Govt to take the middle path on labour reforms

NEW DELHI: Labour reforms are back on the agenda. After keeping the issue on the sidelines for some time, the government plans to include it as part of the second generation reforms during the forthcoming National Development Council (NDC) meeting, the apex forum for both the Centre and states.

The Centre is likely to seek states’ support states to allow flexibility in labour norms in the NDC meeting to adopt the Eleventh Five year Plan, sources said. The government is likely to adopt a middle path where several archaic labour laws may not be amended to prevent any backlash from the Left parties and labour unions.

Reforms would, however, be given a push by defining criterion under which industrial units may be allowed close down without seeking mandatory government permission.

The Planning Commission is working on a proposal under which industrial units promising higher compensation package (say 30 or 60 days wages for each year of service instead of present 15 days wages) may be allowed flexibility to shut shop or retrench without approaching the government.

The criterion may even be applied in case a company employs more than 100 workers, sources said. Though the proposal is in its initial stages of discussions, it is also likely to find a place in the final draft of Approach Paper that is expected to be submitted to the PM later this month. The current draft also talks about the need for reforming the labour market to spur manufacturing.

At present, industrial units employing more than 100 workers have to seek government nod to close down or retrench or lay off. The commission believes that when permission isn’t required to set up a unit, permission should not be needed for closing it.

If the states agree to suggestions at the NDC meet, the changes may be introduced without amending labour laws. The move is also considered non-controversial as unions and Left parties may not object to any proposal that protects labour interests and guarantees good compensation package.

Yojana Bhawan sources said changes in labour laws have become essential to make the country a manufacturing hub. “While China has given a push to its manufacturing sector through large scale production, the same is considered risky in India due to complex labour laws,” said a source.

A World Bank Study said introduction of contract labour system raises employment opportunities in the manufacturing sector by 30%. There are around 154 labour laws to ensure welfare of workers. Most of these laws affect the workers in the organised sector who constitute around three crore workers out of the total workforce of about 40 crore.

The previous NDA government appointed a Labour Commission under former labour minister Ravinder Verma, the second since independence, which submitted an exhaustive report on labour reforms about three years ago. However, consensus eluded the efforts made by the previous government in effecting labour reforms.