Fear factor, again

Industry right to question definition of negligence in Covid cases

The spread of Covid-19 and the extended nationwide lockdown to contain it have brought economic activity to a virtual standstill. In this context, the government did well to allow business to resume selectively in designated areas from April 20, as the experience would be critical in deciding the future course of action. However, some rules attached to the resumption of economic activity have led to confusion and apprehension among Indian businesses. The fear is that the managements would be punished if employees are infected by the virus. Clause 21 of the guidelines issued by the Ministry of Home Affairs had noted that company managements can be deemed guilty and punished for negligence under the Disaster Management Act in the case of Covid-19 incidence at workplaces. Clearly, it will not be easy to determine whether employees are getting infected because of the negligence of the management or some other reason.

While the government has issued clarifications, saying penal action would be taken only if complicity is proven, industry is not convinced, and rightly so. Such rules give enormous powers to officials and often result in harassment. While the government has the right to spell out the boundaries which would guide the staggered resumption in economic activity, the guidelines must be unambiguous so that they leave no scope for harassment of employers. For example, a legitimate question by industry is who will determine the definition of “negligence” or “cognizance” of employers. In addition to several overzealous district administrations threatening industrial units with shutdowns, this will only increase the fear factor. This must stop immediately.

It is extremely important for the government to recognise two important things at this stage. First, India is not in a position to extend the lockdown further and will need to open up the economy, perhaps in phases, as even a limited opening will give firms some respite in terms of cash flow. Both the economic and human cost of extending the lockdown will increase disproportionately from hereon. It is also clear that given the fiscal constraints, the government is not willing to actively support businesses. Therefore, it is critical that the rules of reopening are clear with limited administrative discretion on the ground. The position of company managements should not be akin to public-sector bankers who have been reluctant to take lending decisions because of the fear of investigating agencies. The government had done well to repeal unwarranted criminal provisions in the Companies Act. Arbitrary decisions such as this should not undo the good work.

Second, it is possible that the number of cases would increase with resumption in economic activity and infection may not peak anytime soon. In such a situation, going after company managers and directors will not solve the problem. Therefore, the government should now work on a broad exit strategy with clearly defined rules. It will be important to ensure that operating conditions do not take India back to the era of inspector raj, which will only increase economic difficulties. This is not to suggest that firms should not take appropriate measures to ensure the safety of their employees, but the government needs to strike a balance. It must recognise that businesses across sectors are under severe stress and ill-judged conditions can just end up killing them all.