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Reform labour laws for 'Make in India' to succeed

Goutam Das     January 8, 2015

One of the biggest threats to Prime Minister Narendra Modi's 'Make in India' efforts comes from a key factor of production - labour.

Over the last one year labour strife shows no signs of ebbing and has engulfed both the public and private sectors.

The latest salvo came from five Coal India unions that called a five-day strike protesting a clause in the coal ordinance that would allow private firms to mine coal. While the strike was called off last night, it did send a chill down the industry's spine.

Industry body ASSOCHAM said that "the entire economy would come to a grinding halt as the country would lose production of over one million tonnes of coal worth about Rs 200 crore per day".

Had it continued, the strike would have impacted many industries that depend on coal, such as cement.

Labour disputes needled the private sector throughout 2014. In Bangalore, strikes around wage disputes and disciplinary action from the management engulfed carmaker Toyota's factory in Bangalore, textile processing company Bombay Rayon Fashions, auto-component maker Stump Scheule Somappa, farm-equipment maker Fowler Westrup and Coca-Cola.

In the western region, near Pune, Bajaj Auto's workers threatened a strike demanding wage hikes and equity shares at concessional rates.

Although the northern regions hasn't witnessed a Maruti Suzuki-type blow up, where a management representative was charred to death in 2012, smaller disputes continue to plague auto-component makers.

Clearly, both the government and industry need to do more. The industry has been slow to learn its lessons.

While the Coal India strike was more about political muscle flexing from the unions who wanted to be consulted, in the private sector, many industrial relations disputes are about treatment of workers on the factory floor.

Pradeep Bhargava, Director at Pune-based Cummins India, for instance, has been trying to sensitise companies into complying with "hygiene" factors - ensuring contract workers get safety training, personal protection equipment, canteen facilities and uniforms.

Most companies, he reckons, still haven't formed any internal complaints committee for harassment of women.

Contract workers earn much less than permanent employees.

According to a former bureaucrat, for the same work on the shop floor, a regular worker can be paid Rs 30,000 and a contract worker Rs 7,000-8,000.

On the other hand, the government needs to hurry up on labour reform. Disciplining the workforce has become too challenging an effort for the industry, impacting India's manufacturing competitiveness.  

The Industrial Disputes Act, 1947, mandates companies employing 100 or more workers to seek prior permission of the government to lay off even a single worker.

Chapter V B of the Act bars companies from exiting or downsizing quickly.

To make 'Make in India' successful, the new government needs to address outdated labour laws urgently.

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