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Business News/ Politics / Policy/  Modi launches labour reforms to make doing business in India simpler
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Modi launches labour reforms to make doing business in India simpler

Prime Minister launches new inspection scheme, friendlier provident fund facilities, among other reforms

Prime Minister Narendra Modi unveiled the new inspection scheme that is expected to end the so-called inspector raj, which for companies often meant harassment by labour inspectors. Photo: Bloomberg Premium
Prime Minister Narendra Modi unveiled the new inspection scheme that is expected to end the so-called inspector raj, which for companies often meant harassment by labour inspectors. Photo: Bloomberg

New Delhi: With elections to key state assemblies concluded and with the government secure that it continues to enjoy the political momentum, the focus has turned to business.

On Thursday the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) formally put in place the new labour laws that will create a more enabling environment for transacting business and effected a major rejig of the team that will assist finance minister Arun Jaitley in making the next budget.

And this a day after exit polls projected that the BJP would wrest political control of both Maharashtra and Haryana, presently governed by the Congress. Barring elections to the Jharkhand assembly and possibly Jammu and Kashmir, the next big electoral test for the NDA is late next year when Bihar goes to polls.

The day began with Prime Minister Narendra Modi launching several initiatives, including a single-window labour compliance process for industries and friendlier provident fund (PF) facilities. He also unveiled the new inspection scheme that is expected to end the so-called Inspector Raj.

Modi, however, couched the initiative in the context of improving the lot of labour and not in the context of reforms—something that has been long sought by foreign investors. To be sure, some states like Rajasthan have also initiated similar changes, suggesting that there is now greater consensus to amend politically sensitive labour laws in the country.

The reworking of the labour laws is consistent with the NDA’s approach, first spelt out in the July budget, to streamline rules and regulations to create a better business environment. In the budget session of Parliament, it eliminated a tranche of outdated laws and is now awaiting the recommendations of a high-level panel to initiate another round.

Starting on Thursday, the 1,800 labour inspectors will no longer have the powers to decide on the premises they would survey. Instead, a computerized system will randomly, based on data and objective criteria, identify the companies to be inspected (Something similar to what is done during random scrutiny of income tax returns). Further, the inspectors will have to upload their inspection reports within 72 hours and can’t modify them thereafter.

“Let’s start with trust," Modi said in New Delhi during the launch.

The Prime Minister said labour reforms that make it easier for companies to do business in India would fulfil India’s aspiration to become a manufacturing hub through a new programme called Make in India. The government wants to focus on manufacturing and create more jobs.

Speaking about the single-window platform for compliance with labour laws, Modi said it would allow companies to file, starting Thursday, one labour compliance report online for 16 laws.

“E-governance is easy governance," he said, reiterating his vision of minimum government and maximum governance.

Later in the day the government announced a rejig of the top level of bureaucracy in North Block. Arvind Subramanian, senior fellow at Peterson Institute for International Economics and the Center for Global Development, was appointed the new chief economic advisor. Rajiv Mehrishi, chief secretary of Rajasthan, will replace Arvind Mayaram as the economic affairs secretary.

Labour minister Narendra Singh Tomar said the central government was striving to fulfil the aspiration of all Indians. While improving the environment for businesses is important, the government is also looking at employee benefits and more jobs for the young.

For making the single-window scheme a success, the labour ministry has compiled data of all companies that come under central labour laws. Each factory has been issued a labour identification number to enable them to register online and file the unified labour law return.

The ministry has collected information about 1.1 million companies under four different bodies of the labour ministry—the chief labour commissioner, Employees’ Provident Fund Organization (EPFO), Employees’ State Insurance Corporation and Directorate General of Mines Safety.

The data was digitized and duplicate entries removed, reducing the total number of companies/factories to between 600,000 and 700,000. “What the PM unveiled today (Thursday) is a fundamental change in certain labour issues," said labour secretary Gauri Kumar.

According to Tomar, this will boost investment, create jobs, improve the trust of people in social security schemes and make vocational education aspirational.

Welcoming the new inspection scheme and the single-window compliance system, Chandrajit Banerjee, director general of the Confederation of Indian Industry, a business lobby, said this will bring in greater transparency and accountability.

“Simplification of procedures has been a longstanding concern for industry and this initiative by the ministry will considerably ease the burden of compliances, especially for SME (small and medium enterprise) sector. The most important advantage of the portal (single window) is that this will allow online registration of units and filing of self-certified single online returns," said Banerjee.

Modi also unveiled the provident fund number portability that allows an Aadhaar-linked PF account—like a bank account—to be retained by an employee throughout his or her professional career. Some 27,000 crore is lying unclaimed in inoperative accounts and with the issue of Universal Account Number, EPFO can identify the beneficiaries and pay them back.

Modi said this money belonged to poor workers of India.

With the scheme going live on Thursday, employees will now be able to check their PF accounts online.

“Congratulation on getting portability facility for EPF account. Now you can operate your account without any intermediation," Modi said in an SMS to over 40 million PF account holders.

On Thursday, the labour ministry also appointed brand ambassadors for its vocational training schools, or Industrial Training Institutes (ITIs), mostly individuals who graduated from these and went on to achieve bigger things. Modi said this would instil pride and confidence in ITI students. The labour ministry would also revamp the skill education and apprentices provisions to improve the number of people getting trained every year.

Tomar said the government is moving with speed to reform the labour sector and has approved amendment to three key labour laws—the Factories Act, 1948; Apprentices Act, 1961; and the Labour Laws (exemption from furnishing returns and maintaining registers by certain establishments) Act, 1988. All the three pieces of legislation have already been tabled in Parliament. He said the Child Labour Act will also be amended in coming times.

K.R. Shyam Sundar, a human resources management professor at XLRI, Jamshedpur, said if the labour inspections are centralized and orders for inspection visits emanate from above and if the visits’ timings are controlled, these will violate the International Labour Organization’s labour inspection convention 81 (1947).

The convention requires the ratifying countries, including India, to create a labour inspection system free of external influences and inspections to be held at any time and any place if such are required by the contextual circumstances.

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Updated: 17 Oct 2014, 01:35 AM IST
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