The NDA government has begun a fresh review of the country’s labour laws that have remained unchanged since Independence, and tailor them to meet the needs of the National Manufacturing Policy with an aim towards boosting growth in the manufacturing sector.
Accordingly, the labour ministry has proposed changes to the Industrial Disputes Act, 1947, for easier retrenchment of workers in the National Investment and Manufacturing Zones (NIMZs).
Under the proposal, workers in any unit in the NIMZ may be removed without notice or compensation if the employer provides them with alternative employment in the same zone at the same pay and conditions of work.
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In case alternative employment is not possible, the employer will have to pay compensation to the worker at the rate of 20 days’ wages for every completed year of continuous service or any part over six months.
This is a significant change from the current law where such a provision is not available for workers in the manufacturing sector. Companies with over 100 workers cannot terminate the services of workers who have been employed for over one year without prior permission of the state government and three months’ notice.
However, a clause in the Industrial Disputes Act, allows workers in mining operations to be retrenched if the mine shuts down due to exhaustion of resources, provided the employer provides them with alternative employment under him from the date of closure, on the same wages and terms of service or compensation, based on the workers’ service period.
“Such a provision is already present in the Act for workers engaged in mines. Based on a recommendation of the department of industrial policy and promotion, we want to extend it to cover the manufacturing sector as well,” said a senior labour ministry official, adding that the objective is not to make retrenchment of workers easier, but to give some flexibility to employers.
The labour ministry has now called a tri-partite meeting with trade union representatives and employers before finalising amendments to the Industrial Disputes Act.
Interestingly, while trade union leaders had opposed the amendments in negotiations held in September 2012, this time around they are willing to provide some flexibility.
“It is in the interest of the country and workers if there is some progress in the manufacturing sector. We are willing to make some compromises, but the government has to ensure that rights of workers are safeguarded,” said a leader with a trade union who has been invited for the consultations with the labour ministry next week.
Under the National Manufacturing Policy (NMP) that the UPA government released in 2011, NIMZs are envisaged as industrial townships with world class infrastructure that would help increase the contribution of manufacturing to GDP to 25 per cent by 2022 from 16 per cent then. The ambitious plan notwithstanding, complicated and inflexible labour laws have been the biggest stumbling block to its success.
Apart from the Delhi-Mumbai Industrial Corridor, five NIMZs have been given an in-principle approval but actual work on the ground is yet to begin.
Current data from the government shows that the manufacturing sector’s contribution to the GDP dwindled to 14.9 per cent in the provisional estimates of GDP for FY14.
“It is a welcome move but at the same time the government also needs to review other laws including the Factories Act to bring about a comprehensive overhaul of the labour laws,” said Michael Dias, secretary, Employers’ Association of Delhi and a member of the Council of Indian Employers.
The labour ministry, which has also begun a review of the Factories Act, is hopeful that if changes in the Industrial Disputes Act can be made for the NMP, these can then be expanded to across the industry.
Following consultations, the ministry will begin preparing a draft Cabinet note for the amendments.
It has already finished consultations on the issue with the department of industrial policy and promotion that is responsible for the NMP. Views and comments of all other ministries have also been taken on board.