Manufacturing policy to be finalized today

Manufacturing policy to be finalized today

New Delhi: The government is set to unveil a national manufacturing policy with the objective of creating 100 million additional jobs by 2025, by incentivizing Indian firms through tax concessions, subsidies and the relaxation of labour laws.

The job creation exercise is a key element of the Congress-led United Progressive Alliance government’s pledge to make growth inclusive, while strengthening India’s manufacturing base and ensuring that economic expansion can be maintained at close to 9% as it seeks to eradicate poverty in the nation of 1.2 billion people.

Also See | The Policy Explaned (PDF)

The policy is to be finalized on Thursday by a high-level committee on manufacturing headed by Prime Minister Manmohan Singh.

The industry department first issued a discussion paper seeking comments on such a policy in March last year. It was strongly opposed by the environment and labour ministries as well as unions for its liberal approach.

The latest draft policy, a copy of which was reviewed by Mint, says a comprehensive exit policy for industries has been conceptualized that will promote productivity while providing flexibility by removing “rigidity in labour market", while ensuring protection of workers’ rights.

An official in the Prime Minister’s Office (PMO), who declined to be identified, said the policy is politically significant as the government’s focus, which has so far been primarily on agriculture, will be extended to manufacturing. “This was one of the agenda (items) set by the ruling party leadership and was pushed by Congress general secretary Rahul Gandhi," the official added.

The thrust with regard to labour management will be to encourage unions and employers to develop better institutional arrangements and conventions in the states and in production units through dialogue and consultation, the draft policy states. “The stress will be on modification in employment laws and in shop floor practices," it says.

It also promises to take measures to make land available to industry through the creation of land banks by states, digitizing of land and resource maps, and programmes for the utilization of land locked into non-productive uses, including defunct or sick industries.

The policy also proposes the setting up of a Manufacturing Industry Promotion Board, headed by commerce and industry minister Anand Sharma, to ensure coordination among Central ministries and state governments. “State governments would need to be equal partners in giving effect to this policy and the state industry ministers’ conference will be convened on a half-yearly basis to initiate a dialogue for giving a focused thrust to manufacturing," it says.

Communist Party of India (Marxist) politburo member M.K. Pandhe, who’s also the vice-president of its trade union wing, said his party would oppose the policy as it would lead to an increase in contract labour, which makes it easier for employers to fire workers.

“Already labour laws are bypassed by industry and now they want further relaxation. Labour laws will become a mockery in India," he said, pointing out that about 40% of the workforce in state-controlled coal sector consists of contract labour.

Firms have long protested that Indian labour laws, as they pertain to permanent staffers, are highly restrictive, adding to costs and curbing entrepreneurship.

The draft may see minor changes, said the PMO official cited above. Tax breaks will be given to enable easier access for Indian firms to foreign technology and the development of advanced home-grown technology. Other measures that the government will undertake, according to the policy, include preferential purchases by government agencies of indigenously developed products and technologies, and the judicious development of an intellectual property regime to enable local innovation.

The policy also seeks to make skill development integral to productive enterprise in the country, which would be supported by robust government institutions. Industry will be encouraged under the policy to collaborate with higher educational institutions to develop curricula for grooming professionals for various facets of manufacturing.

Prashant K. Nanda contributed to this story.