New closing-shop and labour-bashing policies

"The second generation reforms have started with a bang," media reports quoted R.S. Lodha, head of the Federation of Indian Chambers of Commerce and Industry on February 22, 2002. Mr. Hiroshi Hirabayashi, Japanese ambassador to India said the management should have the right to hire and fire and a proper exit policy was a pre-requisite for faster investment flows into the country. Representatives of Indian big industry and foreign corporations and international financial institutions invariably hailed the Government of India’s labour law reforms. But for labour, the sole producer of value in the whole production process, the bulk of these new legal amendments are added woes piling upon them ever since the initiation of the so-called ‘economic reforms’ in 1991.

The proposed set of amendments include a ‘flexible exit policy’ (amendment to Industrial Disputes and Redressal Act 1947) for closing down enterprises and terminating (euphemistically said as ‘retrenching’) workers at will; amendment to Trade Unions Act making the registration of trade unions extremely difficult.

Already in the budget speech of 2001-02, the Finance Minister Yashwant Sinha had tested waters by proposing the new exit policy and the amendment to TUs Act. The lapse of one year in carrying it forward is sometimes blamed upon Sharad Yadav, the then Labour minister. With the new saffron minister of labour, Sahib Singh Varma in saddle, the ‘swadeshi’ compradors of BJP-led NDA is hopeful of having their way. The Second National Commission on Labour (appointed in 1999) has submitted its report to the PM this year. Although the actual recommendations of the Commission are under wraps, Vajpayee has promised implementation of ‘labour reforms’ to attract investment by foreign multinationals and to the full satisfaction of the captains of industry, as part the ‘second generation reforms’. Vajpayee shed tears over ‘pending economic legislations’. They are pending thanks to the hangama in parliament over the Gujarat carnage, the scams as usual (petrol pump and land allotments; tehelka being a thing of the past), an early adjournment, etc. Or else, these amendments were to be brought into effect from 03.09.2001 vide Repealing Act 30 of 2001.

The core issues of ‘labour reforms’ was spelt out by T. Damu of the Tata group as wage policy, employment security, labour redundancy, etc. As for wage policy, the capitalists and the pro-market lobby demand that wages should be [downwardly] flexible, linked to productivity and profitability of the firm. As for employment security, it is argued that excessive job security has affected worker productivity and efficiency. A policy of hire and fire is advocated. Yashwant Sinha had announced that contracting would be permitted in both core and peripheral jobs. As for ‘labour redundancy’, 16 per cent of the organised sector together) workers are estimated to be ‘redundant’ (!) or surplus. They would be thrown out as part of the policy of ‘cut-the-flab’, never mind the human costs.

The major amendments proposed include the repealing/amending of Chapter V B of Industrial Disputes and Redressal Act 1947 (ID Act). With the amendment, no government permission would henceforth be required for closure of units employing less than 1000 workers. 25 K of the original Act had made it mandatory for all firms employing more than 100 workers to procure government permission before the closure. Section 25 ‘0’ of V B had required prior permission of at least ninety days before the closure of the unit from the appropriate governmental authority. With the proposed repealing of V B, Chapter V A applicable to units employing less than 100 workers become inapplicable too. 25 N of V B had required the employers to give a three months’ notice of retrenchment or pay three months’ wages instead. 25 Q of V B had provided for penalty for lay-off and retrenchment without previous permission; 25 R of V B had provided for penalty for such closures. 25 B of V B had made the provision for any one with even one-year service to be given one months’ notice or salary, if retrenched.

Second National Labour Commission Recommendations

Stringent curbs on strikes

Second National Commission on labour, which submitted its report to the Prime Minister on June 29, 2002 has recommended that before declaring strikes, there should be an opinion poll to ensure that the strike has support of a minimum of 51 percent of the employees within the unit. Strikes by employees and lock-outs by employers done without a prior notice of 14 days should be considered illegal, says the Commission. For such illegal strikes, it is recommended that a salary equivalent of three days should be recovered from the employees for each day. And for every illegal lock-out, the employer would have to pay the workers a salary equivalent of three days for each day lost.

The Commission also suggests that ‘go slow’ and ‘work-to-rule’ strike practices be considered violation of discipline.

The Commission wants that in essential services like water supply, once an opinion poll on support to strike is obtained from a minimum of 51 percent of the employees, there should be compulsory dialogue and compromise presuming that strike has already taken place.

The Commission has also recommended curtailment of government holidays: ‘national holidays’ should be reduced to just three. Besides these, there should be only two holidays and ten restricted holidays.

The Commission advises the workers not to be rigid about work hours. Yet overtime wages are recommended for work more than nine hours per day and 48 hours per week.

Ideally for the Commission, the right to enter into agreement with management should be the prerogative of a trade union having support of 66 percent of the workers of a unit. Since most unions do not have so much support base, the right to hold talks is reserved for unions having support of over 25 per cent. Restriction is also proposed on unions whose leadership could be from outside the unit.

The Commission is understood to have opposed a hire-and-fie policy without provision for a judicial review saying this is against the Constitutional guarantee of the right to seek justice. To have contract labour on a large scale, the Commission advocates some corrective measures like suitable work culture, training and social security measures. Before retrenchment (termination) or closure of the firms, the Commission requires the clearance of all arrears. The Commission has also opposed including all firms employing up to 1000 workers in the new exit policy. The Commission recommends the number limit of the workers to be brought down to 300 or so.

To demarcate highly paid workers from ordinary workers, the Commission recommends the government to determine a wage limit (eg. Rs.25,000/- per month). Similarly, supervisors should be excluded from the definition of workers and be included among managerial or administrative staff, according to the Commission.

The commission has proposed enactment of seven new labour laws on labour management relations, wages, occupational safety and health, small enterprises, hours of work, leave and other working conditions at workplace, child labour and unorganised sector.

The Union Labour Minister, Sahib Singh Verma said, the central government would take final decisions on the report within three months after consulting political parties and trade unions. On 29 September, 2002, a meeting of the ministers of labour from the states is slated to be held where the report would be discussed.

For the workers thus terminated, Yashwant Sinha had in his budget proposals 2001-02, proposed 45 days’ wages for each year of service, enhanced from the initial proposal of 15 days’ wages. This is apparently an amount equivalent to the one envisaged under Voluntary Retirement Scheme (VRS). It is said, the amendment would enable employers of 98 percent of the units covered under the earlier Act to terminate (‘retrench’) labour with impunity. An obvious implication of such closing-the-shop policy would be reduction in the number of protected jobs and casualisation, with an expansion of the informal sector, as has already happened in countries where Structural Adjustment policies under the aegis of IMF-WB-WTO have been carried out. Trade Unions have alleged that the amendment to ID Act is IMF-inspired.

The Trade Unions Act was already past the Rajya Sabha in 2001. It seems primarily intended to make the formation and registration of trade unions extremely difficult. Earlier, it was sufficient to have seven workers in a unit to start a trade union. It is now being proposed that it requires 10 percent of the workers of a unit to apply for registration. Management approval can be obtained only through a referendum of a stipulated percentage of workers in an enterprise. There are also restrictions on ‘outside leadership’. After some debates, the provision is now being qualified that outside leadership, unless they are retired or retrenched workers could not hold the leadership of trade unions. Workers might turn out to benefit from the stranglehold of outside leadership in bourgeois and revisionist trade unions. But otherwise, the usefulness of the measure is debatable.

Such stringent restrictions on the formation and registration of trade unions is a clear violation of the right to freedom of association under the fundamental rights of the Constitution. It has also been of concern for the advocates of ‘labour reforms’ that labour is for the most part in Concurrent list requiring consultations with the state governments as well. It seems to be a move to perpetuate the predominance of the trade unions under the leadership of bourgeois and revisionist political parties, disallowing the emergence of radical trade unions.

The Payment of Bonus Act 1965 is proposed to be amended with a view to cover only those drawing salaries below Rs.2,500/- per month as against Rs.3,500/- p.m. hitherto. The payment would be made on the basis of Rs.1600/- for those drqwing Rs.2500/- p.m. as was the case prior to 1965. Payment of Gratuity Act 1972 is being amended with a view to change the gratuity amount from a ceiling of Rs.3.5 lakhs to salary of 20 months. This works out to be a gross reduction of the amount in most cases.

The pursuers of reform were so desparate that the leave provisions for MTP (medical termination of pregnancy) and vasectomy are sought to be deleted from Maternity Benefit Act 1961!

The definitional amendment of 2 (a) in Contract Labour Act 1970 seems to be intended to legalize and legitimize the ubiquitous practice of contract labour and the much sought after hire and fire policy. However, provision for statutory minimum wages and certain benefits for contract workers and legalisation of employers-contractors-workers relationship could turn out to benefit the working class in an interim period. The threat of trade barriers to exports by imperialist countries under labour and environmental clauses could be motivations behind such legislation. The implementation machinery, however, has remained teethless to this day as is evident from the fact that minimum wages is not implemented in this country after 55 years of ‘independence’. So then, in case of the upcoming amendments too the universal dictum holds, ‘The State is guilty until proved innocent.’

There are also numerous other upcoming amendments as part of the ‘labour reforms’. There is no doubt that the overall thrust of the so-called ‘labour reforms’ under the ‘second generation reforms’ is very much anti-labour. The new exit policy for terminating labour at will under the ID Act and the amendment to Trade Unions Act making the legal organisation and struggle by labour immensely more difficult are serious attacks on the hard-earned rights of labour, meager though.

The legitimizing arguments advanced for pursuing such a line of policies run thus: ‘Flexible labour laws could create more employment; lead to greater growth and attract foreign investment,’ etc.

However, the possibility of employment generation can be ruled out, since the closure of industries would lead to a reduction in the number of protected/secure jobs in organised sector and cause an increase in the number of casual jobs. Job security would be undermined but the increasing use of labour displacing technologies would constrain employment prospects for workers. Already, the Special Group on Targetting 10 Million Jobs/Year set up by the Planning Commission has noted that employment growth during the SAP of 1990s was three times lower than in 1980s. Thus during 1983-93, employment growth was 2.8 per cent and during 1999-2000, it was just 1.0 per cent. This is a matter of concern since 3.50 crore persons are already unemployed in India and 70 lakh new job seekers enter the job market every year. Even today, it is the unorganised sector which employs 92 per cent of the labour force. The proposed amendments are bound to result in greater job insecurity. GDP growth in India during 1990s was 6.7 per cent, that is higher than the 5.2 per cent of 1980s. This is not so impressive given the much hyped growth of the service sector, with the high profile Information Technology during the decade. The balance-sheet for the period of ‘economic reforms’ shows up ‘jobless growth’. Any further job growth may be expected in the informal and service sectors, not in industry. This has been the trajectory of the dependent paradigm of development pursued so far. To say the least, it would be foolish to imagine that an accentuation of this line of policies with greater FDI inflows would reverse the pattern altogether.

Far from the glossolalia of justifications, the fact remains that with the accentuation of the dependant paradigm of development and the ‘liberalisation’ of the economy, the imperatives of competition, particularly price competition between firms has necessitated the use of labour displacing technologies and the hire and fire policy. Thus ‘rationalisation measures’ are expected to displace labour in the textiles industry in a big way. The ‘exit policy’ is an easy way-out to close down sick private firms and PSUs with scant regard for labour rights. This means shifting the entire burden of capitalist crisis and bureaucratic corruption of yesteryears on to the shoulders of the working class. By pitting accumulated/dead labour (technology, in particular) against living labour and permanent employees against casual labour, the pro-reform lobby hopes to wade their way through.

The reform advocates further contend that the ‘rigid’ labour laws and excessive employment security in India hamper competition in today’s globalised market economy. But is it not a fact that India’s labour force is one of the most insecure ones in the world; with 92 per cent employed in unorganised/informal sector, with low levels of unionisation; in terms of real incomes, one of the lowest paid in the world, with hardly any social security benefits; yet with internationally competitive quality of work? It is a pity that labour conditions in the social fascist China today is touted as a model for India to emulate!

Social security net for labour is already bad enough in this country. Yet the government is unwilling to ratify ILO Convention No. 102 concerning Social Security (Minimum) Standards, 1952 although the coverage of schemes like Employees State Insurance (ESI) is very little. Nor is the government ready to provide any unemployment allowance or any other such welfare benefits. Yet the government is hell-bent on pushing through these anti-labour reforms.

Labour law reforms’

New closing-shop and labour-bashing policies