Representatives of micro, small and medium enterprises (MSMEs) are seeking a simpler labour law exclusively for the sector, saying it’s not feasible for small firms with minimal resources to comply with multiple laws.
An expert group of government and industry officials set up by the Prime Minister’s Office (PMO) is looking at ways to streamline labour laws.
At least seven expert groups have been recently set up by a task force led by T.K.A. Nair, principal secretary to Prime Minister Manmohan Singh, to address various issues, including labour and its impact on the SME sector that contributes 45% of India’s manufacturing output.
There are 44 Central Acts governing labour. Under the law, SMEs have to implement at least 15 of them, including those covering social security, minimum wages and payment of gratuity and bonus.
Industry representatives say most small units are one-man operations and they lack the infrastructure to implement labour laws. “We need a single law to reduce the burden of inspections and compliance costs,” said Anil Gupta, president of Indian Industries Association, which has some 7,000 members from plastic to paint manufacturers.
The sector, which was hit by delayed payments from customers and tight credit flow owing to the global economic slowdown, employs an estimated 42 million workers, according to government data.
Emphasizing the sector’s importance in India, Singh had said in August that “good health of these enterprises” is crucial not just for the economy, “but for protecting the livelihood and well-being of a very large section of our people”.
The SME sector has been lobbying with the government on the issue of labour, which has divided the industry and trade unions, and been the subject of friction between ministries.
The MSME ministry, for example, has been opposing the labour ministry’s move to bring establishments employing 10 people under the Central health insurance plan, the Employees’ State Insurance, without simplifying overall implementation norms.
“Compliance should be simplified and there must be changes in how returns are filed and inspections are done. Unless this is done, it will not be appropriate,” Madhav Lal, development commissioner at the MSME ministry, said.
The labour ministry, according to a note being prepared for submission to the PMO, says it has already simplified several filing norms. Firms employing up to 40 workers will be exempted from maintaining registers and filing information required by various government agencies; firms employing up to 19 are exempt now.
The note also mentions that its revised policy plans to make an annual inspection mandatory for only large firms employing over 250 workers.
Trade unions, however, oppose these moves. “We want the procedures to be simplified, but there’s no justification on why filing should be completely stopped,” said M.H. Mahadevan, deputy general secretary of the All India Trade Union Congress.