Kick-starting reforms in the country’s antiquated labour laws, some of which date back to Independence, has been among the first significant reform measures of the Narendra Modi-led NDA government. However, it has strategically left out the most controversial of them — the Industrial Disputes Act, Chapter V B of which deals with retrenchment or hire and fire policy — for the future.
Less than a month after taking charge, the new government began consultations on amending half a dozen legislations, including the Factories Act, the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers) Act and the National Minimum Wages Act. All these had been stalled for the past decade despite former prime minister Manmohan Singh often pointing out that the country’s labour laws needed first-generation reforms to keep pace with the industrial licensing reforms he kicked off in 1991.
Singh had argued that these laws were the biggest stumbling block in creating jobs for the youth and in turning India into a manufacturing destination.
The passage of the Apprenticeship Amendment Bill is widely seen as one of the biggest successes in steamrolling labour reforms.
While the changes could have dug in deeper to benefit more establishments, they must be seen in tandem with the government’s decision to lend ownership to skill development by making it a ministry. The amendments to the Apprenticeship Act, together with mapping of skills versus job requirements today, can potentially absorb the millions entering the labour market every year.
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The setting up of a Skill Development Ministry fufills the NDA’s election-time promise of job creation by aiming to provide vocational training to youth in a country where only 2 per cent of the population has receiving any formal training.
Prime Minister Narendra Modi is understood to have personally finalised the contours of this ministry that will coordinate skill development programmes with over two dozen other ministries and go beyond the UPA’s target of training 500 million youths by 2022.
While the NDA’s labour reform push comes after a similar move by the BJP government in Rajasthan, it is facing stiff resistance from trade unions, including the Bharatiya Mazdoor Sangh, a trade union affiliated to the party. The Rajasthan government is considered a path-breaker in the sector and has successfully enacted amendments to the Factories Act, the Industrial Disputes’ Act, the Apprenticeship Act and the Contract Labour (Regulation and Abolition) Act.
However, the Modi government has, as of now, shelved a proposal to amend the Industrial Disputes Act which would have allowed easier retrenchment of workers in National Manufacturing Investment Zones (NMIZ), after trade unions refused to negotiate on the clause. This is blamed for NMIZs not taking off on a big scale.
Trade unions have also opposed the introduction of labour law reform Bills in the Budget Session, calling it a “unilateral” move. Eleven central trade unions have convened a meeting on September 15 to protest against the government’s “anti-labour policies”.
“During our meeting in June, the Labour Minister had assured us that there would be discussions before any change. But we were surprised when the Bills were tabled in Parliament without even a heads-up to us,” two senior trade union leaders told The Indian Express.
Aside from kicking off legislative processes, the Modi government has taken executive actions to fix labour market rigidities. For instance, it has provided flexible working hours to offshore oil and rig workers and set up an online portal for firms to file compliance reports that would also end the ‘labour inspector raj’ that results in nearly 1,75,000 annual labour inspections across the country.
“Why would you want to set up a factory in this country when you have to face tough retrenchment laws, arbitrary visits from labour inspectors and adhere to regulations specifying the number of spittoons you must have in your workshop?” said a sector expert who did not wish to be named.
Similarly, ending uncertainty of subscribers concerning the Employees’ Provident Fund Organisation, the government speedily announced a Provident Fund rate of 8.75 per cent for the fiscal on August 26 — a first for an organisation whose annual dividend was often announced after the end of the financial year under an indecisive UPA.
The NDA government has also notified a higher wage cap for mandatory PF benefits to employees, revising the Rs 6,500 per month ceiling set in 2001 to Rs 15,000 per month. At the same time, it has instituted a minimum monthly pension of Rs 1,000 under the Employees’ Pension Scheme and is in the midst of rolling out individual PF account numbers to all members.
“During the Code of Conduct period and the Lok Sabha elections, the Labour Ministry was readying all these proposals. The new government decided to take forward these issues quite successfully,” said a top Labour Ministry official.