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Journalism of Courage
In generating consensus on the Common Minimum Programme CMP, and on reforms outside the CMP, labour market reforms invariably figure. Indeed, they have figured on the reform agenda since 1991. Blood pressures rise, because labour market reforms suggest 8216;8216;hire and fire8217;8217;. Which labour market? 8216;8216;Only a small percentage 8 to 9 per cent of the total workforce of the country is employed in the organised sector.8217;8217; This is a quote from Economic Survey, 2002-03. In 1999-2000, the last year for which we have large sample National Sample Survey NSS data, the labour force was 363.33 million and the workforce was a little less at 336.75 million. And on March 31 2001, organised sector employment public plus private was 27.8 million. 27.8 divided by 363.33 is 7.65 per cent and 27.8 divided by 336.75 is 8.26 per cent. The figures should actually be slightly lower, because in the denominator we should use total labour force or workforce figures for 2001, not 1999-2000. The 8216;8216;hire and fire8217;8217; discourse is therefore about 8 per cent of India8217;s working population, those employed in the organised sector.
To muddy matters further, there are at least three definitions of organised, although they largely overlap. First, there is the standard definition through labour laws, that is, organised means non-agricultural establishments that employ 10 or more persons and use power or employ 20 or more persons and don8217;t use power. Second, there is a small-scale sector definition, through threshold levels of investment in plant and machinery. Third, there is a threshold level of turnover below which you don8217;t pay excise. Most, but not all, labour laws apply to the organised sector and because labour is on the Concurrent List, there are central labour statutes, as well as state-level ones. There are 47 central statutes that directly deal with labour. In addition, there are rules, orders and regulations.
In most instances, people object to Chapter V-B of IDA. These span Sections 25-K through 25-S of IDA. There are also problems with Sections like 9-A or 11-A, but those don8217;t usually increase blood pressures. In essence, Sections 25-K through 25-S say there must be permission from the appropriate government before lay-offs, retrenchments, closures. Notice that Chapter V-B hasn8217;t existed in IDA since 1947. It was inserted in 1976. Before that, there was no evidence that labour was being especially exploited in its absence. Notice also there is a parallel Chapter V-A, part of IDA since 1964. This has sections on layoff and retrenchment, but doesn8217;t require mandatory permission from the appropriate government before these can take place. Chapter V-B doesn8217;t apply to all establishments. The work must be non-seasonal and not intermittent. The enterprise must employ 100 workmen 8216;8216;on an average per working day for the preceding twelve months8217;8217;. West Bengal has 50 instead of 100. Orissa has 300 instead of 100. However, 100 is the central norm. Notice that till 1984, the threshold used to be 300, not 100. There is no evidence that labour was especially exploited before 1984.
For IDA to be applicable, you must therefore employ at least 100 workers. Specifically, labour laws have concepts of workmen and employees and to be under Chapter V-B of IDA, 100 workmen must be employed. The latest Annual Survey of Industries ASI data are for 1997-98. And in that year, the total number of workers plus employees was 17.53 million. Of these, 5.29 million workers were employed in industrial enterprises that employ more than 100 workers. 5.29 divided by 17.53 is 0.301. The organised sector is 8 per cent or less of the workforce. And one-third of 8 per cent is 2.41 per cent. That8217;s how important 8216;8216;hire or fire8217;8217; cum the IDA is to the Indian economy.
Besides, what does Chapter V-B say? Permission is necessary from the appropriate government. Whether this is a serious issue or not depends on how easily permission is granted for layoffs, retrenchment, closure. If permissions are granted easily, IDA is not as much of an issue as is made out to be, even though it should become more flexible. Through the Labour Bureau, we have data for 2001 on layoffs, retrenchments and closure and these cover both the private and the public sector and even the cooperative sector. These are actual figures and they don8217;t tell us how many applications have been refused or how many applications have not been submitted at all, because industry knows it is going to be difficult to obtain permission. Subject to this, in 2001, there were 151 closures affecting 11,599 workers. There were 133 retrenchments, affecting 3,668 workers. There were 236 layoffs, affecting 26,231 workers. Restricting oneself to state-level, as opposed to central permissions, the largest number of workers affected through closures was in UP, Gujarat and Kerala. The largest number affected through retrenchments was in Gujarat, Manipur and Goa. Finally, the largest number affected through layoffs was in Pondicherry, Kerala and UP.
We have subjective notions of which are reform-minded states and which are not. But if you look at the names of states I have just mentioned, permissions seem to have been granted in a variety of states. Are we excited about something that is not much of an issue?
