New Delhi: Labour laws will not be relaxed at the national investment and manufacturing zones (NIMZs) that are proposed to be set up to boost the share of manufacturing in India’s gross domestic product (GDP), labour secretary Prabhat Chaturvedi said.

A committee of secretaries has relented on the issue after the labour ministry objected to making labour laws easier for manufacturers, he said.

Relaxing labour laws, along with tax concessions and subsidies at the NIMZ, is part of a national manufacturing policy proposed by the department of industrial policy and promotion (DIPP) in March last year. The policy aims to increase the share of manufacturing in the GDP from 16% to 25% and create 100 million jobs by 2025.

At present, labour officers inspect whether manufacturers are adhering to laws on workers’ insurance, minimum wage, working hours and work environment. The draft manufacturing policy proposes to allow businesses to outsource inspection to a third party or expert group, but the labour ministry says this is a function of the government and cannot be outsourced.

In June, a high-level committee on manufacturing, headed by Prime Minister Manmohan Singh, approved the draft policy while seeking further consultation on contentious issues related to labour and environment laws under the chairmanship of T.K.A. Nair, principal secretary to the Prime Minister.

“We had two rounds of meeting under principal secretary T.K.A. Nair. Now, they have accepted our position," Chaturvedi said. The last meeting was on 8 July.

He added that DIPP may hold further discussions with the finance and environment ministries on tax and environment issues, respectively.

No DIPP official could be immediately reached for comment.

Industry lobby groups said making labour laws flexible is critical to boost manufacturing.

“Without greater flexibility such as in employment conditions and laying off workers, units within the proposed manufacturing zones will not have any advantage," said Rajiv Kumar, secretary general of the Federation of Indian Chambers of Commerce and Industry (Ficci).

Kumar said commerce minister Anand Sharma had assured the industry last week he would meet labour minister Mallikarjun Kharge to press for change. “So the issue is still under consideration," Kumar said.

M.K. Pandhe, vice-president of the Centre of Indian Trade Unions, said it is wrong to argue that jobs cannot be created without allowing companies to lay off workers at will.

The proposed manufacturing zones will lead to more workers being hired as casual labourers rather than being given permanent jobs, said Pandhe, who has been part of the talks on the new manufacturing policy.

He said the Gurgaon-Manesar industrial belt is facing worker protests as contract workers have been hired in large numbers there. “You increase your revenue because of the hard work put by the labourers, yet you deny them required social and financial security. You already have SEZs (special economic zones), what is the point of having NIMZs."

Businesses in SEZs enjoy a range of tax concessions.

DIPP floated another discussion paper last week proposing to set up an independent trust to take care of pension, insurance and hospital-related issues of labourers as part of the new manufacturing policy. The paper says that besides the small and medium enterprises (SME) sector, larger establishments will also benefit from such a trust by avoiding a lot of paperwork.

However, it is not clear if establishments with more than 20 employees will come under the proposed trust. If they do, the trust will be interfering with the Employees’ Provident Fund Organisation (EPFO), a part of the labour ministry that manages the retirement corpus of employees of companies that have 20 or more employees.

“We have no problem if they are trying to bring more people under the social security net," labour secretary Chaturvedi said. “I think they are speaking about the SMEs only as they don’t fall under our purview. If it is beyond SMEs, then we have to study it. The paper is yet to come for an inter-ministerial consultation."