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Manufacturing policy may make it easier for firms to hire and fire

Manufacturing policy may make it easier for firms to hire and fire
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First Published: Wed, Mar 31 2010. 11 27 PM IST
Updated: Wed, Mar 31 2010. 11 27 PM IST
New Delhi: A new manufacturing policy being worked on by the Union commerce and industry ministry could allow companies in specified manufacturing zones to hire and fire with greater freedom, a move that will surely be opposed by labour unions and might become difficult for the government with an aam aadmi mandate to push through.
The ministry, which put out a discussion paper on the issue on the department of industrial policy and promotion’s (DIPP) website, said that under the proposed national manufacturing and investment Zones (NMIZs), the Contract Labour Abolition Act will not be applicable while employees will have temporary status.
The right to join unions would also be confined to workers earning below a certain limit.
However, the ministry maintained that wherever application labour welfare legislation is suspended or diluted, an alternative safety net will be put in place to take care of the interests of labour.
Under the proposed policy, the asset striping of sick units will not have to wait until the payment has been made to workers. “This could help ease the pressure on the manufacturing entity considerably,” the discussion paper said.
Gurudas Dasgupta, a Communist Party of India member of Parliament and former general secretary of the All India Trade Union Congress said he is opposed to this idea. “We will oppose it totally. It is the beginning of a general liberalization and taking away the rights of the workers. Whatever rules are there already, they do not enforce,” he said.
M.K. Pandhe, Communist Party of India (Marxist) politbureau member and president of Centre of Indian Trade Unions, said the proposal had been around in various forms in the past as well.
“The proposal means many labour laws won’t be applicable. Flexibility means employers can be allowed to interpret (the law by themselves). Security of jobs will be totally withdrawn. It will ensure new kind of slavery of the working class. This will be strongly resisted. All trade unions are meeting on 7 April, we will discuss this,” Pandhe said.
Union commerce and industry minister Anand Sharma early this month had announced that his ministry would come out with a draft version of a manufacturing policy by June and the policy will be in place by August. He had said that the government wants to increase the share of manufacturing in the country’s gross domestic product from a little more than 15-25% by 2022.
The proposed NMIZs will be akin to special economic zones (SEZs). NMIZ will be an area specifically delineated for the establishment of manufacturing facilities for domestic and export led production, along with the associated services and infrastructure.
It will house one or more SEZs, industrial parks and warehousing zones, export oriented units, along with domestic tariff area units.
The policy allows any acquisition of land only by the state government, which would then hand it over to a special purpose vehicle created for this purpose.
The proposed zones will be cleared in a time-bound manner by DIPP which will be the central authority in this case. An empowered project clearance authority will be formed to liaise with different state and central departments to get clearances in a time-bound manner.
While the units within such zones will enjoy the tax benefits already available elsewhere, the discussion paper proposes to further incentivize such units. It says 50% of the expenditure incurred in filing international patents by units within such zones will be shared by the government. Subvention of interest on working capital by 4% will also be available to them to create parity with international counterparts.
In government purchases, preference will also be given to units located in such manufacturing zones. In order to encourage supply chain development, income tax exemption to suppliers will also be available in proportion to the supplies made within the zones.
The state government may also be asked to notify a package of incentives for the development of such zones including moratorium on all municipal and other local taxes for 10 years, for the NMIZ developers as well as the units which are located in the zone.
asit.m@livemint.com
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First Published: Wed, Mar 31 2010. 11 27 PM IST