Center For Workers Education

for building a democratic labour movement in India

The Political Economy of Labour law Reforms in India- Part III

The Political Economy of Labour law Reforms in India- Part III
Surendra Pratap, Center for Workers Education, New Delhi

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The process of labour reforms has accelerated dramatically. This paper will attempt an analysis of the nature of the new labour relations regime that is taking shape and its implications for labour. But its overall significance and importance cannot under stood in isolation and therefore before attempting an analysis of the labour reforms, it is important to mention briefly and point wise some other important aspects of the current capitalist aggression that are underway, and that are closely linked with each other and with the issue of labour reforms. This will help in understanding the issue of labour reforms in its totality.
With Chinese economy increasingly saturated and moving up the value chain focusing on made in China (developing and expanding their own brands), with huge reserve army of labour and a large market India (along with Indonesia and Vietnam) is poised to emerge as new center of global factory for low end labour intensive manufacturing. The emergence of Modi government with such a huge majority, historical support to him by national and international capital and the whole media controlled by them can be understood in this background. In order to make India a major profit generating hub for global capital, they want to transform the Indian economy and politics in such a way that there is no restriction on capital accumulation and wealth transfer and it provides maximum possible scope for profit maximization. The focus is on five areas: a) Privatization of all sectors and opening whole economy to FDI (including railways, ports, mines, defence, and everything) and duty free imports, to facilitate capture of all resources and markets by the global capital; b) Privatization of all services (including electricity, water supply, transport, retail trade, health, sanitation, education, communication and insurance etc) and commoditization and privatization of those aspects of social life that were out of the scope of capital accumulation (safe drinking water and toilet campaign etc) to create new space (and actually a very huge space) for capital accumulation (generating profit); c) Accelerating financialisation of accumulation by opening banking, finance and real estate sectors; d) Privatisation and financialisation of social security as a new area of profit generation; e) expanding the reserve army of labour by mass destruction of livelihoods and creating a crisis in the traditional economies and reforming the labour laws to reduce the labour cost to the minimum by increasing the vulnerabilities of labour and minimizing space for any collective bargaining; and f) removing any effective democratic space and silencing all possible voices of dissent. The global capital is extending all possible support to equip Modi government to deliver and the Modi government is attempting to achieve these objectives in best possible and best creative way, with only hurdle of not having majority in Rajya Sabha. It is expected that in 2016, it will be able to achieve the needed majority in Rajya Sabha in whatever way, and the real game will start only after that.
There is already an all round drive of Commoditisation, Privatisation, corporatisation of all public resources as well as all public space and all sectors are gradually being opened for FDI. The situation is such that the whole economy and politics as well as social life are controlled by the corporate. Almost all aspects of our life, the food we eat, the water we drink, energy we use, our health and sanitation, various communication systems and transport we use, are all increasingly privatized and corporatized. The nature of corporate control being imposed on people has no parallel in history. And over and above, the democratic space is reduced to the minimum, the media is almost completely corporatized and monopolized, whatever democratic space is there is being commoditized and no space is left for people’s organizations to even popularize their slogans and demands, now all space (including the walls of buildings, dividers on roads, Body of Buses and trains) is paid space. It is in these situations, the whole political environment is turned in favour of corporate capital and against the people. With effective neutralization of the impact of pro-people forces and equipped with huge propaganda machinery, the state and capital is effectively propagating the anti-people policies in colourful pro-people packages and effectively attempting to manipulate their consent.
This whole so called development is actually emerging as a Monster’s dream. What kind of society, economy and politics it is creating? This is creating three distinct classes, one represented by few thousands corporate controlling the whole economy and politics, the other around 10 percent-the middle class consumers enjoying relatively better life, and the rest 90 percent are increasingly completely expropriated and compelled to compete with each other to work as slaves day and night without any dissent, just to avoid the hunger pain.
Looking only on few implications provides a window of the future.
The government is actually increasingly making itself bankrupt (with no source of income except taxing public) and in future it may also create an excuse for not spending any money on public welfare. It is to be remembered what happened in Sri Lanka which opened its economy as early as 1977-78, then prime minister of Sri Lanka Ranil Wickremasinghe in July 2002 made a statement that the government is operating with money that is 98 percent of Employees Provident Fund (EPF) contributions. In 2011 when he was in opposition, he again raised this issue and accused the government for using monies in the EPF and ETF accounts to pay government debt.

It is also to be kept in mind that in almost all countries the new aggression of capitalist globalization and liberalization was accompanied with some kind of authoritarian/dictatorial political regimes, including China, Vietnam, Indonesia, Philippines, Thailand, Singapore, Malaysia, Korea and Taiwan. In South Asia, the Srilanks was the first country to move on this road, and it is worth mentioning that it was accompanied with a major change in political system from parliamentary system to an all-powerful Executive Presidential system. The current situations in India also send some warnings of such developments.

This whole system of FDI and global value chain is such that it facilitates and accelerates the wealth transfer from India to big capitalist countries. For example, it we look at the global value chain of production in various industries only about 10-15 percent of share of revenue remains in India in the form of profits of local companies and wages of workers, the rest all is captured by the multinational companies based in developed countries.
Huge agriculture land and forests are being acquired for mining, SEZs, power plants and other industries and other urbanization projects and actually unimaginably large area of land is to be acquired for planned Delhi-Mumbai and Delhi Kolkata industrial Corridors. Moreover a number of ports are made and planned in the coastal regions and moreover inland fishing is opened for corporate sector. All this is leading to mass destruction of livelihoods. This is also impacting the food security. Privatisation and corporatizing the water resources are further aggravating this problem beyond the impacts of land acquisitions. The case of Sheonath river in Chhatishgarh is quite revealing in this regards. According to an estimate of Centre for Science and Environment, New Delhi, the total water requirement for projects cleared between 2007 and 2011 for five major sectors (cement, coalmining, mining, iron and steel, and thermal power) is sufficient to meet the daily needs of 250million people, or in other words, these projects are going to create a water crisis for 250 million people, and this will have serious impact on agriculture as well. It is to be remembered here how the Philippines once a net exporter of rice was converted in to a net importer of rice. The same dynamics has already strongly emerged in Kerala, and the current dynamics is pushing the whole country on that road.
What for we are paying this price? The Modi government again and again emphasizes that these developments will bring employment and resolve the problem of poverty. Is it true? What is actually happening on the ground?
During 2004-05 to 2009-10, the economic growth rate was about 8 per cent per annum, but the employment growth was only about 0.22 percent. A CAG report exposed that that out of the 45,635.63 hectares of land notified for the development of SEZs, actual operations took place in only 28,488.49 hectares or 62 per cent of the land acquired. Neither did the SEZs create any significant additional employment nor did it lead to manufacturing or industrial growth. It exposes a clear case that the so called development is actually leading to more destruction of livelihoods than creating additional employment. On the other hand, all kinds of tax holidays extended to investors in SEZs amount a revenue loss in tune of Rs 1.75 lakh crore. CAG report says “Acquisition of land from the public by the government is proving to be a major transfer of wealth from the rural populace to the corporate world.”
Moreover, mainly low-productivity informal jobs are created in sectors like construction and not high productivity formal jobs in manufacturing. In formal sectors, jobs shifted from regular to contract work and actually the whole employment is converted in to non-sustainable and precarious employment. The dynamics of new development is such that in the event of any small global economic crisis all the jobs are lost in no time, and then the state pumps all the public money to save private corporations and throws all the load of crisis on workers further and leave them to suffer from hunger pain or suicide.
It is in this background, we may understand the significance of the issue of labour law reforms.

As we earlier discussed that the strategy seems ‘appear to be moving in right direction but actually moving in completely opposite direction’. Initially it may appear that the initiative of central government is targeted towards integrating various labour laws to end the multiplicity and make them more effective. But after closely examining what is being done in the name of integrating the labour laws it becomes clear that on the one hand, rather than resolving the complexity it is creating more complexities; on the other hand it is targeted towards downgrading the labour laws in the line with demands of the employers’ organizations. Closely looking at what employers are demanding and what the government is doing one may find that in many sections word by word and sentence by sentence are picked up from their suggestions.
It seems that the Modi government and the employers’ organizations have realized that quickly achieving the objectives of labour reforms and amendments in other crucial laws like land acquisition law may not be possible because of strong opposition in Rajya Sabha where Modi government is in minority. Therefore, now two fold strategy is being used, on the one hand, more focus is on state level changes in laws and on the other hand, there is an attempt to club the labour laws at central level so that only few ordinances are needed for amending all labour laws, and also the business will be easier in case they plan to call the joint house to pass these amendments. It is interesting to note that the employers’ organizations are also demanding that state governments may be given sole authority on labour laws. In labour code on wages, the government has already attempted to give sole power to the state to fix and revise wages. Moreover, initially the employers organizations were against integrating the labour laws but probably because of the above factors later they also started demanding the clubbing of labour laws. The Modi government will try by all means to manage a majority in Rajya Sabha but that may take time and there is only little chance that they may get it in 2016. Therefore, more focus is creating a state level dynamics. The BJP led governments are taking the initiative and it is expected that other states may be soon compelled to do the same in order to compete for investments for so called development of their states.
The picture of labour relations system that emerges from the labour law amendments done or in process at central and state level can be summarized as follows:
Job security and more comprehensive labour laws will apply to industries with 300 or more workers. Actually there are and there will be very few industrial units that will come in this category. Even when certain industries require this much workforce, they may be able to escape from this category by engaging less than 300 workers, and maintaining rest of the workforce as apprentices who are not considered workers
Majority of Industrial units will manage to remain within the limit of small factories (less than 40 workers) to avoid applicability of 14 labour laws including factories act and industrial act etc. Even if they require more work force they may be able to manage in the above way, or by simply by using large number of unreported workers which they will be able to manage by virtue of easy hire and fire system.
There will be few industries in the categories of engaging up to 100 workers. It will be as good for them as in the category of less than 40 workers, except that they may need to take permission for closure. Below 100 factories may not be required to have standing orders and will enjoy easy hire and fire system. Therefore on the whole, most of the industries may be within this limit and if they require more workforce, they may manage it by engaging large numbers of apprentice workers.
No labour law will apply to the household industries and they will grow like anything with their linkages in global value chain and will represent the space of most exploited labour including the child labour. Probably similar will be the situation in manufacturing units with 1-10 workers, it is still not clear whether any industrial relations law and occupational health and safety law will apply to them.
There may also be a new development in labour relations where in contract labour system may come to an end, because in the new system there are enough space for employers engaging less than 100 workers to easily hire and fire the workers, and engage large number of apprentices.
There seems a big game on wages to project the current wages at higher level without any increase but only by adding employers’ PF and ESI contribution in wages; the resultant effect will actually reduce the take home wages.
Easy hire and fire in industrial units with less than 300 workers will increase the vulnerability of workers drastically and unionization of workforce will be highly difficult. This will create a major challenge for workers in exercising right to association and collective bargaining.
Right to strike is under serious attack. By requirement of 14 days prior notice and then conciliation proceedings, practically the whole industries are put in public utility services. It is not clear in amendments whether workers in small factories will have right to strike. The states are also taking similar initiatives to curtail right to strike; for example, the state of Andhra Pradesh has already declared the automobile industry as public utility service, and state of Tamilnadu is also considering the same. It is to be kept in mind that the wave of strikes that emerged from 2005 mainly on the issue of right to association and collective bargaining and against contract labour system has been most strong in automobile sector. Moreover, as we already discussed, the recent Gujarat Labour Laws (Gujarat Amendment) Bill 2015 prohibits the strikes in public utilities for two years (existing 6 months), and moreover it brings out a new provision to settle various offences out of court.
Most serious impact may be felt in drastically increasing the health and safety problems because on the one hand, the small factories (less than 40 workers) are put out of The Factories Act, on the other hand, excessive overtime is getting legal justification and list of hazardous industries and substances are deleted in the new proposed amendments. One may think about the impact of all this keeping in mind the self certifications granted to various industries under various labour laws and labour inspectors becoming facilitators, in a situation when the country is becoming a dumping ground of hazardous industries.

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