The Unprecedented Changes To India’s Labour Laws = Social Chaos?
A worker uses a shovel to place boulders in a bowl while building a stone dam as part of a project to stop rainwater flows in Dewas, Madhya Pradesh, India (Photographer: Prashanth Vishwanathan/Bloomberg)

The Unprecedented Changes To India’s Labour Laws = Social Chaos?

The decision by various states like Uttar Pradesh, Madhya Pradesh, Gujarat and Maharashtra to amend certain labour law provisions has elicited two diametrically opposing views.

On the one hand are those who argue that businesses today largely employ temporary workers. And so, the dilution of labour laws that mostly apply to permanent workers won’t make much of a difference. And that the existence of these laws only served the cause of labour inspectors.

On the other hand, activists have strongly condemned this assertion saying that presence of stringent laws has proved to be a powerful tool in the hands of workers to negotiate for better wages, work conditions etc. And attributing lack of business activity to stringent labour laws is an over-simplification of the problem.

The usefulness of labour laws aside, both sides agree to one thing—that the manner in which the changes are being introduced will lead to social chaos.

Many states have extended the working hours for labourers. This will lead to huge unemployment since companies will keep lower number of workers and take responsibility only for them—limited number of labourers will be forced to work for longer hours, Amit Chakraborty, an independent researcher at Worker Solidarity Centre said. “The labour class is already suffering as a result of Covid-19 and once the protections under various laws are taken away, their condition will become even more precarious,” he said.

While Madhya Pradesh has issued more nuanced changes to the labour laws, the Uttar Pradesh government has chosen to make several sweeping changes. It stated, in a media release, that factories will be exempt from all but five labour laws. The Ordinance on it hasn’t been made public as yet. Gujarat, on the other hand, has extended working hours in factories and stated that wages must also be increased proportionately.

The Social Chaos Scare

The intent is to signal to industry that labour laws won’t come in the way of business activity, experts BloombergQuint spoke with said.

Perhaps why Madhya Pradesh has amended certain labour laws only for new industries that start production for the first time in the next 1,000 days. In a notification last week, it has amended the Industrial Disputes Act, 1947, that lays down provisions for the investigation and settlement of industrial disputes. It has said:

  • Provisions relating to prohibition of strikes and lock-out would continue to apply. Oddly, the sections that impose penalties for this behaviour on workmen and employers will cease to apply.
  • Prior government permission will continue to be required for layoffs.
  • Conditions precedent to retrenchment of workmen will need to be met i.e. give three-months’ notice to the workman stating the reason in writing or pay wages for this duration; and prior permission of the state government. Else, a penalty will need to be paid.
  • Procedure for closing down an undertaking will need to be followed. Non-compliance will attract a penalty.
  • Unfair labour practices like threatening workmen with discharge or dismissal if they join a trade union, establishing employer sponsored trade unions of workmen will continue to be barred.

Among the provisions that will cease to apply, the most crucial one relates to the dispute-settlement mechanism. Works committee that’s supposed to amicably settle differences between employer and workmen—gone. Conciliation officers tasked with promoting settlement of disputes- gone. Labour courts, tribunals—all gone.

Doing away with the entire institutional machinery of settling disputes will lead to labour unrest, Saurabh Bhattacharjee, assistant professor at National University of Juridical Sciences, told BloombergQuint. Members of the works committee, conciliation officers often pre-empt disputes and prevent escalations. Workers will now have to resort to aggressive campaigning, advocacy for even minor disagreements, he added.

While most of the laws have been poorly implemented, the overwhelming possibility that workers might go to court ensured that some of their demands are met. I’ve seen instances of workers at shops who were able to get an increase in pay each time the minimum wages were revised by using these mechanisms. 
Saurabh Bhattacharjee, Assistant Professor, NUJS

What’s even more damaging is the suspension of Industrial Relation Acts, 1960, for 11 sectors—textiles, electrical goods, iron and steel, to name a few. The provisions of this law empower workmen unions to apply for recognition and grants them protection from dismissal, reduction in pay as retaliation measures.

Bhattacharjee pointed out that these provisions were useful to prevent inter-union rivalry and made collective bargaining more meaningful. Madhya Pradesh is one of the few states that has a law on recognition of unions. Suspending that altogether will make industrial relations a lot more adversarial, he explained.

Are Businesses Optimistic?

States that have amended labour laws has packaged the move as business-friendly measures.

For instance, Madhya Pradesh has relaxed the conditions relating to contract labour. So far, contractors had to renew their license every year and pay a fee based on the workmen they intended to employ. This has now been relaxed to say that renewal of license can be for the period mentioned in the application. Additionally, factories that fall in the non-hazardous category and employ up to 50 workers will be exempted from the inspection process. A third-party certification for such factories will be sufficient.

Some of these procedural reliefs may help especially in sectors like textiles—foreign investors, unsure of whether they’ll be able to navigate the bureaucracy, have been hesitant to set up factories.

In fact, the provisions relating to permission of the appropriate government for retrenchment and lay-offs could be done away with. Ironically, the Madhya Pradesh government has retained these. So, how sincere they are about labour flexibility—I’m not sure.
Saurabh Bhattacharjee, Assistant Professor, NUJS

Industries’ worries around rent-seeking will continue until these provisions on prior permission of the government remain, he said.

But RS Goswami, president of Federation of Madhya Pradesh Chambers of Commerce and Industry, is optimistic that these changes will inspire confidence among businesses.

He pointed out that most of the changes relate to simplification of procedures and none of this will cause any financial loss or burden to workmen. Some businesses have had to wait for more than five and even 10 years for license renewal—new generation is refusing to continue family businesses because of lengthy procedures.

One businessman wanted to set up a hospital. Three generations have been struggling to get a licence. Their file ran into 1,000 pages. The request was rejected on flimsy grounds—no stamp on the papers, you’ve not made provision of a separate bathroom, this photocopy is missing, four empty envelopes weren’t attached.
RS Goswami, President, Federation of Madhya Pradesh Chambers of Commerce and Industry

There are thousands of such stories. And it’s an incorrect perception that industry and workmen are at conflict all the time. ‘There are 1,000 plus industries in Bhopal—in the last three years, there’s not been a single strike. Gone are the days when industry could exploit workers. These laws have become archaic. “40 years ago, you would find union flags everywhere—now, the business can run only if you keep the workers happy,” he added.

Finally, all businesses registered under the Factories Act in Madhya Pradesh have been exempted from its requirements for three months barring the provisions that relate to:

  • Approval, licensing and registration.
  • Appointment of inspectors.
  • Safety in the factory premises.
  • Extra wages for overtime, annual leave with wages.
  • Prohibition of employment of young children.

Provisions relating to hazardous processes, overlapping shifts and welfare measures like canteen, crèche, shelters have been dispensed with.

Worker association Bharatiya Mazdoor Sangh has instructed its state units to oppose the unilateral withdrawal of labour laws, as per the media release. The units have been asked to write to the chief ministers of the respective states to stop withdrawal of labour laws and ask governments to consult trade unions on every step taken in labour sector. The state governments have so far not been able to convince the public how labour laws are hurdles in economic activities and about the emergent situation requiring the extreme step of suspension of labour laws, it said.

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