Under fire from labour unions, Centre puts reforms on the back burner

BJP-ruled states push through amendments to laws, aim to get larger share of FDI pie

Union Labour Minister Bandaru Dattatreya invoked B R Ambedkar, the architect of the Constitution, on International Labour Day to highlight various pro-worker steps taken by the government.

He spoke of minimum wages and extending of social security schemes to unorganised workers. He also launched a programme to consolidate multiple provident fund accounts. But, Dattatreya was silent on long-pending reforms to archaic labour laws.

"As a founding member of the ILO (International Labour Organization), India is committed to the principle of tripartitism," he said. "The ministry has made the best efforts to reach a consensus on all issues and many tripartite discussions have been held before taking decisions."

The government, however, has put the ambitious plan for labour reforms on hold after coming under fire from trade unions.

While the Centre has dragged its feet, states ruled by the Bharatiya Janata Party, such as Rajasthan, Madhya Pradesh and Gujarat, have moved swiftly to usher in reforms as they aim to take larger share of the foreign direct investment pie.

Rajasthan has been the pioneer by relaxing provisions of the Factories Act, Industrial Disputes Act, Apprentices Act and Contract Labour Act.

Madhya Pradesh has amended at least 20 labour laws, including the Industrial Disputes Act, Factories Act, and Shops and Establishments Act.

Experts said the central government was working to foster a competitive environment among states, while simultaneously attempting to unseat Opposition parties in state Assemblies.

"If the Union government is unable to introduce comprehensive investor-friendly labour laws at the national level because of political resistance, it will remain incumbent on India's states to decide if they want to take the political risks necessary to enact difficult reforms such as deregulating labour laws," said Owen Jolie, a researcher with Centre for Strategic and International Studies.

The central government has often returned to the drawing board, realising that it required more consultations with the unions after they opposed the changes. "We will call for a tripartite discussion after this Parliament session ends," Dattatreya said.

Many meetings have been planned over the next few months to incorporate changes to the draft reforms, said an official in the know of the developments.

The Centre also plans to move swiftly on the proposed social security schemes for the workers. According to labour ministry officials, there has been a consensus that the government wants to portray itself as pro-worker as it completes the second year in office.

Of the many regulations that the government is trying to push is the Employees' Provident Fund and Miscellaneous Provisions (Amendment) Bill, which aims to provide National Pension System (NPS) as an alternative to the Employees' Provident Fund, which is now compulsory for establishments with 20 workers.

"The law ministry has already approved the amendment Bill to change the Employees' Provident Fund & Miscellaneous Provisions Act, 1952. The labour ministry has circulated the Cabinet proposal," the official said.

Besides that, the government is waiting for Cabinet approval for the Maternity Benefits Act, 1961, which mandates to increase maternity leave to 28 weeks from current 12 weeks.

The government is also planning to soon bring out an executive order to halve the threshold for coverage of firms to 10 workers the official added. "We will give notice for consultations by first week of the next month."

The trade unions are of the opinion that the government needs to reverse some of the "anti-worker" decisions it has taken (see chart for status of some amendments).

"The government is on the back foot. It is unlikely to push anything afresh. It has already taken enough unilateral anti-workers decision; those need to be reversed first," said D L Sachdeva, secretary, All India Trade Union Congress.