Updated: March 5, 2021 8:14:20 am
The move by the Haryana government requiring that locals — born in the state or living there for five years — account for 75% of all hiring by companies in jobs with gross salary under Rs 50,000 per month will potentially slow the post-Covid economic recovery, increase compliance burden and usher in an “inspector raj,” a cross-section of industry representatives have told The Indian Express.
On Tuesday, the state administration notified the Haryana State Employment of Local Candidates Act 2020, which requires all companies, LLPs, trusts, societies and partnership firms with more than 10 employees to follow these local employment requirements and specifically empower the district administrations to enforce the new regulations through inspections with a 24-hour notice.
The legislation, the government argued, is aimed at boosting local employment particularly for the youth in unskilled jobs.
Industry players, however, were unanimous in calling the move “regressive” and pointed to how the lack of a sufficiently large qualified domestic workforce in Haryana made the implementation of the new act “impractical”.
“The economic recovery (post-Covid) will definitely be affected by these restrictions,” said Sunjay Kapur, chairman of auto parts manufacturer Sona Comstar, adding that the move would hinder investments coming into Haryana.
Kapur, a past chairman of the Haryana chapter of CII, said that industry was in talks with the Haryana government seeking a relook at the legislation. The move could further affect the competitiveness of Haryana, Kapur said.
Under the regulations, firms and companies would also have to register all of their employees receiving a gross salary of Rs 50,000 or less on a government portal and update it at regular intervals.
Kapur noted that about 50 per cent of Sona Comstar’s workforce would be classified in this category and about 30-40 per cent of this workforce was from Haryana. Industry sources noted that employees with salaries under Rs 50,000 accounted for about 60-70% of the workforce of major industries in Haryana.
The Andhra Pradesh assembly in 2019 passed a similar law, which has subsequently been challenged in courts.
When asked about the impact of the move on the competitiveness of Haryana, Niti Ayog Vice Chairman, Rajiv Kumar said: “I just hope that the government has consulted with the companies in the private sector…which are there in large numbers, before taking the decision and announcing it.”
Notably, a majority of industry association members that The Indian Express reached out to, including members from the CII, said they had not been consulted before the announcement of the change.
Said Chandrajit Banerjee, CII’s Director General: “At a time when it is important to attract investments at State level, the Haryana Government could have avoided imposing restrictions on Industry. Reservation affects productivity and Industry competitiveness. We hope the State Government relooks at the legislation. With Prime Minister’s vision of ‘Ek Bharat Shrestha Bharat’, we look forward to an integrated and mobile labour market within the country.”
A senior official with Maruti Suzuki said he would not like to comment, at this point in time, beyond what the CII DG had said.
“This is like giving encouragement to inspector raj,” said JN Mangla, president of the Gurgaon Industrial Association. He flagged the provision in the law that requires a firm to seek exemption from the district administration if it cannot find enough qualified workers. This brings in an element of bureaucratic discretion in the entire process, he said.
“It is not possible for so many skilled and semi-skilled local workers to become available so quickly,” said Mangla noting that the government should be flexible in the implementation of this regulation so that businesses can continue their work “peacefully.”
Another industrialist who represents MSMEs in Haryana said that the legislation would damage small firms and halt expansion plans. “This will lead to job destruction instead of job creation for locals as nobody will expand operations in the state and foreign investors will not even consider investing here,” he said.
“Expansion of businesses will come to a standstill,” said PK Jain, former president of the Gurgaon Chamber of Commerce and Industries noting that companies will prefer to expand operations in neighbouring states. “There will also be discontent among employees when they see less qualified employees earning the same as them,” said Jain.
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