Labour issues

A self goal

Print edition : May 27, 2016

On the second day of protests against amendments to the EPF rules at the Peenya industrial area on Tumakuru Road in Bengaluru on April 19. Photo: G.R.N. Somashekar

The police dispersing protesting workers in the industrial estate. Photo: G.R.N. Somashekar

The NDA government restores the EPF interest rate under pressure from trade unions, but it will have to pay a heavy price for its move to trifle with working people’s social security.

ALL we have from the National Democratic Alliance (NDA) government is empty rhetoric. It promised to adopt pro-people policies after it came to power in 2014, but the actions by some of the Ministries, particularly the Ministry of Finance, have proved that the government is keen more to project a pro-industry face than to listen to the common people, even the middle classes, considered its key support base.

The government sought to introduce several measures that were perceived to deal a blow to the salaried class, such as levying a tax on the Employees’ Provident Fund and lowering the interest rate on EPF. The manner in which it moved these proposals took even the Bharatiya Mazdoor Sangh (BMS), the trade union ideologically affiliated to the Bharatiya Janata Party (BJP), by surprise.

On April 16, the Central Board of Trustees (CBT), a tripartite body chaired by the Union Labour Minister and consisting of representatives from the Finance Ministry and the trade unions, as an interim measure, unanimously decided that the rate of interest on EPF would be 8.8 per cent. The idea was to aim for an upward revision. This was a promise the NDA government had made. But the Finance Ministry overturned the recommendation and scaled down the interest rate to 8.7 per cent, the lowest rate of interest offered in the last three years, in what was seen as another instance of high-handedness. Ten Central trade unions, including the BMS, expressed their disapproval of the cut. The BMS organised protests at about 46 EPF offices across the country. The other trade unions gave a call for a nationwide protest on April 29.

When the matter was raised in the Budget session of Parliament, the Labour Minister informed the House that the interest rate had been cut and the action had been ratified by the Finance Ministry. While the MPs of the Left parties raised the issue in both Houses, Congress members chose to remain silent. The protests started to gain momentum as no rationale could be found for reducing the interest rate except that the government was seeking, one, to keep parity with the interest rates of small saving schemes, such as the Public Provident Fund (PPF), which had been brought down to 8.1 per cent; two, to keep the surplus at Rs.1,000 crore; and, three, to credit interest into inoperative accounts the government had little option but to roll back the interest rates.

In their editorials, leading newspapers attempted to convince the government about the pitfalls of rolling back the decision and urged it not to bow down to pressure. Notwithstanding such counsel, the government backtracked on the rate cuts following a backlash from trade unions, and workers themselves. A.K. Padmanabhan, president of the Centre of Indian Trade Unions (CITU), clarified that as far as the burden of interest on inoperative EPF accounts was concerned, since 2011 no interest had been paid into such accounts. “It is the money of the subscriber. If the government is holding on to it, it should pay interest. This is what the unions believe,” he said.

State governments’ labour reforms

The Central government has been at loggerheads with trade unions over a slew of decisions, such as a sweeping labour reform of Central labour laws, which has had the effect of different State governments patterning their own labour laws on similar lines. The general signal was that State governments were free to make changes in their own labour laws as per their requirements.

In 2014, Rajasthan amended its Factories Act, Industrial Disputes Act and Contract Workers Act, despite protests from workers and their representatives. Other BJP-led governments followed suit. On March 31, the Haryana government introduced three pieces of legislation—the Industrial Disputes Amendment Bill, allowing enterprises employing up to 300 workers to lay off without the government’s permission; the Contract Workers (Regulation and Abolition) Haryana Amendment Bill, 2016, proposing to do away with registration of industrial establishments employing up to 50 workers (raising the threshold from the existing 20); and, the Factories (Haryana Amendment) Bill, exempting from the Factories Act those units that employ up to 20 workers with the aid of power and 40 workers without the aid of power. These reforms were similar to the ones introduced by the Rajasthan government. Interestingly, a survey conducted by the PHD Chamber of Commerce and Industry (PHDCCI) in five districts of Rajasthan showed that investment had not picked up despite labour law reforms.

Madhya Pradesh also ushered in labour laws on the lines of Rajasthan to relax retrenchment norms. The new law allowed companies employing up to 300 workers to retrench workers or shut shop without government approval against the threshold of 100 workers earlier. The only silver lining was that workers would be entitled to a three-months notice and three-months salary. Earlier, either of the two was allowed and employees were paid 15 days’ wages for every year they were on the rolls. It is learnt that Maharashtra had contemplated similar reforms, but changed its mind in the last minute.

The BMS, which, of late, has not been part of any joint trade unions action, has been feeling the pressure from its own constituents. Though hard-pressed to defend the government owing to its ideological affinity, it was compelled to stage protests against the NDA government’s decision on EPF interest rates and labour reforms initiated by BJP-ruled States. Virjesh Upadhyay, national general secretary of the BMS, told Frontline that a delegation of the BMS met the Haryana Chief Minister and expressed its concerns over the implications of liberalising labour laws. The Rajasthan experiment had a cascading effect. Chhattisgarh, Andhra Pradesh and Gujarat followed suit and amended their labour laws on similar lines for the “ease of doing business”.

But more than the unpopular labour reforms introduced by the various State governments, it was the cut in the EPF interest rates that rattled the Union Labour Ministry. The CBT was after all headed by the Labour Minister and it was after a consensus decision that the interest rate had been arrived at. Union representatives argued that when the CBT decided on an interest rate of 8.8 per cent, it was on the understanding that there was money available and that even if an interest rate of 8.95 per cent was given, there would still be a surplus of Rs.91 crore. “Even the 8.8 per cent was provisional. The idea was that workers would be given more,” said Padmanabhan.

The Finance Ministry had to retract its proposal to tax 60 per cent of EPF withdrawals. In February, the Union Labour Ministry issued a notification restricting the EPF balance to subscribers until they reached retirement age. The excuse was social security. Padmanabhan said the notification was not only unfair, but created unnecessary confusion. The unions raised the matter at the March meeting of the CBT and objected to the cap on withdrawal. “It is subscribers’ money. How can the government decide not to allow access to them?” he asked. In February, the government notified that a worker could not withdraw the employer’s share from the PF before superannuation. Of the employer’s contribution of 12 per cent, 8.33 per cent went to the Employees Pension Scheme while 3.67 per cent was deposited in the PF account.

The government decreed that employees could not withdraw the employer’s contribution to the EPF until after they retired. This triggered protests, particularly in the Visakhapatnam Special Economic Zone and in Bengaluru. Thousands of women working in Brandix Apparel India City, Atchyutpuram, Visakhapatnam, went on strike demanding a hike in wages and the lifting of the embargo on withdrawal of PF deposits.

K. Hemalatha, national president of the All India Coordination Committee of Working Women, said: “In many establishments of the garment industry, there is no job security and it is very rare for women to remain employed until the age of 58. Many of them leave once they get married, so the government notification naturally created a lot of panic among them. They often require this money for special occasions.”

On April 18, traffic on a seven-kilometre stretch on Hosur Road in Bengaluru came to a standstill for several hours when some 15,000 women garment workers from five garment units took to the streets protesting against the government notification. The police used tear gas shells and other means to disperse them. A similar protest was organised on the Bengaluru-Mysuru highway. Trade union leaders told Frontline that the protest was a spontaneous one and not organised by any trade union in the area. The fear of losing their savings triggered the uproar. The government notification was supposed to come into effect from May 1.

Padmanabhan said: “The EPF is a form of social security. But workers need the money, otherwise they would have to borrow at high rates of interest. What is in the EPF is their money and they have a right to withdraw it when they need it. The contribution of 3.67 per cent in any case is hardly enough but when a worker is hard-pressed for money, he or she will want to dip into the savings.”

The NDA government suffered a major setback when it was forced to retract the announcement.

In March, the Finance Ministry notified rules allowing the transfer of unclaimed deposits in the EPF, the PPF and other small savings schemes to a proposed Citizens Welfare Fund. Trade unions and the Labour Ministry objected to the diversion of unclaimed EPF deposits. Trade unions and their representatives feel that the government’s targeting of people’s savings is a ploy to do away with social security altogether.

Garment workers are paid as low as Rs.6,000 a month in some units. With little or no additional government support in the form of social security, any perceived move to target the savings of workers is sure to have serious consequences.

A letter from the Editor


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