Labour policy reforms in cold storage

NEW DELHI: With the Left leaving a strong imprint on economic issues, liberalisation of the labour policy – expected to be ‘soft launched’ with the special economic zones (SEZs) – has quietly slipped into the backburner.

The draft SEZ Bill, which has been circulated to various ministries and departments, is totally silent on the issue of labour reforms. The NDA government was trying to push labour reforms on the agenda and discussions were on to experiment with liberal laws in the export sector.

Instead, the Centre has now put the ball in the court of the state governments. The government wants states to take the lead and initiate labour reforms by vesting the powers of labour commissioners with the development commissioners who administer SEZs.

The government’s argument is that labour is a state subject and the issue should be dealt with by the state governments. This, despite the fact that SEZs are considered to be ‘foreign’ territories for most purposes including taxation and banking.

The government’s attitude has put a major question mark on the liberal labour policy, including provisions for contract labour, demanded by the export community.

During the NDA regime, SEZs were seen as the ‘laboratories’ for labour policy reform. As the Vajpayee government was struggling to further reforms in this sector — despite budget announcements — due to political resistance, introducing liberal policies for SEZ units was seen as a good option.

While export-oriented units (EOUs), especially those in the textile sector, were also seeking hire & fire powers, the government was looking at flexibility for the export sector as it would also help in attracting more FDI.

Starting with SEZs would mean have meant gradual introduction of the labour policies, diluting the resistance to such liberalisation. With the draft SEZ legislation going silent on the issue, the Left-backed government seems to have given up the idea for good.