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Vasundhara Raje-led Rajasthan government had forwarded the reforms to the centre after they were passed in the state assembly two months ago. Photo: Raj K. Raj/Mint
Vasundhara Raje-led Rajasthan government had forwarded the reforms to the centre after they were passed in the state assembly two months ago. Photo: Raj K. Raj/Mint

Key Rajasthan labour reforms get President’s approval

Move will give firms more flexibility in hiring and firing of staff, make tougher the registration of labour unions

New Delhi: President Pranab Mukherjee on Friday gave his assent to key labour reforms, including amendments to the Industrial Dispute Act, Contract Labour Act and Factories Act that the Vasundhara Raje-led Rajasthan government had forwarded to the Union government after they were passed in the state assembly two months ago, a central government official said, requesting anonymity.

The Union labour ministry has already said it had no objection to the changes and the home ministry was in touch with the President on the reforms, the official said.

Rajat Mishra, secretary-labour with the Rajasthan government, confirmed the development, calling it a “milestone".

“It’s a major achievement for us—the state government, which was looking to reform a sector on practical grounds," Mishra said in a telephone interview.

These laws have been identified variously as a constraint to expansion of investments in manufacturing and a hindrance in doing business in India.

The approval of amendments will give companies greater flexibility in hiring and firing of employees and make it tougher for registration of labour unions, which many analysts say would encourage industries to expand and recruit more workers.

The move is expected to encourage similar measures in other states as well. In fact, Madhya Pradesh has already moved on the same lines as Rajasthan on labour reforms.

Prime Minister Narendra Modi has tacitly endorsed reforms of archaic labour laws, the central government official cited earlier said.

Analysts say it will lead to decentralization of the labour market and the creation of 29 labour markets in the country—one in every state.

“With this, the labour market in India will turn a new leaf and instead of reform in central sphere, states will adopt state-specific reforms to compete and attract investments," said Rituparna Chakraborty, senior vice-president at human resources consulting company Teamlease Services Pvt. Ltd and president of the Staffing Federation of India, an industry association.

“Instead of one labour market, each state can follow the template and create a labour market as per the need of the state. Twenty-nine labour markets in India are better than one centralized market full of archaic laws," she said.

The labour law changes are the first major reforms put in place by the Bharatiya Janata Party (BJP) government of Rajasthan; the party had made an election promise to improve the investment atmosphere and create more jobs in the state.

“We had set a model and others are free to follow. We have received an encouraging response from the industries and were waiting for the final approval from the centre. This success is because of the strong leadership both at the state and central level," said Mishra.

“What we have done is very fundamental. It would change the purview of the labour market," Mishra said, adding that it would be unfair to call it anti-worker as the state government has taken care of the employees as well. “There is a balance and if you look at the big picture, its prime intention is job creation," Mishra explained.

But trade unions are sceptical.

“We don’t think this will help investment or employment situation. It will only lead to conflict in workplace," said Communist Party of India (Marxist) parliamentarian Tapan Sen, who is also the general secretary of the Centre of Indian Trade Unions (CITU), a Left-leaning central labour union.

“What the government is trying is to curb the constitutional rights of the trade unions, diminish workers’ rights, and they are doing so by mortgaging everything to the capitalist lobby," said Sen.

The amendment to the Industrial Dispute Act will allow companies to retrench up to 300 employees without seeking government permission. Earlier, it was restricted to 100. It has also introduced a time limit of three years for raising industrial disputes. The modifications also make it tougher to register labour unions—instead of 15% of workers, now 30% of workers in a factory need to join hands to form a union.

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