective of the report is not to strengthen the arms of labour in order to ensure that it has a legitimate place in the mode of production and better bargaining power. The irony is that it has been envisaged in a situation of declining work participation rates in both urban and rural areas, steady decline in the proportion of self-employed people and an increase in the proportion of casual labour in rural areas, stagnancy in handloom production and employment, a crisis in the plantation and coal industries, and so on. The NCL report admits that employment generation had actually fallen since the 1980s despite the growth in the economy. It also notes that around the same period employers began to outsource production work from the unorganised sector.
Assessing the impact of globalisation, the report says that the industrial sector has been affected during the last few years and the slowdown and loss of production and employment have resulted in a lower demand of consumer goods which, in turn, has led to a general levelling of all productive activities. "The implementation of the new economic policy has hit this sector the hardest," it states. Exports have been stagnating over the past one decade and the new economic policy seems to be resulting in the closure or disappearance of many Indian companies, especially those in the consumer goods industry.
One important aspect of the report is that it demystifies the notion that China's economic growth has been owing to flexible labour laws. In fact, the Commission found evidence to the contrary. China followed a proper sequence of reforms and did not, in the Commission's words, "follow the standard policy of prescriptions, laid down by the World Bank and the International Monetary Fund for developing economies, blindly". Instead of initiating reforms with foreign trade and exchange rate liberalisation, China started with the agriculture sector. Labour laws in the country were found to be very much in place and did not contemplate or permit the policy of "hire and fire".
TRADE union representatives and others had been awaiting the release of the report. Several times in the past year, there were signals from the government at various forums regarding the need for drastic changes in the labour laws. In fact Yashwant Sinha, in his Budget speech as Finance Minister in 2001, mentioned that the government had decided to introduce amendments to the Industrial Disputes Act and the Contract Labour (Abolition and Regulation) Act in that Budget session of Parliament. The government's haste in facilitating industrial interests at the cost of diluting labour legislation could not have been more apparent.
However, the detractors of the government said that the government should wait for the NCL report. Even the NCL chairperson expressed his reservations about Yashwant Sinha virtually jumping the gun. In a letter to the Prime Minister on March 7, 2001, which reflected the resentment among the Commission members, Ravindra Varma said that the announcement had come in an unusual and unprecedented manner. He added that since the government itself had appointed the Commission, it could have waited for the Commission's report. Even if the government felt that urgency warranted an immediate amendment, it could have asked the NCL for an interim report on the amendments. Ravindra Varma said that both the alternatives were ignored, giving an opportunity for sceptics and critics to say that the government's mind was already made up and that the Commission had no relevance. The letter also reveals the latent pliability of the Commission when it refers to the option of giving an interim report on the amendments to the labour laws.
The final report has been unduly kind to employers and the owners of industries. Rationalisation, in the understanding of the Commission, means making laws more consistent with the context, more consistent with one another, less cumbersome, simpler and more transparent. The emphasis is on arbitration and mediation in industrial relations. In sum, industrial peace, and not unrest, has been overemphasised. Trade unions have been urged to reflect on the current situation and not to create conditions that would alienate public sympathy. The report frowns upon the kind of industrial action that has taken place so far and is critical of the "increasing tendency on the part of the trade unions to get together in ad hoc struggle committees to launch struggles or to support a struggle one of them have launched".
Probably inspired by the NCL's recommendations, Vajpayee, addressing a meeting of the Advisory Council on Trade and Industry on July 10, said that the Cabinet had decided to "vigorously pursue" labour reforms. He urged political parties to arrive at a consensus so that relevant legislation could be passed in Parliament. The labour reforms, according to Vajpayee, would create more employment opportunities, thus fulfilling the objective of achieving growth with the creation of more jobs. Although the Electricity Bill 2002, the Convergence Bill for Telecom and Information Technology, the Petroleum Regulatory Board Bill and the Bill for Securatisation and Reconstruction of Financial Assets and Enforcement of Security Interests came up for discussion at the meeting, it was apparent that the thrust was on labour reforms. The message from the meeting, which was attended by several industry representatives, was that the government was going to put in place a framework that would enable business to become globally competitive. A Cabinet committee on economic reforms was set up to develop a priority agenda for policy reforms every year and to monitor its implementation.
The CITU reacted sharply to the Prime Minister's call for a consensus, especially when the NCL's recommendations were not the last word on labour reforms. Stating that Vajpayee had got carried away by the recommendations, CITU cautioned that it would be relevant to take cognisance of the note of dissent appended to the report. Moreover, the CITU pointed out that the government was yet to make the report public or circulate it among the unions for a discussion.
It is a matter of time before the recommendations of the NCL are translated into legislation, either by amending existing provisions or by introducing new labour laws. The worst fears of the trade unions and the working class may come true in the months to come when ways and means to create an atmosphere that is conducive to economic growth at the cost of labour will be devised. (The winter session of Parliament is likely to witness the introduction of some crucial pieces of labour legislation. A meeting of the Indian Labour Conference, the highest tripartite body that involves labour, industry and the government, is scheduled for the first week of September.)