Old laws, skewed wages cause of auto industry unrest: study

Consultancy firm Mazars today blamed India's "archaic" labour laws as one of the reasons for frequent strikes in the automobile industry and said they need to be upgraded to protect the growth of the sector.

The firm said differential wages paid by firms are also responsible for repeated agitations in a company. It, however, said presence of a union is a positive development that checks many irregularities.

"Indian labour laws are archaic. We need effective laws...There are many regulations," Mazars India Executive Director (Head of Governance, Risk and Internal Controls Practice) Monish Chatrath told reporters here.

He said the laws need to be rationalised to protect the growth of the Indian automobile industry.

"It's important to have laws, which are practical and forward looking. Strike occur to break out of the legacy framework," he said.

Labour unrest has been hitting car maker General Motors badly with its Holol facility in Gujarat facing 16th day of agitation today with a production loss of over 900 units so far.

During 2010, the auto industry faced several instances of labour unrest resulting in production losses in different facilities of companies, including Hyundai Motor India, General Motors and Honda Motorcycle & Scooter India. Tyre maker Apollo Tyres and battery producer Exide also had to face workers' strike.

Taking a dig at the companies, Chatrath said the auto makers practice differential wage standards among its staff.

"One of the reasons is difference of payments. We can see, labour wages differing as much as 25-30% between different companies in a same (industrial) belt," he said, adding the companies need to take "stern" actions for the benefit in the long-run.

He also supported the existence of unions saying these are "very important and healthy as it checks many wrong things to happen. I am very positive about it".

Earlier, he had said a mechanism to measure corporate governance practices in the automobile companies was required in order to avoid frequent labour unrest in the sector.

In June last year, a section of workers at the Hyundai's Sriperumbudur plant went on a three-day strike. It was called off following a government-brokered deal after the carmaker lost about 2,000 units every day on an average and around Rs 65 crore due to the strike.

Apollo Tyres' Perambra facility in Kerala was locked out for more than two months after labour unrest hit the facility in April last year. The entire episode cost the company about Rs 600 crore in revenues.