UP's Yogi Adityanath govt is walking the tightrope on labour reforms

While UP has miles to cover in terms of labour reforms and liberalising related laws, the Adityanath govt has so far amended about a dozen labour laws for a more conducive manufacturing landscape

A few days before Prime Minister Narendra Modi launched projects totalling Rs 600 billion in Lucknow at a glittering ceremony on July 29, a delegation of industrialists under the aegis of Confederation of Indian Industry (CII) had called upon Uttar Pradesh Chief Minister Yogi Adityanath for ushering in labour reforms for faster industrial development and boosting the ‘ease of doing business’ index.

“There have been positive developments in UP under the present dispensation, including improvement in law & order, power situation and infrastructure development. However, we feel the state should also liberalise labour laws to make it easier to do business here,” CII Northern Region Chairman Sachit Jain had told Business Standard.

While UP has miles to cover in terms of labour reforms and liberalising related laws, the Adityanath government has so far amended about a dozen labour laws for a more conducive manufacturing landscape.

Among the most prominent changes is increase in the ceiling from 100 to 300 workers for a sick enterprise to exit without seeking a certificate from the labour department, but at the same time ensuring all statutory dues of workers had been settled in entirety.

There are an estimated 15,000 registered industrial units employing more than 25 workers. Of those, 85 per cent fall under the category of ‘having less than 300 workers’. According to industry body Laghu Udyog Bharati, 30-40 per cent of these units are either sick or are on the verge of becoming sick.

Besides, under the Factory Act, the minimum number of workers in a factory having power supply and without power supply has been raised from 10 to 20 and 20 to 40 workers, respectively, for compulsory registration. However, the industry had demanded it to be raised to 40 and 60, respectively.

However, since most of these norms have come into effect this financial year, there still is little or no awareness among industrialists about the changed laws. And the labour department has also been rather comatose in reaching out to the targetted beneficiaries. A senior labour department official who did not wish to be named said that the department was still updating its software to accommodate the amended norms in compliance forms, even as enquiries from industrialists had started pouring in.

Another major change has been the raising of ceiling from 20 workers to 50 workers for establishments to mandatorily register and maintain ESI and pension records for contractual labour. The state has also allowed a fixed-term contract system, which is expected to primarily provide the much-needed leeway to exporters and short-term contract firms to offer employment whenever they can.

For bringing labour into the finance and banking mainstream, the government has mandated payments by cheque/online mode to factory workers. However, this has been causing resentment among industrialists, who cite practical difficulties, such as advance payments or giving cash payment during emergencies.

“We are taking all the steps to boost production and benefit both workers and entrepreneurs. We believe that enabling and liberal laws would promote more enterprises and generate jobs. However, we would ensure the workers are not exploited and industrialists also get a congenial atmosphere to function,” UP Labour and Employment Minister Swamy Prasad Maurya said.

He maintained that the government was working on a proactive agenda set by the Centre to speed up the formal economy and protect the interests of the labour force. “We would continue to make similar changes going forward to further improve the ease of doing business environment in the state.”

Labour law expert and former UP additional labour commissioner D K Kanchal said the state had been making ‘revolutionary changes’ in the labour and factory laws, many of which had been suggested by various industry chambers and associations.

There are, however, areas that still have not been addressed, such as the provision of overtime to workers. The current state laws restrict overtime beyond a certain limit, even if workers are willing to earn additional income (a model allowed in the developed economies). Although, the government has relaxed the overtime norms to some extent, industry has been seeking a greater relaxation.

Anil Gupta, who runs enterprises both in UP and Chhattisgarh, said while there had been a perceptible improvement in the state’s business environment, no far-reaching reforms had yet been introduced. This despite such reforms being easy to implement with some policy tweaking and the use of technology.

“The need is to incentivise entrepreneurs for willingly complying with laws by liberalising norms. No amount of regulation would bear the desired result if the laws emphasise on slapping penalties on industrialists rather than creating an enabling framework for entrepreneurs,” he observed.

Lucknow-based industrialist and LUB Lucknow unit president Vishal Gupta said the state government should exempt engineering units from the minimum wages requirement, as in the case of other states, to let it flourish and allow more flexibility.

RSS-affiliated Bharatiya Mazdoor Sangh (BMS) Vice-President Mahendra Pratap Singh said while contractual labour norms would prevent the exploitation of workers at the hands of petty contractors, it would be detrimental for the job market, if implemented for permanent employment as well by factory owners and industrialists.”

“On October 30, BMS would organise a massive protest in Lucknow to highlight labour issues in the state,” he said, adding the Sangh had more than 1.5 million members in the state.

Here’s a lowdown on key labour reforms of the Yogi Adityanath government in Uttar Pradesh:

1. Ceiling for sick units raised from 100 to 300 workers to exit without seeking special certificate from labour department

2. Ceiling raised from 10 to 20 workers and from 20 to 40 workers for units without and with power supply, respectively, for mandatory registration

3. Mandatory payment of wages through cheque/online mode

4. Factories allowed for hiring on fixed term contract

5. Ceiling for mandatory registration and keeping of ESI, pension records raised from 20 to 50 contractual labour

A look at some quick industry facts:

1. UP is estimated to have 15,000 industrial units that employ 25 workers or more

2. 30-40% of these units are either sick or are on the verge of becoming sick

3. The proportion of units with less than 300 workers is estimated at 85%

4. Collation of statistics pertaining to industry has traditionally been sloppy in UP

5. The UP labour department is updating software to accommodate changed norms