Center For Workers Education

for building a democratic labour movement in India

The Political Economy of Labour Law Reforms in India-Part I

Surendra Pratap, Centre for Workers Education, New Delhi

A draft not to be quoted (still in the process of editing and circulated to seek comments)

The new global politico-economic regime and new international division of labour forced an industrial restructuring in that the whole public space (economic, social and cultural) including all economic and social sectors are being privatized and opened to foreign investments and all the production and distribution operations are reorganized in accordance with the global value chain arrangements, and an export led competitive growth model is being imposed. With these changes in the political economy, the labour and the capital both strongly demanded for labour law reforms, and obviously they articulated these demands from different perspectives. The demand of labour movement was targeted to address the new vulnerabilities created for labour by the new politico-economic regime and hence focused on extending job security and social security to all sections of labour and ensuring right to organize and collective bargaining to the labour in new situations that increasingly restricted the space for collective bargaining. On the other hand, the demands of the capital were largely targeted to achieve complete freedom to hire and fire and reduce their liabilities towards labour and society to the minimum in the name of building comparative advantage of Indian industry over other countries. The demands of the capital clearly reflected a decisive change in the whole perspective of economic development and openly argued for the dominance of ‘profit over people’, that is actually inbuilt in the export led growth model. Therefore the agenda of labour and the capital were in conflict with each other. The capital was aggressive right from the beginning of liberalization and in collusion with the state it was able to force implement large scale privatization, downsizing and retrenchments across the sectors. It was also able to force the state to initiate pro-capital labour reforms and overlook large scale violations of labour laws. Therefore the labour movement was compelled to go on defensive and for a long time its agenda of labour reforms was not heard and not highlighted. In these situations it appeared as if only the capital is demanding labour reforms and the labour is protesting against it. However, the labour movement was able to gradually articulate its agenda of labour reforms that was put forward at various forums. It was reflected in the report of the 11th law commission of India (1985-88) on forum for national uniformity in labour Adjudication (1987), various sessions of Indian labour conference, the draft uniform labour code 1994 worked out by National Labour Law Association and most prominently in the report of the working group on labour laws & other regulations for the 12th five year plan (2012-17) constituted by the ministry of labour and employment, government of India.

Before attempting to elaborate and explain various aspects of the agenda of labour reforms put forward by labour and capital, it may be relevant to briefly revisit the political economy of labour laws and have a brief overview of labour relations dynamics before liberalization.

In a capitalist democracy, the labour laws are nothing but a contract between labour and the capital determined by the balance of power between the two classes in the time and space. This balance of power is also reflected in and interlinked with the nature of politico-economic regime and the degree of neutrality that the state apparently displays in labour-capital relations. If the working class movement emerges powerful and is able to tilt the balance of power in favour of labour, it is able to compel the state to amend labour laws in favour of labour to upgrade the labour standards, or compel the employers by way of collective bargaining to upgrade the labour standards over and above what is provided by existing labour laws. In these situations the state is also compelled to show more neutrality in dealing with labour-capital relations, if not acting in favour of labour. However, the situation is reversed when the balance of power is decisively tilted in favour of capital. In such situations, the capital is able to compel the state to reform the labour relations (labour laws) against labour. Even when labour laws remain the same, practically they lose their meaning and relevance. The state no more appears as a neutral entity, and in collusion with capital it openly acts against labour. This dynamics appears very clearly in various phases of Indian history, particularly when we compare the situations before and after liberalization.

Before liberalization, the politico-economic regime was largely based on producing and selling within the national boundaries and the imports and exports were limited and determined by the necessities and compulsions of underdevelopment and lack of technological capabilities. Therefore increasing purchasing power of masses and protecting natural resources were to some extent inbuilt in the nature of socio-economic policies. The private capital was weaker and public sectors played a greater role[1] in the economy. In these situations the state was willing and able to show more neutrality in labour-capital relations. The state was able to effectively regulate the economy and exercise a control on private capital, particularly the foreign capital. On the other hand, the working class movement, born and shaped in anti-colonial movement and ideologically and culturally linked with democratic and socialist movements, emerged as a strong social force. By virtue of above situations the labour enjoyed comparatively better collective bargaining power. The presence of a strong working class movement was an important factor consistently compelling the state to show more neutrality in labour-capital relations and compel the industries to respect labour rights. The better wages and working conditions ensured in public sectors, to a large extent facilitated improvements in wages and working conditions in private sectors as well. Moreover, the cumulative impact of the above factors also insured a certain degree of social inclusion that was inbuilt in the whole dynamics of socio-economic development and a certain degree of pro-people and pro-labour aspects that were inbuilt in socio-economic policies. Some of the important aspects that reflected the impact of the above dynamics were: a) highly subsidized education, health and housing, b) highly subsidized daily life necessities supplied by public distribution system (PDS) to all, c) highly subsidized inputs including raw materials and power supply for workers engaged in traditional occupations, c) restriction of private corporate and foreign capital in various sectors and reservation of some sectors for small scale enterprises, d) presence of a strong peasant movement (and its achievements) for land reforms and for distribution of land to landless; and a comparatively strong left and other social movements working for more democratic and equitable development of society, and e) a strong labour movement consistently (and successfully) compelling the state to extend job security and social security to increasing sections of the labour force.

The direction and some worth mentioning achievements of the labour movement before the liberalization can be listed as follows:

  1. The amendment in industrial disputes act in 1972 introduced a new clause that made it compulsory for employers to give six months prior notice to the government before closure of enterprises engaging 50 or more workers. This had a significant positive impact on labour movement. An upsurge of the working class movement emerged largely since 1965 that grew stronger year by year and finally the Indian state suspended the democracy and imposed emergency in 1975 to handle the situation. However, it aggravated the problems further and a mass upsurge emerged against imposition of emergency and working class movement grew stronger in alliance with broader democratic movement. During this period, the industrial disputes act was further amended in 1976, and a new chapter V-B was introduced to make it compulsory for the employers to give 90 days notice to the government before closure, retrenchment, and layoff in enterprises engaging 300 or more workers. This amendment was targeted to neutralize and win the labour in larger enterprises because they were the dominant and most influential section of the labour movement. The purpose was also to minimize the discontent among labour that was flaring up largely on the issues of large scale retrenchments, layoffs and closures. It was also an attempt to divide the labour movement, because the above amendment applied to only larger enterprises and left the major section of industrial labour force unprotected, because majority of enterprises in the country engaged less than 300 workers. The demand of the labour movement was to extend this protection to all sections of industrial labour force or atleast those engaged in enterprises with 50 or more workers, as the earlier amendment in 1972 relating to closure of enterprises was applicable to enterprises engaging 50 or more workers. The labour movement was able to achieve another victory in this regard in 1982 when the chapter V-B was amended and its applicability was extended to enterprises engaging 100 or more workers. The demand for its applicability to all industrial enterprises (or atleast those engaging 50 workers) continued
  2. The labour movement was strongly demanding to end the system of using irregular workers in large numbers. Across industries large numbers of workers were engaged as casual, contract workers and denied job security as well as social security. Finally the labour movement achieved a victory and the contract labour abolition and regulation act was legislated in 1970 to prohibit the use of contract/casual labour in perennial activities of the enterprises engaging 20 or more workers, and to regularize irregular workers engaged in perennial activities. It was a path breaking achievement of the labour movement that led to regularization of hundreds of thousands of workers across the sectors, and it also increased the strength and power of the unions. However, soon, with the advent of liberalization, the situations again reached back to square one, when this act practically lost its meaning. The whole dynamics of this issue is very well reflected in the story of Chhattisgarh mine workers struggle led by Shankar Guha Niyogi
  3. The labour movement was also able to achieve certain level of regulation of working conditions and insuring some welfare benefits to workers that were denied coverage under the factories act. For example, the bonded labour abolition act 1976, Interstate migrant workmen’s act 1979,workmen’s compensation act amendment in 1976 to remove wage ceiling for its applicability, the Bidi and Cigar Workers (Conditions of Employment) Act, 1966, Equal Remuneration Act, 1976, Limestone and Dolomite Mines Labour Welfare Fund Act, 1972, Iron Ore, Manganese Ore and Chrome Ore Mines Labour Welfare Fund Act, 1976 and Shops and establishments act and various other legislations and policies in various states
  4. The agriculture labour movement in India was strongly demanding for a central legislation for agriculture labour. The movement achieved victory in Kerala and Tripura where agriculture labour legislation was enacted (The Kerala Agricultural Workers Act, 1974, and TheTripura Agricultural Workers Act, 1986) that insured a mechanism of tripartite conciliation and settlements, certain level of social security and better collective bargaining power to agriculture labour in these states. The struggle for enactment of this legislation in other states and enactment of a central legislation on agriculture labour continued
  5. The agrarian movements strongly demanded for land reforms targeted to increase the average size of land holdings and distribution of land to landless workers by way of equitable distribution of land. The successes and failures on this issue are very well reflected in the report of the committee on state agrarian relations and unfinished task of land reforms published by Ministry of Rural Development

Before liberalization there was no such terminology of formal and informal sectors, or organized and unorganized sectors. Largely the terminology of unorganized labour/workforce was used to define vulnerable sections of workforce. The terminologies of unprotected workforce and small economies were used to define the nature of vulnerabilities of various sections of unorganized workforce. The understanding behind these terminologies clearly conveyed that the vulnerabilities of these sections of the workforce can be removed and it is possible for them to move out of the situations of unorganized labour. Therefore, the vulnerabilities were not considered of permanent kind and so there was no permanent kind of so called unorganized sector. This understanding articulated the situations in a continuous process of transformation and the existence of unorganized labour reflected a phase of transition. The vulnerabilities of organized labour were precisely due to the fact that they were not protected and not organized, therefore the approach and strategy was targeted to organize them and extend relevant protections to them. This was also reflected in the report of first national commission on labour (1967-69) that defined the unorganized labour as that part of workforce “who have not been able to organize in pursuit of a common objective because of constraints such as (a) casual nature of employment, (b) ignorance and illiteracy, (c) small size of establishments with low capital investment per person employed, (d) scattered nature of establishments and (e) superior strength of the employer operating singly or in combination.” To transform the conditions of the unorganized labour, the Commission recommended a) detailed survey of unorganized labour time to time to understand their conditions, b) Legislative protection to unprotected/unorganized labour, c) Simplification of legislations and administrative procedures for small scale industries, d) Expediting education and organization of unorganized labour, e) Reinforcement and strengthening of inspection system to ensure labour rights, f) Protection of workers against middlemen, and g) Development of cooperatives and ensuring that cooperatives pay adequate wages and bonus to workers.

Forms of organizing to increase collective bargaining power and the legislative-policy initiatives to extend protection may be different for different sections of unprotected wage labour and small economies. Therefore, the subsector centered focus was inbuilt in the strategies. For example, in agriculture, a home of major section of unprotected labour and small economies, the dominant discourse was for agrarian transformation with three major aspects in the strategy: a) organizing them to increase their collective bargaining, and to enable them to collectively function as larger economies; b) enacting and enforcing land reform policies, and a central legislation for agriculture labour; and c) extending subsidized inputs and promoting cooperatives. Similar strategies were adopted in some other major sectors, for example, mining, bidi making[2] etc. The struggle for extending protection to unprotected labour in enterprises was reflected in the enactment of contract labour abolition and regulation act. Moreover, the dominant practice of industry level bargaining ensured protection to unprotected workers in industries where smaller enterprises dominated the scene, for example, jute industry, textile industry and plantations etc.

There was a strong possibility of gradual disappearance of unorganized labour, if the working class movement was able to achieve its above goals, particularly the implementation of land reforms, enactment of legislation for agriculture labour and extending job security and social security to all workers. However, even if some significant achievements were made in this direction before liberalisation, the structural transformation could not be achieved. Land reforms were not implemented, legislation for agriculture labour was not enacted, and the legislations that were enacted to protect labour left large sections of the workforce out of its coverage and so on.

It is also to be understood that the issue of transformation of small economies and unprotected labour in broader context is a political issue and cannot be addressed within the restricted boundaries in which typical trade unions operate. Only when the trade unions develop broader social concerns and become part of the struggles for broader social change, then they are able to address the issue of broader transformation of unorganized labour. Before liberalization, most of the major trade unions were linked with various kinds of politics and political forces. Only those trade unions that were part of political movements working for democratic and equitable transformation of society were able to understand the problems in their wholeness (and not in detached parts) and therefore were also able to devote their energies towards transformation of unorganized labour. For example, communist and socialist forces played a great role in the movement for land reforms and for agriculture legislation. All socialist, communist, democratic and reformist forces played an important role in the movement for extending livelihood security and social security to unorganized labour. It is also worth mentioning that various people’s movements that emerged from the mass upsurge against emergency (when democracy was suspended) and that later targeted to organize the neglected sections of workers in various pockets of the country, were also part of the political forces working for the social change and played a role in the movement for transforming the conditions of the unorganized labour. Tribal and dalit movements were also by nature political movements with a distinct vision for democratic transformation in political economy of society and played a role in the movement for transformation of unorganized labour. Therefore, the achievements and failures discussed above were not only that of trade unions but also that of these political forces.

The factors behind the failure of labour and political movements were mainly the three: a) lack of unity among various political forces, and further divisions in the movement in 1970s and 1980s, b) the Indian economy entered in a prolonged stagnation and systemic crisis in 1970s and the increasing problems of unemployment reversed the wheels of transformation and aggravated the problems of unorganized labour further, and c) increasing urbanization combined with jobless growth led to expansion of unorganized sectors alarmingly, for example, in construction, mining, street vending and waste collection and disposal etc.

The liberalization came with a completely new dynamics. On the one hand, the social and political forces working for transformation of society and political economy of country were weakened largely due to: a) downfall of the international socialist and democratic movements and emergence of largely a uni-polar world from the working class perspective, b) downfall and disastrous divisions in the working class movements leading to virtually its disintegration, c) co-option of a large section of people’s movements by national and international capital (by helping and promoting them) and building or forcing a consent to work as a ‘responsible’ opposition within the framework of new global political economy, c) a consensus built or forced among almost all parliamentary parties, from right to left, on anti-labour economic policies largely on the ground of TINA (there is no alternative); and therefore a large section of working class movement that was associated with these parties was virtually paralyzed, d) the new global political economy and new international division of labour transformed the state virtually in to a corporate agent, and e) new system of production and distribution based of global value chains led to divisions and scattering of the working classes and thereby drastically reduced their collective strength and collective bargaining power. On the other hand, in the new global political economy based on new international division of labour, the unorganized labour emerged as an important source of profit maximization. Global value chains of various industries are established in such a way that almost all labour intensive production activities are shifted to developing countries that are typically locked in low organic composition of capital and the cost of production including the wages are very low. Further profit maximization depends on two factors: a) the unorganized labour in the developing countries largely acts as reserve army of labour and consistently puts a downward pressure on wages and reduces the collective bargaining power of labour; and therefore, larger the size of this reserve army of labour, lower is the share of wages and greater is the share of profits in total value, and b) the cost of production is reduced drastically by integrating the increasing sections of unorganized labour (particularly the small and tiny enterprises, self employed producers/service providers and home based workers) in the global value chains; and therefore, larger the proportion of unorganized labour in the value chain, greater is the share of profit in total value. In these situations the foreign investments move (i.e. industries from developed countries are shifted) to those developing countries having greater reserve army of labour in the form of unorganized labour (and so the wages are one of the lowest), provided that the cost of other factors is more or less equal. The cost of other factors include the infrastructure costs of production (costs of power and raw materials, the cost transportation of raw materials, parts and components within the value chain networks, and administrative costs) and infrastructure costs of distribution (costs of transportation of products to the markets). Therefore these factors relate to the existence of competent subcontracting industries in the country and in the region, liberalization of economy and regional integration of economies and the existence of significant size of national and regional market. In these situations, with an imposed model of export oriented growth, the developing countries, in order to attract sufficient FDI and to get sufficient export orders, are compelled to compete with each other to offer better prospects of profit maximization for the capital. The winners in this competition are those countries that are able to effectively reduce the share of wages to the minimum by ‘disciplining’ labour and ensuring a significant supply of unprotected labour.

It is in this background, the whole dynamics of discourse on the issues of unprotected labour and small economies took a new turn in the phase of liberalization. The focus decisively shifted from transforming the conditions of the unprotected labour and small economies to maintaining them at bare minimum levels of subsistence. Therefore, it was consciously and purposefully accepted and we were made to accept that unprotected labour and small economies may not disappear and remain forever. Defining and treating them as a specific sector served well the above purpose and the intensions. It does not appear just a coincidence that ILO ‘discovered’ the dynamics of so called informal sector (in 1972 in Kenya) and started promoting a completely new strategy for this sector based on divide between formal and informal sector (the report on “Dilemma of the Informal Sector” presented in International Labour Conference in 1987) in the same period during which the new international division of labour was taking shape. In India, the term unorganized sector was probably for the first time systematically used in 1987 in the terms of reference of The National Commission on Self-Employed Women, set up under the chairpersonship of Smt. Ela R. Bhatt and probably the first systematic attempt to define the so called informal sector was done in a workshop jointly organized by the National Council for Applied Economic Research (NCAER) and Self-Employed Women’s Association-SEWA in 1997 (The report of the second national commission on labour 2002).

However, it is worth mentioning that within the working class movement the dominant discourse on transforming the conditions of unprotected labour and small economies was still based on subsector approach. For example, there was a strong movement for a legislation and welfare board for construction workers to regulate the working conditions and to extend social security to unorganized construction workers. The enactment of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and Building & Other Construction Workers’ Welfare Cess Act, 1996 reflected a great victory of the workers movement. These legislations included extensive provisions for regulation of working conditions, occupational health and safety of construction workers and also for establishment of construction workers welfare boards in all states to provide social security benefits to the workers. The welfare boards are funded by levying one percent cess on all investments in construction business. This legislation greatly accelerated the process of organizing the construction workers and also created a better space for collective bargaining.

The second national commission on labour in its report that was submitted in 2002 finally provided a detailed outline and justification for the divide between organized and unorganized sector and proposed a separate social security bill for unorganized sector workers. Thereafter the duality of labour and divide of organized and unorganized sector decisively became the part of dominant discourse on labour. Terminologies of organized/unorganized sector and formal/informal sectors were being used interchangeably.

The period of 14th Loksabha when UPA coalition government was formed in 2004 in the leadership of congress party and supported by the left parties, was largely a period of transition when we witness the dynamics of continuity as well as change. Largely under the pressure of left the sub sector centered approach for transforming the unprotected labour and small economies to some extent continued, but there were also decisive moves towards institutionalizing the duality of labour as well as towards anti-worker labour reforms. This was reflected in the common minimum program of UPA government in 2004 (see annexure). The national rural employment guarantee act was enacted in 2005, and this was probably the only great achievement of left as part of coalition government. This act ensures 100 days of employment to one member of rural families. In a situation when employment in agriculture has become only seasonal, and large majority of land holdings are at below subsistence level, this law is meant to ensure survival of agriculture workers. The other achievement was the establishment of National Commission on Enterprises in Unorganized Sector (NCEUS) in 2004 that for the first time produced extensive and valuable reports exploring the problems of various sections of unprotected labour and proposed policy initiatives. However, during the same UPA government, the New (or national) Pension Scheme (NPS) 2004 was legislated and initiatives were taken for legislating a separate national level social security legislation for unorganized sector workers.

The new pension scheme was formulated in 2003 by Bhartiya Janata Party led NDA government and implemented by UPA government in 2004, despite strong protest from trade unions and the state governments of mainly West Bengal, Kerala and Tripura. It was initially implemented in central government and railways, and later it was extended to all sectors including the informal sector workers. The earlier pension scheme was based on providing defined benefits and it was replaced by this new pension scheme based on defined contributions but no defined benefits. In the new pension scheme the contributions of employees and employers are transferred to a trustee bank that invests it in share and bond markets, and therefore the benefits for the workers depend on the rise and fall of share markets. In the earlier pension schemes there was a provision of guaranteed pension amount, including a family pension, gratuity, and disability pension. But in the new scheme all these benefits are lost, and there is even no guarantee of the principal amount invested by the workers. Informal workers are also covered under this scheme and they are required to contribute a minimum of Rs 1,000 per year. Their money will also be similarly invested in the share markets and they will get the benefits and pension in the same manner as discussed above. The pension fund is effectively privatized and 26 percent foreign partner holdings are allowed. Pension scheme is regulated by a government agency named PERDA (pension fund regulatory and development authority) and insurers are given option to choose insurance agencies to manage their pension fund, including ICICI prudential fund, IDFC pension fund, Kotak Mahindra pension fund, Reliance capital pension fund, SBI pension fund, UTI retirement solution and Annuity service provider. Therefore, the new pension scheme provides no guaranteed amount of pension to workers, and on the other hand, the huge pension fund is handed over to private national and foreign companies to generate profits. It is clear that the new pension scheme is nothing but a decisive step to promote privatization and financialization of accumulation, offering a huge opportunity to national and international capital for generating profit out of public money.

The Unorganized Workers Social Security act was enacted in 2008. This act came as a total disappointment for workers because it practically added almost no social security benefits and provided only for applicability of already existing 10 central welfare schemes[3] (providing nominal monetary benefits) in certain sectors to all unorganized workers. Moreover, the act also states that it may be applicable to only those workers earning below certain limits (ceiling of monthly salary/earning or size of landholding) to be decided by the state governments and therefore it may not be applicable to all unorganized workers. Most importantly, the act does not mention the source of funding for its implementation. It is interesting to note that the employers are kept out from any financial liabilities, but they are ensured representation in the board. Implementation of the act is left to the state governments. The only scheme under the act for which the process is said to have started for implementation in few states is Rastriya Swasthya Bima Yojana (RSBY)-a national health insurance scheme. For example, the labour department of Delhi government has specifically asked urban local bodies to provide the list of riksha pullars, auto-taxi drivers, porters, street vendors, domestic workers and waste collectors for enlisting them under this scheme. However, the urban local bodies are hesitant to list most of these workers, because if they are listed in this scheme, then they may also legally become the residents of Delhi and therefore may also claim for other benefits like BPL (below poverty line) cards and benefits and housing facilities etc. Under this scheme, the workers are required to pay a premium of Rs 30 per year to a private insurance company. The company will issue them a card and they will be able to get free treatment of up to Rs 30000 for themselves and other 4 family members in any hospital listed by the company. However, this scheme is unable to attract the workers, because as in case of all such medical insurances, there are so many ‘ifs and buts’ for availing the medical facilities, for example, insured person can avail this benefit only when he/she is admitted in a hospital. Moreover, the listed hospitals are interested only in eating the insured amount. Recently, the Modi government declared to club three schemes-Rashtriya Swastha Bima Yojana (RSBY), Aam Aadmi Bima Yojan (AABY) and Indira Gandhi National Old Age Pension Scheme (IGNOAPS) and suggested to issue one single smart card to workers for implementation of these schemes on pilot basis in 20 districts. However, ambiguity on its financing and coverage still continues. On the other hand, if we read the meaning of these initiatives with the National health policy 2002 and the recent 12th five year plan document then a completely new dimension is exposed. National health policy 2002 clearly proposes for privatization of health care, and the new plan document provides a clear cut system and plan to implement it. The planning commission in this 12th plan document proposes only to keep non-profit health care works like immunization, anti-natal care and health education in the public sector and all other health care that provide prospects for profit making may be handed over to the private sector. The overemphasis of the government on health insurance schemes is a decisive move towards privatization of health care. In all such schemes the private health care providers may play a prominent role and they would be reimbursed by the government. This is a highly retrogressive step in a country with a large (although still insufficient and inefficient) network of public health system and that played a major role in insuring health services to urban poor and rural population in general. Now rather than improving and developing a better public health system with enhanced health budget, the state is handing over the whole health care system to private institutions. Rashtriya Swasthya Bhima Yojana is actually being used as a medium to hand over public funds to the private sector through an insurance route. It is also interesting to note that the Maharashtra government in 2012 floated proposals to privatize radiology services in 14 Government Medical College hospitals and all district hospitals across Maharashtra. The state has also been planning to hand over huge sums of public money to insurance companies and large private hospitals through a Private-Public Partnership (PPP). This involves large scale public finances being given to corporate hospitals without any standardization or regulation of the services, and no protection of patients’ rights.[4] There are also attempts to privatize the Employees State Insurance that is the life line of industrial workers.[5] The minister of state for Labour and Haj in Karnataka clearly declared in 2005 that the State Government was seriously considering a proposal to privatize 128 dispensaries and nine hospitals on the ground that a task force found the medical centers run under the Employees’ State Insurance (ESI) scheme inadequately equipped.[6] All these policy initiatives are targeted to promote privatization and financialization of accumulation at the cost of public health.

The unorganized workers social security act 2008 and the national pension scheme 2004 were two major anti-worker labour reforms done without naming them as labour reforms. They decisively institutionalized the duality of labour, and provided a justification for informalisation of labour in organized sectors, because they were made applicable to informal workers in organized sectors as well. Most importantly, these policy initiatives decisively established the dominance of profit over people through promoting privatization of social security and financialization of accumulation by handing over huge social security funds to private corporations.

Let us see how the unorganized workers social security act was a step moving backwards in terms of extending social security coverage to unorganized labour, rather than moving forward. In the federal structure of Indian state, both central government and state governments have powers to legislate on labour, and moreover, the strength and collective bargaining power of labour movement varies from state to state. Therefore, national picture of labour relations dynamics based only on central legislations and schemes are many times misleading. A clear picture emerges only when we look at the dynamics of labour relations and labour movements in states. In the present context, it is worth mentioning that in various states effective initiatives emerged for transforming the conditions of unorganized labour before liberalization or in its early phases. The initiatives in three states-Kerala, Tamil Nadu and Maharashtra are particularly exemplary and clearly show the direction towards which the labour movement was moving in various states to address the problems of unorganized labour.

The Kerala was a pioneering state in designing and implementing legislations and policies directed towards transformation of conditions of unorganized labour. We have already discussed that the Kerala is one of the two states (other is Tripura) where legislation for agriculture workers was enacted, and moreover, this is one of three states where land reforms are implemented in a better way (other two states are West Bengal and Jammu and Kashmir). The Kerala State has set up more than 20 welfare funds/boards for various sections of unorganized labour including abkari/toddy workers, head load workers, agricultural workers, handloom workers, auto-rickshaw workers, cashew workers, coir workers, construction workers, motor transport workers, some artisans and others. The boards are statutory bodies and provide a wide range of benefits including old-age benefit, medical care, education for children, assistance for marriage, housing etc to the workers. The boards are autonomous and financed by contributions from employers, workers and the government. Later, an apex body was set up through the Kerala State Labour Authority Ordinance, largely to coordinate, regulate, streamline, monitor and control the activities of the Labour Welfare Schemes, Boards and the Government.

In Maharashtra, a state level board-the Maharashtra Labour Welfare Board (MLWB) was constituted as a statutory body under the Bombay Labour Welfare and Fund Act, 1953 for promotion of welfare of labour and their dependants. All factories coming under the Factories Act, 1948, all shops and establishments within the meaning of the Bombay Shops and Establishments Act, 1948 employing 5 or more persons, and all motor transport undertakings coming under the Motor Transport Workers’ Act, 1961, are covered under the act. The financing of the boards is based on six monthly tripartite contributions from workers, employers and government along with the fines realized and unpaid dues of the employees collected from various factories and establishments. All the establishments covered under the act are required to pay employees’ and employers’ contributions to the Labour Welfare Funds at prescribed rates, in respect of their all employees, as on 30 June and 31 December every year. However, as clear from its applicability, a large section of unorganized workers are still not covered under the act. The objective was to gradually include other sections of unorganized workers. Enactment of Mathadi, Hamal and Other Manual Workers (Regulation of Employment and Welfare) Act, 1969 and constitution of Mathadi Tripartite Board was an exemplary initiative in this direction.

The Tamilnadu started with a state level board and then separate funds/boards for various occupations were constituted under it. Tamil Nadu Manual Workers (Regulation of Employment and Conditions of Work) Act was enacted in 1982 and currently about 55 employments are covered under it. Domestic workers are also covered under it. It also includes occupations with very small size of workforce like cycle repairs. The Tamil Nadu Manual Workers Social Security and Welfare Scheme for unorganized workers was implemented in 1999 and a state level Tamil Nadu Manual Workers Social Security and Welfare board was established. Wide variety of social security benefits are extended by the boards to workers including Group Personal Accident Relief Scheme, Maternity Benefit Scheme, and Terminal Benefit Scheme. The Board is tripartite and kept flexible to add more occupations, and new schemes or benefits. Currently 60 employments are covered under it.  Financing of the welfare board is based on contributions from employers, workers and the government. Currently the Board runs 52 Labour Welfare Centres and 71 Tailoring Centres throughout the State. Each Labour Welfare Centre consists of a Tailoring Class for women dependants of workers and a childcare centre. Tailoring classes are conducted for the wives and unmarried daughters of the workers. The training period is for one year, and stipend is provided to every trainee. The Board also pays their examination fees. In the childcare section, free primary school education is provided to the children, apart from providing nutritious midday meals, milk, eggs, fruits and medical care, etc. Qualified doctors medically examine these children twice a month. Two sets of uniforms are also supplied to the children each year. The Tamil Nadu Manual Workers (Construction Workers) Welfare Scheme was initiated in 1994 and welfare board was established well before the enactment of the central act on construction workers.

In all the three states the legislations and the social security and welfare boards has three common features: a) clear financing mechanism and provision for tripartite contributions and tripartite management of boards, b) subsector centered focus, c) varying degree of focus on regulating working conditions along with extending social security benefits. The cumulative impact of this dynamics also helped in increasing collectivity and collective bargaining power of workers in varying degrees in various sectors and various states. To explain it more clearly we may cite the examples of The Kerala Fishermen Welfare Board and Maharashtra Mathadi, Hamal and Other Manual Workers welfare board.

The Kerala Fishermen Welfare Fund Board was established in 1986 under Kerala Fishermen Welfare Fund Act 1985. The Board has three regional executives and 54 Fisheries Officers who look after 235 fisheries villages. The fish-worker has to contribute Rs. 30 per year for initial three years, and then 3% of the price of his/her catch or of his/her wages or earnings. The trader has to contribute 1% of the annual turnover or an amount fixed by the Board. The owner of the fishing vessel, owner of the fishing net, and prawn and pisciculture owners have also to contribute to the Fund. The Board runs 15 schemes and provides a much wider range of benefits than those included in the ILO Convention on Minimum Standards of Social Security. The benefits also include payment for injury in any accident sustained while fishing, lump sum assistance for funeral expenses, interest-free loans for the marriage of daughters, educational assistance, and medical facilities, along with others. The tripartite dynamics of the board is such that on the one hand, it helps the workers to organize themselves for their collective interests, and on the other hand also indicates the responsibility of employers. This dynamics also increases the collective bargaining power of labour.

The case of Maharashtra Mathadi, Hamal and Other Manual Workers welfare board is far more interesting. In Maharashtra in 1950s and 1960s strategy of forming tripartite bodies was adopted to realize a decasualization impact for dockworkers and badali (replacement) workers in textile mills. These tripartite bodies/boards evolved a method to extend basic protective social security to unorganized workers by regularizing their intermittently available work and developing employer-employee relationships. The tripartite bodies extended a statutory right to unorganized dock workers and badali workers in textile mills for an attendance allowance of 50% of daily wages, weekly off, one-day holiday wage, and 12 days’ minimum guaranteed wages per month. In 1969, under the Maharashtra Mathadi, Hamal and Other Manual Workers (Regulation of Employment and Welfare) Act the Mathadi Tripartite Board was constituted on the same lines. Currently there are around 50,000 registered employers with almost 1.5 lakh workers registered under 30 different boards in Maharashtra. The board includes a chairperson in each board appointed by the Government of Maharashtra and equal number of representatives from the unions and the employers’ association. Along with providing health facilities and social security, the boards also give importance to housing for the workers and education for their children. Scholarships are also initiated for the children of mathadi workers. Mathadi Boards regulate the labour market by bringing all the workers into an organized set-up. The entry of new, employable workers is linked with a process of regularization of existing workers. Young blood is brought into such organized structures through a process of recruitment, and age based superannuation. This dynamics increases the collectivity and collective bargaining power of workers significantly.

This is not the case that these sub sector centered boards were perfect in all respects. There were problems and in many cases they were also facing the financial constraints. But by and large this strategy proved effective in extending protection to unorganized labour in the relevant sub sectors. It is also to be noted that the state level initiatives discussed above, and the central initiatives such as welfare boards for bidi workers, construction workers and mine workers etc, targeted only those workers that were not covered under the major labour acts like factories act, and inherently supported that the strategy for transforming the conditions of informal workers in formal sectors is to be focused on regularization of those workers. It was expected by trade unions and workers that the initiative for a central legislation on social security for unorganized workers may develop a model based on the best practices and positive aspects in all the above models. This was the right choice for transforming the conditions of unorganized labour and small economies across the nation. However, the unorganized workers social security act 2008 came as a complete disappointment for workers and trade unions.

It is also worth mentioning that along with above developments, the conflict on the issue of amendments in labour laws continued during this whole period. The labour movement was largely demanding better labour standards and uniformity and consistency in labour laws, and the capital and the state was attempting to bring out more anti-worker labour laws and policies.

During the same period an initiative was taken up by national labour law association (NALLA) to end multiplicity and bring uniformity and consistency in labour laws. With hectic work of more than two years a draft uniform labour code was presented in 1994 and discussed in various forums. In 1987, a forum for national uniformity in labour adjudication was constituted under the National Law Commission (one hundred and thirty second report of National Law Commission).

On the other hand, in 1994 a Trade Union Amendment Bill was introduced by Congress party led government in Rajya Sabha proposing a membership of 10% of the workers to be made mandatory for registration of trade unions. Due to strong opposition the bill was not passed that time, but later in 2002, when Bhartiya Janata Party was in power, the trade union act was finally amended and membership of 10 percent of workers or 100 workers (and at any case not less than 7 members) was made mandatory for registration of trade unions. It was a major attack on right to organize and collective bargaining. In given anti-union environment, requirement of large number of workers as members for registration of a union made the unionization highly difficult.

The second national commission of labour was constituted by the BJP government in 1998 with a specific purpose of giving recommendations for labour law amendments. In the highlights of the annual national budget in 2001-02, the BJP government declared that the labour laws would be amended and particularly three laws were targeted including Industrial Disputes Act, Contract Labour Act and the Factories Act. It was by and large this period when a common platform of the national trade unions emerged and even the Bhartiya Mazdoor Sangh (BMS) affiliated to ruling party Bhartiya Janata Party became part of it to protest against the proposed labour law amendments. Due to strong protest from trade unions, the state was not able to do any major amendment in labour laws (other than trade union act). However, the state increasingly enforced a liberal labour regime by way of allowing violation of labour laws, paralyzing the inspection machinery for labour laws, allowing self certification under various labour laws, allowing large scale informalisation of workforce in formal sectors, discouraging registration of trade unions, declaring more and more sectors as public utility services where legal strikes are almost impossible, frequently imposing Essential Services Maintenance Act (ESMA) to ban the strikes, establishing large number of special economic zones and granting them exemptions under various labour laws, and judicial pronouncements virtually changing the meaning of labour laws. ESMA was imposed end number of times since 1990 on the strikes. The most publicized case of ESMA was that of Tamilnadu in 2003 when it was imposed on a general strike of government and public sector employees and 170000 employees were dismissed from the service. Later the court granted some relief to workers (number of dismissed employees was reduced to 6074) but the judgment made a precedent against the strike, opining that the government employees did not have the right to strike (Decision of Supreme court in TR Rangarajan vs Government of Tamil Nadu, AIR 2003 SC 3032). In 1998 Supreme Court of India had upheld a 1997 verdict of the Kerala high court directing that the Bandhs (general strikes) are illegal and violate the Indian constitution. In 2002, the State of Kerala issued an order stating that all general strikes were illegal when they involve a complete close down of all activities, and later when it was challenged, the Supreme Court also upheld this order as legally justified. The Calcutta High Court in 2004, the Kerala High Court in 2006 and the Supreme Court in 2007 reiterated that the general strikes were illegal and not constitutional. The judicial pronouncements has also virtually changed the meaning of contract labour act and there are rarely any case where contract workers succeeded in their claims for regularization of their employment on the ground that they are engaged in perennial jobs in core activities.

On the other hand, even when labour laws apply to special economic zones (SEZs), they have practically lost their meaning. SEZs are put out of the ambit of the government’s labour law enforcement machinery and the powers of labour departments are transferred to the SEZ development authorities that include the representatives of private developers of the zones. They are also declared public utility services and therefore legal strikes are almost impossible. For SEZ units self certification is allowed under various labour laws. There is also a provision under the SEZ act for separate courts for the zones and the labour and civil courts in the administrative regions where SEZs are located do not have jurisdiction to hear a dispute arising in the zones. Moreover, the state governments have exempted or proposed to exempt units in SEZs from various labour laws, for example, exemption from Section 22 of Trade Union Act, 1926 for restricting/excluding outsiders from becoming office bearers of trade unions (e.g., in Uttar Pradesh), exemption from Contract Labour (R&A) Act (e.g., in Uttar Pradesh, Madhya Pradesh and Andhra Pradesh), exemption from Employment Exchanges (Compulsory Notification of Vacancies) Act (e.g., in Madhya Pradesh), exemption from apprentices Act (various states), and exemption from applicability of protective provisions of Industrial disputes act (various states).

The various sessions of the Indian labour conference, various reports of the national commission on enterprises in unorganized sector and the relevant reports of the planning commission also addressed the issue of labour reforms and their proposals for labour law amendments contained a mix of anti-labour and pro-labour approaches. Recommendations of most of these reports in general included the proposals justifying the capital’s agenda of labour reform, but they also by and large included certain aspects of labour’s agenda of labour reform, for example, bringing uniformity in labour codes and moving towards a uniform labour code. It is not possible here to provide a detailed picture of the debates on labour reforms. But we may provide a brief outline of the issues articulated for labour reforms by various stakeholders, as presented in the report of the working group on labour laws & other regulations[7] constituted by ministry of labour, as given in table below.

Table: Views of various stakeholders on labour reforms and Recommendations of the Working group constituted by Ministry of labour
Views of Central Trade Unions
  • Universal applicability of all Labour laws
  • Unification of labour laws in 5-6 groups, codification of Labour Laws, uniformity in definitions in all labour laws, definition of workmen provided in ID act should be applicable to all labour laws
  • Right to strike should be incorporated in labour laws
  • Amendment in Chapter V (b) of ID act 1947 to extend this protective law to all industrial units
  • Amendment in Payment of Bonus Act 1965 to remove the ceiling
  • A law to extend protection to migrant labours
  • Abolish the contract labour/casual labour system in perennial jobs and abolish it completely from all jobs in government departments
  • Due to already overburdening of judicial system, a separate independent judicial system for labour issues may be created
  • Decent work must be priority agenda
  • Fixation of National level Minimum Wage
  • Payment of wages through cheques and bank accounts
  • Strengthen enforcement machinery for implementing labour laws, labour department should be provided stringent penal powers for non-compliance of labour laws
  • The concept of self-certification by employers is not acceptable
  • Planning Commission should develop a tripartite mechanism for discussions on the issues of labour reforms
Views of Employers
  • A single, simplified and comprehensive Act for the small scale sector, clubbing of 18 laws into a single law as Small Industries Regulation Act (SIRA); Collective bargaining may not be applicable
  • Uniform labour laws are not possible as objective of every labour Act is different and it can also not be under single definition. If there is only one Act for social security of workers then there has to be single rate of contribution, and is it possible to have this single rate?
  • Many laws like the Industrial Disputes Act 1947 have become archaic in the present scenario
  • Contract labour cannot be abolished, it is not possible to keep every worker on muster roll, demand changes with business cycle
  • Government should be only a facilitator in promotion of industry
  • Decent work should be basic agenda of the Ministry of Labour
  • Wage payments should be made by cheques and RBI may change its policy so that zero balance accounts can be maintained
  • Large corporate should provide more contribution for provident funds and social security in comparison to small scale units
  • Minimum wages should be paid to contract workers but wages of contract workers cannot be equated with that of regular workers
  • Self-certification by the employers is welcome initiative
  • Provision of collective bargaining agent must be simple and less time consuming method
Views of State Governments
  • One law should take care of all whether it is organized or unorganized class of workers, Laws should be clubbed as suggested in to a single composite law for Industrial Relations
  • Codifying the labour laws should focus on evolving an employment code to take care of all issues related to worker-employer relationship
  • The idea of common definitions is welcome, a beginning can be made with common definitions for one set of laws. Definition of ‘appropriate government’ as defined in the ID act 1947 may be made universal.
  • Tripartite mechanism or alternate dispute redressal system is to be incorporated in law in addition to system of collective bargaining
  • An insurance scheme should be started for the retrenched workers from the time the industry commenced operations, so that workers were not put to hardship later
  • Expanding labour enforcement machinery for enforcement of labour laws, and adequate allocations for this
  • Bills presented for enactment of Labour Laws should include the financial requirements for enforcing implementation
  • Uniform system of minimum wages and all payments by Cheque
  • A law governing the migrant labours. The Inter-State Migrant Workmen Act, 1979 is to be revised to make it implementable
  • An Inter State Council or any other mechanism to record the workers in hazardous industries that migrate from State to state
  • Provision for compounding of offences under labour laws to make enforcement quicker and effective, fines are not revised over time so violating laws became more profitable than implement it
  • Some method for resolving disputes that reduces confrontation and the necessity of strikes etc.
  • Trade Union Act, 1926 needs to be revised with a provision of de-registration of Unions
  • Registration under Building & Other Construction Workers (Cess) Act, 1996 may be mandatory, the condition of 90 days leads to misuse, granting of permission for prosecution under this Act should be decentralized
  • A provision of a floor level minimum compensation to be given immediately under Employees Compensation Act, 1923
  • Employment of a child below the 14 years age must be made illegal to support the implementation of Right to Education Act
  • Digital sharing of data on registered job seekers should be made mandatory for all Employment Exchanges
  • The concern raised by ILO on self-certification may be considered before a stand is taken on this issue.
  • A mechanism in the form of “joint inspection” may be evolved, it may be started in MSME sector but the provisions of labour inspection should not be completely given up.
  • Under the Unorganized Workers Social Security Act, 2008, the definition of ‘State’ should be broadened to include “UTs with Legislatures” also
  • Judiciary is overburdened and not able to deliver in time and this issue needs urgent attention
  • Regarding bonded labour, there is a need for revisiting this issue in relation to brick kiln workers
Views of Central Ministries
Ministry of Micro, Small and Medium Enterprises (MSME) Sector suggested for running of joint awareness campaign about labour regulations for the benefit of small scale entrepreneurs.

MSME suggested for simplification of penal provisions in the labour laws for the small scale sector.

MSME supported the clubbing of laws in groups and also suggested that the multiplicity of provisions in different laws should be avoided

MSME suggested for moving from a regulatory system to an incentive based system on implementation of labour laws with incentives to MSE being linked to compliance with labour laws

Ministry of Heavy Industries and Public Enterprises suggested setting up a common body at the Central level for interpretation of labour laws which should be binding for all concerned. The Labour laws should be such that they help in business growth and do not become a hindrance to growth of economy.

There should be some reasonable restriction regarding number of trade unions within an organization by stipulating that the union should have at least 10% of the total strength of workers.

Planning Commission objected to clubbing of Acts as different laws have different purposes

Recommendations of the working group
  • All the labour laws may be harmonized and consolidated in to four major groups of labour laws:

Laws governing Industrial Relations: Consolidate the Industrial Disputes Act, 1947, the Industrial Employment (Standing Orders) Act, 1946 and the Trade Unions Act, 1926 in to one law i.e. Industrial Relations Act

Laws governing Wages: Consolidate the Equal Remuneration Act, 1976, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Payment of Wages Act, 1936 in to one Act i.e. Payment of Wages Act

Laws governing Social Security: The definition of establishments, eligibility criteria, etc. in the Employees’ State Insurance Act, 1948, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and the Payment of Gratuity Act, 1972 may be harmonized for purposes of consolidation

Laws governing Working Conditions & Welfare: The  Laws governing Working Conditions & Welfare, i.e., the Factories Act, 1948, the Maternity Benefit Act, 1961, the Workmen’s Compensation Act, 1936, the Contract Labour (Regulation and Abolition) Act, 1970 and the Inter-State Migrant Workers(RE&CS) Act, 1979 may be consolidated

Welfare Cess Laws: All Cess Act and Welfare Fund Acts can be clubbed into one Act.

  • Common Definitions for “Establishment” , “Employee”, “Wage”, “Employer” and “Appropriate Government” in all labour laws
  • Protecting Interest of Workers in the Unorganized Sector: The core conventions and recommendations of ILO on decent working conditions need to be fully incorporated in the laws for the unorganized sector
  • .Amendment in the Minimum Wages Act, 1948: One single statutory National Floor Level Minimum Wage for entire nation

Amendment in the Factories Act, 1948: In the global scenario where worker has to face new hazards and risks, the Factories Act  should be amended to re-define hazards to ensure better safety and health standards. Amendments should also address the issues and concerns of especially women workers in IT/ITES and export enclaves with regards to their security, transportation and workplace conditions.

  • .Amendment of the Contract Labour Act, 1970 so that contract workers get the same wages, facilities and social security benefits as regular employees
  • Amendment in Building and other Construction Workers Act:

Registration to be made mandatory like in the PF and ESI laws, Pre- service of 90 days of workers be waived, Renewal of membership be done after 3 years

  • Amendment in The Trade Unions Act,1926: The Act needs to be a complete code in itself including recognition, machinery for the resolution of intra union dispute and deregistration.
  • Amendment in the Employees’ Compensation Act, 1923:

Compensation payable to the employees should be insured, in case the order is not passed by the Authority in three months, a provision needs to be there to ensure that the proceedings after three months are valid and do not lapse.

  • Enhancing Eligibility Criteria and Indexing of Benefits:

In a number of Acts such as those relating to Payment of Wages, ESI, EPF, Employees’ Compensation, etc., there is a well defined eligibility criteria in terms of wage ceiling, and this gets eroded with inflation reducing the number of workers entitled to benefits under these Acts. So eligibility criteria should be reviewed say 3-5 years. To protect the real value of the monetary benefit provided under various laws, a provision should be considered for indexing the benefits involving monetary payments.

  • Recommendations for Improving Enforcement of Labour Laws: Strengthening of enforcement machinery by way of increasing the manpower, improving infrastructure etc. is essential for effective

implementation of labour laws. Creation of an All India Service for labour administration to provide professional experts in the field of labour administration, autonomous bodies and labour adjudications could help. The Working Group also felt that proper enforcement of labour laws can be done through the vigil of trade unions.

  • Recommendations for Easing Compliance Burden of Labour

Laws : Identifying the reasons for non implementation of certain Acts. Inspections should follow Convention 81 of the ILO where sovereign functions of the State cannot be delegated to a third party. However, complaint based inspections; self certification, etc. can complement the present system without substituting it.


Source: Based on Report of the working group on “labour laws & other regulations” for the twelfth five year plan (2012-17), ministry of labour & employment, Government of India 2011

This is very well reflected in the report of the working group of ministry of labour on labour laws & other regulations that the trade unions were successful in putting forward the labour’s agenda of labour laws reforms. The anti-labour agenda of labour reforms was clearly diluted in the report of the working group in comparison to the way it was highlighted in the reports of second national commission on labour and also in planning commission reports. This was the impact of the wide spread industrial unrest in the relevant period as well as the series of successful general strikes called by the central trade unions. However, one of the most important factors behind this was probably another dynamics of democracy. The above report of the working group on labour laws interestingly reveals that the capital’s anti-labour agenda was not supported by various institutions of the state and the central governments. It powerfully reflected the dynamics of federal democratic structure of the state and relative autonomy enjoyed by various institutions of the state that many times put restrictions on the state in imposing a completely anti-people and anti-labour agenda. This dynamics was also observed during various other attempts of amending the labour laws and also on the issue of large scale land acquisitions and displacements of the people. For example, in 2012 the finance ministry (Chidambaram) and agriculture ministry (Sharad Pawar) of the government of India fiercely opposed mandatory periodic revision of national floor level minimum wage in every five years and its applicability in all states, arguing that wage hikes would set a wrong tendency which would have a butterfly effect in all sectors and which would derail the growth trajectory, and also that this would escalate the cost of agriculture production. But the labour ministry of the same government pursued this agenda forcefully. The similar were the conflicts between commerce ministry and labour ministry on the issues of exempting special economic zones and manufacturing zones from applicability of various labour laws. Similarly, on the issue of land acquisitions various ministries of central and state governments and various other government institutions were divided and this was many times surfaced during large scale unrests that emerged on this issue in various states. The above factors also restricted or slowed down the speed of the state’s attempts towards privatization of public services and liberalization of financial services.

In overall terms the capital and the state were not able to achieve the targets of its agenda on labour reforms and economic reforms in general at the end of 15th Loksabha (Parliament). The capital had high expectations from the coming 16th Loksabha and it wanted a government that was willing and also able to achieve the targets of labour reforms and economic reforms as soon as possible. In a really functional democracy with federal democratic structure it is generally not possible that such anti-labour and anti-people reforms go unchallenged. And in given conditions, neither an authoritarian regime can be established, not it is sustainable in India. However, there was another choice. It is possible that the capitalist democracy can transform itself in to some sort of autocracy by purely democratic dynamics. If a political party by and large transforms itself in to an authoritarian structure with minimum inner democracy and authority of a person is justifiably established with an ideological orientation and with a well defined political purpose, and if this political party comes in to power with a huge majority that marginalizes the strength and power of other political parties, then it may form virtually an autocratic government that neither faces any major challenge from within, nor from outside (i.e., from opposition forces). The Bhartiya Janata Party was the only party of choice for the corporate in this regards because it runs perfectly on above lines. It was also a natural choice because the congress party ruled for continuous two terms and this time the people were fed up with that party. However, the BJP was also to be transformed, to be cleaned up from the democratic deviations that infiltrated in to it out of compulsions of winning elections in the earlier decades.[8] But it was not difficult, because its mother organization Rastriya Swayamsevak Sangh had a decisive influence on the party and it had a pool of systematically trained and disciplined cadres that were capable of handling and effectively addressing the assigned political tasks along with ensuring smooth functioning of the autocratic organizational structures. Ideology of national chauvinism and religious fundamentalism preserves this character of RSS and BJP. However, in a situation when almost all dominant political parties openly support the liberalization policies and people have tested and fed up with all of them, generally such a huge majority is next to impossible for any political party.[9] Therefore, systematic efforts to manipulate the consent of the people in a big way in favour of the political party of corporate’s choice was the only effective way to bring such a government. Indian democracy for the first time in history observed such a systematic and large scale effort of manipulating the consent of the people. Media was systematically monopolized by the few corporate and large number of other advocacy agencies and institutions were established for the specific purpose. Exceptionally large scale and multifarious propaganda launched by using money power combined with media power decisively created an atmosphere in favour Modi who was systematically projected as charismatic leader capable of making India a so called super power. Propaganda was so effective that it was able to create an atmosphere that some big change is going to happen; it also created a hope in the middle class in general. Media also played an important role in favour of BJP by discrediting the already discredited congress party by supporting the rise of Aam admi party and then discrediting it also. Probably this was an experiment for testing the effectiveness of media power at small scale that was later to be applied at large scale. Other important factors that insured the victory of BJP were absence of any other powerful alternative political force, extensive political work done by RSS to unite the huge number of smaller and bigger religious leaders of various sects (including some Shia muslim leaders as well) that have an influence on huge majority of Indian people, and some incidences of hindu-muslim riots that were able to create a polarization on religious lines and thereby neutralized the impacts of polarizations at caste lines. It is also interesting to note that the whole propaganda also systematically established the unquestioned authority of Modi in BJP and the government. The propaganda was centered on Modi and not on BJP and the government was projected as Modi government and not BJP government. The Modi government came in to power with such a huge majority that there is not even a leader of opposition in the parliament. The government is completely controlled by Modi and there is absolutely no challenge from within. However, in upper house of the parliament-the Rajyasabha it still lacks a significant majority. Therefore currently the major focus is to win the state assembly elections in some of the states that are coming soon. If it is able to win a majority in Rajyasabha as well, then it will be really able to function as autocratic government in the sense discussed above.

The major expectations of the corporate from this government include amendments in labour laws in accordance with capital’s agenda of labour reforms and implementation of national manufacturing policy, along with wholesale privatization of public services (including health, water, sanitation[10], and transport including the railways etc) and complete deregulation of financial sector. The implementation of new manufacturing policy requires following tasks: a) offering better prospects for investors, b) infrastructure development, c) a policy that facilitates large scale land acquisitions, d) establishment of manufacturing zones and parks, and e) accelerating the process of regional integration in south asia that facilitates emergence of regional value chain networks similar to that in east and south east Asia. The capital wants its above expectations to be fulfilled urgently in view of the emerging prospects for developing India in to a new global manufacturing hub. The Chinese economy increasingly appears saturated and the only two other economies in Asia have the capacity to absorb the major part of future foreign investments-India and Indonesia. Modi’s apparently great success in getting promises for huge investments from various countries including China, Japan and South Korea reflects on this dynamics.

Modi government is moving very fast to accomplish the above tasks, and probably has a well thought strategy for it. It is interesting to see that the amendments in labour laws were first initiated by a state government-the Rajasthan government ruled by BJP and after testing the level of resistance the similar amendments were initiated by the central government at national level (learning from China). On the issue of land acquisition also the initiative is taken by the state government of Rajasthan. Probably in order to avoid large scale discontent at national level, the Modi government is following a state centered strategy. The national government may encourage and facilitate the legislations at state level, initially in the states ruled by BJP and then a competition among various states for winning the investments may ultimately insure similar policies in non-BJP ruled states as well. It is worth mentioning that the land acquisition amendment bill proposed by the state government of Rajasthan is a step backward from that enacted by the central government after upsurge of country wide peasant unrest against the land acquisitions. There were still serious problems in the said central legislation but it was clearly a move to replace the colonial land acquisition act. The Rajasthan land acquisition bill in many regards is bringing back the colonial land acquisition act.[11]

The labour law amendments proposed by the Rajasthan government and the central government can be summarized as follows:

  1. Amendment in Contract Labour (Regulation and Abolition) Act, 1970 by state government of Rajasthan: The amendment proposes to restrict its applicability to establishments and contractors employing 50 or more workers. Earlier it was applied to establishments and contractors employing 20 or more workers. Considering the fact that huge majority of industrial establishments in India legally engage only less than 50 workers to avoid the applicability of section 25FFA of the industrial disputes act that requires permission from the government before closure of an establishment. It is also worth mentioning that various state governments have already amended or in the process of amending this act. For example, the state government of Andhra Pradesh and Maharashtra has amended this act to allow employment of contract labour in certain core activities.
  2. Amendment in Industrial Disputes Act, 1948 proposed by state government of Rajasthan: The amendment proposes to introduce a three years bar against raising any dispute against the establishment relating to lay off, retrenchment and closure; this simply means giving complete freedom to establishments for layoff, retrenchment and closures for three years. It is also proposed to restrict the applicability of section 25 K-chapter V-B that requires permission from government for layoff, retrenchment and closures of units to only those establishment employing 300 or more workers. Currently it applies to the establishment employing 100 or more workers. If this amendment is done the law itself will lose its meaning because there are very few establishments that engage 300 or more workers and such units collectively engage only a very small percentage of industrial workers. Moreover, the amendment also proposes to increase the membership requirement for recognition of a Union from 15 percent to 30 percent. It has also provided a new and very wide definition of Go-slow, that will equip employers to easily level the charges on workers for go slow and punish them, even if they were not engaged in go-slow.
  3. Amendment in Factories Act, 1948 proposed by state government of Rajasthan: The amendment proposes the applicability of the act to factories employing 20 workers with power and 40 workers without power in place of earlier applicability in factories employing 10 workers with power and 20 without power. This is an attempt to gradually increase the threshold limit for applicability. It is to be kept in mind that on the one hand, in the new international division of labour the industrial growth is more at the lower ends of the value chain that engage lesser number of workers per unit, and on the other hand, in many high-tech industries, there are companies with huge turnover but they engage only small number of workers.
  4. Amendment in Factories Act, 1948 by central government: With increasing problems of occupational health and safety due to increasing number of hazardous industries and hazardous substances/chemicals used in industries, there was a demand for revising the list of hazardous industries and hazardous substances in the first schedules of the factories act. The amendment proposed in the factories act apparently appears to be addressing this demand by deleting the first schedule and providing definitions of the hazardous industries and hazardous substances so that new hazardous industries and substances may also be covered under the act. However, deleting the schedule will complicate the problems further, rather than resolving it. It will open a space for long debates and disputes on whether a substance is hazardous and whether an industry can be said to be hazardous, whenever claims will be made by the workers. This will ultimately increase the sufferings of affected claimant workers. Another amendment proposes enabling the factories located in the same area to observe different days as their weekly holiday. In a situation when we are facing large scale violation of labour laws, and in many industries excessive overtime and denying weekly offs have emerged as a serious problem, the proposed amendments may further aggravate these problems because violations may become more invisible and it may become more difficult to expose them. The amendment proposes to increase the period of spread over of work for an adult worker up to 12 hours in place of existing limit of 10.5 hours; and also proposes to increase the total number of permissible overtime hours in a quarter to 100 and not going beyond 115 in any quarter, in place of existing limit of 50 hours and 75 hours respectively. This is clearly an attempt to legalize the practice of excessive working hours. The amendment also proposes to change the existing provision for protecting women workers that does not allow engaging women workers except between the hours of 6 A.M. and 7 P.M. The amendment proposes to allow engaging women workers between 7pm and 6am provided adequate safeguards exist in a factory. This amendment will certainly provide a justification for compelling the women workers to work till late hours and also in night shifts. The amendment proposes for provision canteen to establishments with 200 or more workers replacing the earlier limit of 250 workers and provision for adequate and suitable shelters or rest rooms and a suitable lunch room with provision for drinking water, where workers can eat meals in establishments with 70 or more workers in place of earlier limit of 150 or more workers. There is no justified logic for providing number limits for these facilities and not providing these facilities to all workers in all establishments.
  5. Amendments in Apprentice act proposed by the central government: Amendment proposes to allow engaging apprenticeship workers from states other than the home state and also for removing the restrictions on number of apprenticeship in a unit and requirement of survey of establishments (to see the infrastructure facilities available for training) by the relevant authorizes for fixing the number of apprenticeship workers that may be engaged in a particular unit. The amendment also proposes to provide flexibility to establishments taking in to account the seasonality of operation and changing demand for labour. The stipend for apprenticeship is proposed at 70-90 percent of minimum wages and no applicability of Employees state insurance act (ESI). It is also proposed that the government should bear half of the cost of stipend for one year in case of micro, Small and medium enterprise with a turnover of less than 100 crore. In practice this may include most of the enterprises engaging up to 300 workers. We may also keep in mind that amendment proposed in ID act also provides freedom for lay off, retrenchment and closure in enterprises engaging less than 300 workers. The cumulative impact of all these amendments may provide an opportunity to huge majority of enterprises in India to engage a huge proportion of workers as apprentices, with a greater proportion as migrant workers. The enterprises may also enjoy flexibility of hiring and firing them. Therefore, in a situation when the labour movement is forcefully demanding for abolishing the contract labour system and equal wages for equal work and has been able to build a unity between contract and regular workers, engaging large number of apprentices are seen as an alternative strategy of exploiting cheap and flexible labour. Some industries have already adopted this strategy and apprentices in their workforce constitute more than 50-70 percent of the workforce. On the top of it, if the government is bearing half of the cost of stipend, one can imagine the rate of super profits that the enterprises may be enjoying by using this strategy.
  6. Amendment in Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act proposed by the central government: This act was meant to reduce the burden of small and very small enterprises engaging 10-19 workers for filing returns under various labour laws. The amendment proposes to extend the applicability of these exemptions to establishments engaging 10-40 workers. Moreover, the amendment also proposes to include 16 labour laws for allowing exemptions under the act; earlier only 9 labour laws were included. Therefore, the cumulative impact of proposed amendments may be in terms of exempting majority of enterprises in India from filing returns on labour laws and therefore practically need not bother much about labour laws. We have already discussed that to avoid applicability of section 25FFA of ID act (requirement of permission from government for closure), majority of enterprises remain legally within the limits of engaging less than 50 workers. Even if employers operate at large scale, they register a number of enterprises to divide the workforce and keep the numbers with in the limit in each enterprise.
  7. Amendment in Minimum wages act proposed by the central government: The labour movement was demanding to remove the system of scheduled employments and the minimum wages act must be made applicable to all work and all occupations. The amendment proposes that the minimum wages in scheduled employment fixed by various state governments should not be less than the national floor wage, and in those occupations that are not covered in the list of scheduled employments the minimum wages may be equal to the lowest wages of unskilled workers in scheduled employments in home state or the national floor wage whichever is higher. This provision amounts to discrimination with the workers that are currently not included in scheduled employments. There is no justified logic why these workers (who may be skilled and semiskilled) should get the lowest rate of wages fixed for the unskilled workers in scheduled employments. It is also to be kept in mind that the National Floor wage is fixed so low that it has no significance in terms of creating a factor that ensures minimum living standards for workers across the country; rather, it is providing a justification for low rate of minimum wages in various states. The amendment also proposes for keeping the revision period of minimum wages to 5 yrs in states and UTs where it has a component of variable DA, and but in cases where minimum wages has no component of variable DA the revision may be done in two years. This amendment is opening the doors for avoiding the component of variable dearness allowance and thereby avoiding revision of wages every six months to adjust it for inflation. Moreover, the amendment adds a provision for wage card as an alternative to wage slip. The reason provided for this is “to provide additional facility for authentication of payment to employees”. But why there is a need for this additional facility and for whom? This is not explained. This provision may provide an option to employers to not provide formal wage slips in any case and rather opt for wage cards that may be manipulated easily. Claim period in case of non payment of minimum wages is increased from 6 months to 12 months and the Compensation amount to workers is increased from Rs 10 to Rs 100. The penalty for employers is also increased but is is still very low. It is self explainatory that nonpayment still remains profitable.

  It is ironic to see that the proposed labour law amendments by the government have no respect to the recommendations of the working group on labour laws & other regulations for the twelfth five year plan (2012-17), neither it bothers about the views and suggestions put forward by the trade unions and state governments as listed in the report of the working group. It is blindly moving to implement the capital’s agenda of labour reforms as listed in the report of the said working group and presented in details at various other forums.

It is very much clear from the labour law amendments proposed that the new regime is decisively heading to transform India in to a new global factory with ‘better sweatshop’ conditions than in China or Indonesia. If the government is able to do these amendments in labour laws then almost whole Indian workforce may be practically informalized by: a) effectively shifting the enterprises with less than 50 workers to informal sector, as the contract labour abolition and regulation act and section 25FFA of ID act (requirement of permission for closure) will not apply to them (moreover, enterprises up to 40 workers would not bother about labour laws as they will be exempted from furnishing returns under labour laws, and the factories act will not be applicable to establishments up to 20 workers with power and 40 workers without power); and b) informalization of workforce in enterprises with less than 300 workers, as the protective provisions of ID act (related to retrenchment, layoff and closure) will not apply to them, and they will be permitted to engage huge proportion of workers as apprentices. This system will offer huge super profits to the employers by providing a huge space to engage vulnerable and cheap labour in the form of contract workers and apprentices, and over and above all this, they may also be able to save almost half of the wage bill by virtue of a provision for government bearing half of the cost of stipend to apprentices.

[1] “ I am one of those who have always believed that on our country attaining political independence, had not our government shouldered most of infrastructural industries like coal, steel, rail & air transport, power, fertilizer and a number of other basic industries, the industrialists like Tatas, Birlas, Goenkas, Kirloskars and dozens of others would have found it extremely difficult to attain the extent of industrial development they have been able to achieve…To that extent the private sector ows a debt of gratitude to the government for accelerating the tempo of industrialization, which alone made possible our claim to be amongst the first dozen of the most industrialized countries of the world.” –Naval Tata (as quoted in the essay of K Ashok Rao in Ratnam and Sinha (ed) 2000)

[2] Smoke sticks prepared by rolling tobacco in leaf of Tendu plant

[3] Indira Gandhi national old age pension scheme, National family benefit scheme, Janani suraksha yojana, Handloom weavers’ comprehensive welfare scheme, Handicraft artisans’ comprehensive welfare scheme, Pension to master craft persons, National scheme for welfare of fishermen and training and extension, Janshree bima yojana, Aam admi bima yojana, and Rastriya swasthya bima yojana. Later a new contributory pension scheme was formulated and declared to be applicable for all unorganized sector workers.

[4] Strengthen, don’t privatise; The Hindu, March 23, 2012;

[5] Privatisation of ESI hospitals: Sooner the better; ; and No privatisation of ESI hospitals: Govt; Zeenews, Thursday, May 6, 2010;

[6] Plan to privatise ESI hospitals; The Hindu, Friday, Feb 25, 2005;

[7] GOI (2011). Report of the working group on “labour laws & other regulations” for the twelfth five year plan (2012-17), ministry of labour & employment, Government of India

[8] It is interesting to note that the leaders like Govindacharya who really care for nationalism and talk about swadeshi and those leaders (like Advani and MM Joshi etc) who were seen as prospective challenge for autocratic functioning of party and government in the leadership of Modi were all systematically sidelined. Most serious challenge is created for Bhartiya Mazdoor Sangh (BMS)-the trade union affiliated to RSS and BJP. It is thrown in such a dilemma that it is struggling for its relevance

[9] However, it has another side as well, with almost all political parties openly supporting the liberalization policies, to a large extent, it creates an autocracy like situations for the people

[10] What is the real intension behind the clean India campaign? Is this not creating a justification and preparing a background for: a) reduce the government expenditure on sanitation services, and b) privatization of sanitation services? Can people regularly clean their colonies and office space? On the one hand, this may be a justification for government moving out of its responsibility of sanitation services and making it a profit sector for the corporate, and on the other hand, it also provides a justification for imposing multitasking and increasing load of sanitation work on workers employed anywhere. The worse impact may be on employees engaged in sanitation services; the clean India campaign may take their jobs.

[11] What the New Rajasthan Land Acquisition Bill Actually Says; Campaign for Survival and Dignity;


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