The Hindu : Labour pain in exit policy

Online edition of India's National Newspaper
Monday, Dec 23, 2002

Business

Business

Labour pain in exit policy

THE EMPLOYMENT security system in India has been built on three premises — industrial workers in modern large scale enterprises are potential victims of exploitation, that protection against exploitation has to be provided through government regulations rather than through promotion of effective workers' organisations, and that income security of workers can be ensured only through employment security.

Many developing countries market their export-processing zones as union-free to attract investment: A recent International Labour Organisation (ILO) study of 850 zones around the world, which employ 27 million workers, found that free trade unions and minimum labour standards are "extremely rate."

This enormous mass of unorganised workers poses the central challenge to the international labour movement. Without the ability to organise, bargain collectively, or strike, these workers will be racing to the bottom in the globalisation process. It will not end until policymakers recognise that no nation is too poor to enforce the basic human rights of its workers.

Indian industry which has been somewhat thoughtlessly echoing the neo-liberal demand for sweeping reforms is, perhaps for the first time, and in a far reaching way, getting a real feel of the pain involved in adjusting to the market conditions under globalisation. Before they could bring themselves in line with international business the slowdown and the recession in global markets struck.

Go to any industrial estate, you will find that many small-scale units have become seasonal units and so also the industrial employment in them.

An industrial estate workers commented. "We left seasonal agricultural work and came to the city hoping to get round-the-year work in industries. But here too it has come to resemble the work back in the villages. For a few months we get work and for a few months we remain idle.Many companies send permanent workers out on VRS and take them back as casual workers, often for the same pay. In this respect the VRS in manufacturing industry is quite unlike that in banks. It is not just a matter of shedding the flab. It is not even a matter of financial crunch and high labour costs. It is more a question of acquiring grater resilience, of aligning fixed and variable capital as required by the market, what with the aggregate turnover time of fixed capital becoming an unknown quantity and the business cycle breathing down their necks.

For companies, it is more like setting aside depreciation funds with the crucial difference of zero replacement costs and possible net financial gains in the longer run.

VRS packages

Indian industry, whose wage costs are about one-fortieth to one-fiftieth of the prevailing wage rates in the West, especially in manufacturing; has large elbowroom to offer attractive VRS packages, without any threat to its competitive edge. The labour law reforms have only selectively proposed scrapping of Section V (B) of the Industrial Disputes Act - closure of units with up to 1000 workers without permission from the State government — and were clamouring for more, like legalisation of a generalised contract system (hire-and-fire), but none of the official quarters have ever mentioned a single word about substantially increasing the abysmally low closure/retrenchment compensation.

The labour cost is among the least worries of corporates. Judging by the size of the VRS packages, the capacity of the corporate sector to pay higher severance pay is no longer in doubt. No wonder then that a normal political assault on Indian labour has been packaged as `economic reform' and peddled in budget proposals.

Of course, industrial restructuring has been going on for nearly a decade. But the present manufacturing slowdown has speeded it up.

The VRS is just one by-product. Scrapping of Sec. V (B) of the ID Act is thought of as one way out. About 95 per cent of Indian industries would be exempted from government permission for closure under this legislative change. SICA (Sick Industrial Companies Act) and BIFR (Bureau of Industrial Finance and Restructuring) continue to be big stumbling blocks. Hence the clamour for doing away with both of these.

Contract labour

The Centre has reportedly recommended scrapping of the present Contract Labour (Regulation and Aboligion) Act 1970 and replacing it with an altogether new act to smuggle in hire-and-fire under its guise. The ministers have obviously been emboldened by the 5-member Constitution bench judgement of the Supreme Court on contract labour in public sector enterprises, the biggest judicial salvo fired against the working class in 2001.

It came up with this ambivalent anti-worker judgement — setting aside several of its own earlier positive judgements, notably the 1995 landmark judgement in the Air India case only after mulling over the possible impact of regularising 1.3. lakh contract labourers in FCI and 25,000 in SAIL.

The decline in the number of strikes is more conspicuous than in lockouts reflecting a greater sense of discipline and responsibility among workers. The share of strikes in total work stoppages, which was 80 per cent in 1990, has slided to 53 per cent in 2001. The total number of strikes which was as high as 1459 in 1990 has come down to a low of 293 in 2001. The decline in the case of public sector units from 606 to just 87 is remarkable; the corresponding figures for the private sector being 853 and 206 respectively.

Further, the NSSO surveys also show that a large number of workers (around 30 per cent) are living below the poverty line. This possibly is due to the new entrants being pushed into the labour market in the unorganised sector, which at present is not able to absorb them.

Of the total workforce of around 397 million in the country, 28 million are employed in the organised sector and 369 million in the unorganised sector, which includes 236 million in agricultural and related activities. The existing arrangement for social security covers only 35 million. A prime concern is the challenge of closing the existing coverage gap, which affects about 92 per cent of the workforce.

There is a vast gap in coverage of the employees under the social security net in India. Out of the total workforce, only around 8 per cent is covered in the organised sector. Apart from this, employees under contract labour, informal sector and supervisors have no protection or rights of the workers.

The web of labour legislation and legal and quasi-legal institutions into which labour relations are forced as a consequence of the Government's labour policy, limit the freedom of collective bargaining for the working class. The decision of Chief Justice Kirpal has really shaken the time-tested philosophy of protection to the labour force. A portion of the said judgement is as below:

(2002) 2 SCC 333, 362. "Even though the workers may have interest in the manner in which the company is conducting its business, in as much as its policy decision may have an impact on the workers rights, nevertheless it is an incidence of service for an employee to accept a decision of the employer which has been honestly taken and which is not contrary to law.

Even a government servant, having the protection of not only Article 14 and 16 of the Constitution but also Article 311, has no absolute right to remain in service. For example, apart from cases of disciplinary action, the services can be terminated if posts are abolished.''

The threat to the human basic rights of workers, both in the organised and unorganised sector, has now become more imminent in the scenario of liberalisation policy and with the ultimate judgement of the Supreme Court.

Hence, a comprehensive labour legislation backed by Constitutional amendment is the need of the hour. Or else the Exit Policy will also result in the exit of social justice to the working class apart from the basic human rights of workers in the country.

M. Veerappa Moily

(Former Chief Minister of Karnataka &

Chairman, Revenue Reforms Commission.)

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