NDA govt moves to amend Factories Act

New Delhi: Taking its cue from Rajasthan, as it were, the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government has initiated action on the sensitive subject of labour law reforms. To begin with, the labour ministry has sought suggestions from all stakeholders, including industries, trade unions and experts, on its proposal to amend the 66-year-old Factories Act.

“The labour and employment ministry proposes to amend the Factories Act 1948,” said a ministry document dated 6 June and posted on its website.

Coincidentally, it was the same day the BJP government in Rajasthan approved amendments to three key labour laws—the Industrial Disputes Act, the Factories Act and the Contract Labour Act—and set in motion a process of decentralizing the labour market and making it “employment friendly”.

The BJP, which has won a majority on its own, had in its manifesto signalled its intent to pursue labour law reforms, saying that if elected to power, it would “bring together all stakeholders to review our labour laws which are outdated, complicated and even contradictory”.

According to labour ministry officials, labour reform is definitely a key focus of the government and with the Factories Act, the labour ministry is setting the ball rolling.

“We want to create a conducive atmosphere of growth in the manufacturing sector that would lead to more job creation,” said a labour ministry official, requesting not to be named.

“In the ministry, the thinking is that we have to create a balance between growth and welfare of workers,” the official said. “We don't want to be regressive or pro-industry. Too much of rules and inspector raj needs to go and labour laws need to be simplified,” said a second official, who also did not want to be named.

The amendment to the Factories Act has been pending since 2008.

The proposed changes centre on five points—improved safety of workers; doubling the provision of overtime from 50 hours a quarter to 100 hours in some cases and from 75 hours to 125 hours in others involving work of public interest; increasing the penalty for violation of the Act; relaxing the norms of female participation in certain industry segments; and reducing to 90 from 240 the number of days that an employee needs to work before becoming eligible for benefits like leave with pay.

The proposals are silent on whether like Rajasthan, the centre can exempt factory premises (having electricity supply) with workforce strength of up to 40 (from 20 at present), and premises without power supply with 20 workers (from 10 presently) from adhering to the Factories Act.

Officials said more provisions may be added, keeping in mind the balance the ministry wants to achieve between promoting labour-intensive manufacturing and safeguarding workers’ rights.

“Factories Act was created for a different time altogether. Now there is no need for such an Act as it does not make any economic sense,” said Manish Sabharwal, chairman of TeamLease Services Pvt. Ltd, a staffing and training company.

“It should go. Instead of several vertical labour laws, we should have horizontal clusters; for example, Factories Act, Shops and Establishments Act can be merged along with a few more to create Occupational Health and Safety Act,” he said.

The new government setting in motion the process of labour reforms is a welcome move and would give confidence to the industry to hire more people, said Alok Shriram, deputy managing director of DCM Shriram Industries Ltd.

“We are not looking at hire and fire mindlessly, but we have to realise that we are working in a globalized world. There are technology adoption and demand-supply issues and government needs to allow flexibility,” said Shriram, who is also the senior vice-president of PHD Chamber of Commerce and Industry, an industry lobby group.

Shriram suggested that there should be “some sort of exit” route for workers. What Rajasthan has attempted is very good, and it will attract more investments to the state once the changes are in place, he said.

“If a state gives conducive atmosphere, industries are bound to go there,” Shriram said, adding that when India thinks about competing with countries like China, it has to incentivise the manufacturing sector.

He opposed the move to relax eligibility norms for availing benefits like leave.

India needs progressive labour market reforms, said Sanjay Bhatia, president of the All India Organization of Employers.

Changes in the Industrial Disputes Act, 1947, related to time limit of 3 years for raising disputes, raising the limit from 15% of workers to 30% for registration as a representative union and no government permission required for retrenchment of up to 300 workers (up from 100) in addition to changes in Contract Labour (Regulation and Abolition) Act, 1970 and Factories Act, 1948 will have positive effect, Bhatia said.

With a target of generating 100 million jobs and increasing the share of manufacturing in gross domestic product from the existing 16% to 25%, amendments to labour laws are critical. “We hope that central government will also take necessary action,” he said.

The move is however likely to face political resistance.

The Congress signalled as much on Tuesday during the debate on the motion of thanks to the presidential address in the Lok Sabha. Referring to media reports—The Indian Express and Mint had published stories on Sunday and Monday—that BJP-ruled Rajasthan had sought to change labour laws to bring in more investments, Congress leader Mallikarjun Kharge said BJP was favouring the rich over the poor. Kharge’s remark drew a sharp reaction from the treasury benches, with Arjun Meghwal, BJP member from Rajasthan, demanding that it should be expunged from the records. He explained that the Rajasthan government had just sought a report and no decision had been taken on it.

Trade unions too protested the proposed rejig in labour laws.

“The BJP government...has a corporate mindset. They are pro-industry and anti-worker. In the garb of development, they will try to do all sorts of things to hamper the interest of workers,” said D.L. Sachdeva, national secretary of the All India Trade Union Congress.