Labour Issues

Class concerns

Print edition : September 19, 2014

At a safety matches unit in Kovilpatti, Tamil Nadu. Photo: N. Rajesh

A protest organised by the AITUC in Bangalore on August 18 against the amendments to the labour laws. Photo: K. Bhagya Prakash

Tapan Sen, CITU general secretary and CPI(M) member of the Rajya Sabha.

The labour reforms introduced by the NDA government are aimed at benefiting employers and have the potential to undermine working class rights and the trade union movement.

ON August 7, the Bharatiya Janata Party-led National Democratic Alliance (NDA) government introduced two labour reform Bills in the Lok Sabha—the Apprentices (Amendment) Bill and the Factories Amendment Bill—seeking to amend the 1961 and 1948 Acts respectively. The NDA, it appears, has charted a course similar to that of its predecessor, the United Progressive Alliance (UPA), which was in power at the Centre from 2004-08 and 2008-14.

The Centre’s move did not come as a surprise as the BJP government in Rajasthan, despite stiff opposition from all trade unions, ratified amendments to three labour laws in the State Assembly on August 1. Although there was some opposition in the 200-member Assembly to a few specific changes, the BJP, which enjoys the support of 163 MLAs, had the amendments passed. Perhaps encouraged by the Rajasthan government’s initiative, the BJP proposed amendments to the Central Acts. The Union Labour Ministry spelt out its intention behind the amendments on its website on June 1, and even sought suggestions.

A cursory look at the amendments shows that employers stand to benefit from them. The statement of objects and reasons of the Apprentices Amendment Bill says that employers “are of the opinion that provisions of the Act are too rigid to encourage them to engage apprentices”, and that, “the provision relating to penalty creates fear amongst them of prosecution”. Employers, therefore, had suggested modifying the Act suitably. Clearly, the opinions of trade unions were not considered important. The government also appears to have ignored the tripartite deliberations in forums such as the Indian Labour Conference (ILC).

Trade unions have not been opposed to reforms. In fact, they have time and again suggested ways to improve employer-employee relations, step up productivity, and reduce industrial conflict. But the definition of labour reforms adopted by the ruling dispensation at the Centre for more than two decades has not been in the direction of labour welfare. The government has admitted that the recommendations to amend the Apprentices Act were discussed in the inter-ministerial group. “Putting proposals on a website is not the way to discuss labour issues. It has been a tradition to have tripartite discussions,” said Tapan Sen, general secretary of the Centre of Indian Trade Unions (CITU) and a Communist Party of India (Marxist) member of the Rajya Sabha. The amendments to the Apprentices Act have diluted the penalty clause and allowed employers to engage apprentices from outside the State of their establishment and even formulate their own policies for recruiting apprentices. Tapan Sen said “the regime for penalties will be in terms of fine only”.

Interestingly, the Congress expressed reservations about certain amendments to the Factories Act, which allowed employment of women on night shifts between 7 p.m. and 6 a.m. The opposition parties in Parliament objected to the fact that the proposals to amend the Bills were not circulated among the members before introduction.

Eleven central trade unions, including the CITU, the Bharatiya Mazdoor Sangh (BMS), the Indian National Trade Union Congress (INTUC) and the All India Trade Union Congress (AITUC), issued a joint statement describing the amendments as “unilateral”. They said the proposed changes had the potential to undermine working class rights as also the trade union movement. They said it was “unfortunate” that the trade unions had not been consulted. They were “dismayed” that the unanimous recommendations of at least three ILCs pertaining to parity of wages between contract and regular workers for the same kind of work done had been bypassed. “The Rajasthan Assembly has passed three amendments, which in our view are more retrograde and detrimental to the rights and livelihood of the working people at large. The whole process is aimed at weakening the tripartite consultation mechanism,” the joint statement noted. The unions exhorted their affiliates in Rajasthan to protest against the enactments. They have resolved to launch joint protests soon after holding a national consultation in September. The unions have also objected to the proposal to enhance foreign direct investment in the crucial sectors of Railways, insurance and defence.

The most damning clauses are in the amendments proposed to the Factories Act. First, the period of spread-over time, which at present ranges from 10 to 12 hours, has been extended to 12 hours and that too by a notification by the State government. The trade unions say that this can result in exploitation of workers without providing them remunerative compensation. “The worker could be detained to complete his work beyond eight hours if the State government wanted to,” a union representative said. Under the existing provision, the chief inspector has the powers to increase the spread-over time by giving reasons in writing. The amendment empowers the State government to do so by a simple notification—without stating the reasons in writing or otherwise. Likewise, the amendments allow the State government or the chief inspector (labour) to enhance the hours of overtime work in any quarter to 125 from the existing 75 under the pretext of “public interest”. Clearly, the worker cannot refuse to work overtime if it is in the “public interest”. The enhancement of overtime hours will restrict employment generation and facilitate extraction of more work from the same worker without overtime payment. The government has also ignored the suggestion for a national floor level minimum wage.

‘Hire and fire' regime

Tapan Sen said it was high time a Central law was introduced to make it obligatory for State governments to provide for the revision of the variable dearness allowance (VDA) component every six months on the basis of variations in the consumer price index (CPI). “In many States, the component of VDA and a provision for regular revision of DA do not exist,” he pointed out.

If the amendments to the Factories Act passed by the Rajasthan government are incorporated into the Central legislation as well, out of the 1,75,710 factories employing 1,34,29,956 workers (of whom 36,10,056 are contract workers), 1,25,301 factories, that is, 71.3 per cent of the factories employing less than 50 workers, would go out of the ambit of the Factories Act. (The figures are based on the report of the Annual Survey of Industries, 2011-12, published by the Ministry of Statistics and Programme Implementation in March 2014.) This would happen if the threshold limit of workers employed by the factories covered by the Act was raised from the present 20 to 40. In addition, if the threshold limit of units employing up to 100 workers was raised to 300, and if they are not required to take permission for retrenchment/lay-off under the Industrial Disputes Act (IDA), more than 80 per cent of the factories and their workers would come under the “hire and fire” regime of the employers, Tapan Sen said. Almost all the contract workers in the manufacturing sector would be subjected to similar treatment, he said. If the amendment to the Contract Labour Act raising the threshold level of employment under any contractor from 20 to 50 workers was put into effect, the entire lot of contract workers in the private sector establishments and a large section of contract workers in public sector undertakings (PSUs) would be denied coverage under almost all labour laws. He said as a result of the amendments introduced by the Rajasthan government, 7,252 factories out of 7,622, employing less than 300 workers each, had come under the “hire and fire” regime.

Tapan Sen said a canard was being spread that labour productivity was on the decline. He said the share of wages in net value added in the manufacturing sector had declined from around 30 per cent in the late 1980s to around 20 per cent in the mid-1990s to 9.5 per cent in 2010. During the corresponding period, the share of profit in the net value added had increased from less than 20 per cent in the late 1980s to around 60 per cent in 2010. “In the same period, while labour productivity increased, gross domestic product [GDP] remained well above 5 per cent on an average and the growth rate in the manufacturing sector was above 10 per cent. This was mainly because employers were allowed to violate almost every labour law with impunity,” he said.

R. Chandrasekharan, all-India vice-president of the INTUC and a member of the Governing Board of the International Labour Organisation (ILO), told Frontline that he was surprised that a “democratically elected government was going against the will and pleasure of labour and poor people” within three months of coming to power. Labour, he said, was an important component and not a commodity. “If the government fails to consult the stakeholders, its decisions will not have the support of the people. Naturally, it is bound to attract strong objections from the unions. The Congress leader in the Lok Sabha [Mallikarjun Kharge] raised objections to the proposed reforms,” he said, adding that the INTUC was opposed to the opening up of profit-making PSUs to the international market system. At a time when the ILO had started a debate on how to get countries to formalise the entire informal economy, this government was doing exactly the opposite by having laws that would push more people into the informal sector, he said.

Industry reaction

Industry representatives have mostly welcomed the new labour reforms. The Federation of Indian Chamber of Commerce and Industry (FICCI) complimented the government and urged it to expand the coverage of the Apprentices Act from the existing 27,000 establishments with a seating capacity of approximately 4,60,000 to 30 million registered and unregistered establishments. A. Didar Singh, secretary-general of FICCI, suggested in a submission to the Labour and Employment Secretary that “engaging apprentices in the production processes should be encouraged for ‘hands-on’ training and it should not always be branded as a ‘substitution’ of cheap labour for it improves the quality of training”.

FICCI welcomed the proposal to remove the clause that seeks to punish with imprisonment establishments that do not fill the quota of apprentices and substitute it with a pecuniary fine. It also suggested that the word “inspector” be substituted with “apprentice counsellor” as the former was a symbol of enforcement. In another statement, former FICCI president Y.K. Modi said that Chapter V-B of the IDA, 1947, which makes it mandatory to seek government permission to shut down an industrial unit, should be scrapped. The amendment that added Chapter V-B to the IDA during the Emergency should be removed, he said. He also welcomed the proposal for night shifts for women and the upward revision of the ceiling on overtime work.

In a note on labour reforms submitted on August 22, FICCI urged the Labour Ministry to move labour to the State List from the Concurrent List, which it said would give more economic independence to industrial units and promote federalism. It has argued for a single-window system of labour laws governing employment, wages, social security and welfare, which would make the environment more employment-friendly. The multiplicity of laws for inspection was a further hindrance, it said and has recommended a single labour authority that would look at all aspects of labour. It has recommended a separate set of labour laws for micro, small and medium enterprises (MSME) and that the IDA be confined to employees whose pay does not exceed Rs.20,000. The note said: “This is necessary in view of the need to exclude employees in the higher salary bracket enjoying statutory protection, which is often misused to the detriment of society.” It has also suggested the deletion of Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970, to provide flexibility in engaging contract workers.

In fact, the NDA seems to be carrying forward the “reforms” evolved by the UPA. To that extent, the Left is not entirely incorrect in calling the present government “UPA-III”. Any protest against the amendments by the Congress seems superficial despite the fact that the INTUC, its trade union wing, is opposed to the new reforms. The ultimate test will come when the Congress has to decide whether it will join the Left and others in opposing the amendments.

The Labour Laws (Exemption from Furnishing Returns and Maintenance of Registers by Certain Establishments) Amendments Bill, 2011, was the brainchild of the UPA. It is currently pending in the Rajya Sabha. Introduced in 2005, it relaxed the obligation of establishments employing up to 500 persons to furnish returns and maintain registers. It also provided for enhanced penalty for employers for violating nine major labour laws, Tapan Sen said. The Parliamentary Standing Committee on Labour rejected the Bill unanimously and submitted its recommendation. The government withdrew the Bill in March 2011 and reintroduced it under the same title with some new features. The new Bill does not include any provision for enhanced penalty for employers. It proposed raising the threshold level of employment from 19 to 40 for any establishment to be treated as a small unit. Also, under the pretext of simplifying the forms of returns and registers, the amendment has exempted employers from their obligations under 16 major labour laws, including the Factories Act, the Payment of Wages Act, the Minimum Wages Act, the Weekly Holidays Act, the Plantation Labour Act, Contract Labour (Regulation and Abolition) Act, and the Building & Other Construction Workers Act. “At the present levels of technological advancement, many establishments today employ 20 or more workers involving large capital investment with high levels of turnover and profit. According to our estimate, more than 72 per cent of the factories in the country will find it much easier to violate all the 16 labour laws and thereby subject workers to more exploitation,” Tapan Sen said.

There is no doubt that the NDA is much more serious about labour reforms than the previous UPA government. But its enthusiasm has not won appreciation, even from some of its own ideological affiliates. Its formula for growth seems to be hinged entirely on increasing labour productivity at the cost of the working class. It may suit the government to move in such a direction given the labour reserve that allows it and employers to function arbitrarily, bypassing the genuine representatives of labour.

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