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Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

NDA plans new push for labour reforms

Govt plans to introduce five new bills in second half of budget session, a move that may irk unions, opposition

New Delhi: The government plans to introduce five new labour bills in the second half of the budget session, resuming an effort to reform labour rules after a year’s hiatus, in a move likely to be resisted by opposition parties and unions.

These bills are the Industrial Relations Code Bill 2016, Wage Code Bill 2016, the Small Factories (Regulation of Employment and Conditions of Services) Bill, the Shops and Establishments (Amendment) Bill, and Employees Provident Fund and Miscellaneous Provisions (Amendment) Bill.

Two government officials familiar with the development said the intent is to accelerate labour reforms that have been on the back-burner for the past year. The second half of the budget session resumes on 25 April.

“We have sent the first three to the cabinet and the rest two will be sent very soon, may be in a week’s time, let’s say by end-March or the first week of April," said one of the two officials cited above on condition of anonymity.

The government wants to club around 40 existing labour laws into four or five acts. For example, all wage-related laws will be made part of the wage code and all industrial relations laws included in the related code.

Once passed, the industrial relations code will facilitate easier hiring and retrenchment in factories, the first official said. A previous draft of the proposed law suggested that companies need not seek prior approval for retrenching up to 300 employees in case of an emergency.

“Till the time it gets cabinet approval, no draft bill is permanent," the first official said, without elaborating whether the draft has changed.

The wage code and the industrial relations code will club nearly 10 existing laws, including The Factories Act, 1948, and The Industrial Disputes Act, 1947, into just two.

The legislation will make compliance with the labour laws less stringent for employers.

The Employees Provident Fund and Miscellaneous Provisions (Amendment) Bill seeks to position the National Pension System (NPS) as an alternative to Employees’ Provident Fund (EPF).

Similarly, the wage code bill seeks to offer health insurance as an alternative to Employees State Insurance Corp.’s health facilities for industrial workers.

An attempt in the recent budget to tax withdrawals from the EPF triggered a backlash from the salaried class, forcing the government to roll it back. That was an attempt to put EPF on a par with the NPS, which is partially taxed at withdrawal.

To be sure, some of planned legislation is fairly benign.

Greater women’s participation in the workforce will be facilitated by the Small Factories Bill, which will allow women to work night shifts.

Shops will be allowed to open round the clock under the Shops and Establishments (Amendment) Bill.

The renewed thrust on labour reforms comes as the National Democratic Alliance (NDA) prepares to complete its second year in office. Labour reforms, including greater freedom to managements to hire and fire workers, have been identified as key to promoting investment and boosting growth.

“Since labour reforms have been identified as a key to economic growth, the government is willing to accelerate," the first official said.

He conceded that there will be political difficulties in passing some laws in the Rajya Sabha, where the NDA is outnumbered by opposition members.

“Those are political issues but the labour ministry feels that they will complete the formalities and press ahead with the reform plans. Once the ministry completes its work, then a decision can be taken at the higher level on how the government wants to push these reforms," said the second official, also on condition of anonymity.

The government is essentially looking to make labour laws “flexible to aid the manufacturing sector" and improve job creation, this official said.

Some analysts say that India’s labour laws are archaic and rigid and tend to restrict industrial growth by curbing management freedom to retrench workers, which actually serves to impede job creation.

The unions counter that industries are already flouting labour regulations and any dilution of the existing laws will compromise employees’ welfare.

To allay employee concerns, the government formed a group of ministers under finance minister Arun Jaitley for better coordination on labour policies.

Employee unions are not convinced.

“The government is insisting on changing labour laws without realizing that it is not a shortcut for job creation," said D.L. Sachdeva, national secretary of the All India Trade Union Congress, a central trade union.

“Industries are already not following laws and they know how to bypass them. By making labour laws more flexible you will only hamper the workers. Indian workers are largely badly paid, and during the EPF tax debate, the government said that 30 million organized sector workers are getting less than 15,000 a month. So, by changing the laws you will put these poor workers in further trouble," said Sachdeva.

The Congress indicated that it will oppose the planned legislation.

“This government wants to change the fabric of India from a welfare state to a capitalist state," said Shakeel Ahmed Khan, a secretary of the Congress.

“People will punish them in every election they face for their anti-worker and anti-poor initiatives through so-called labour reforms."

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