Election Results 2017: Outcome bolsters chances of labour law reforms

A favourable outcome in the polls will give BJP muscle to undertake reforms put on the back burner

With a favourable electoral outcome in the country’s most populous state, Uttar Pradesh, the Narendra Modi government is expected to give a push to its promised economic reforms. Primary among them are in the labour market, where the government had promised many things but failed to implement much due to resistance from trade unions, including the Bharatiya Mazdoor Sangh.

In his Budget speech, Finance Minister Arun Jaitley had reiterated the intent on reforming labour laws, and the electoral advantage might allow the Centre to take some bold steps.

According to labour ministry officials, the government plans to introduce two labour Bills in the second half of the Budget session, resuming an effort to reform labour rules, in a move that will be clearly opposed by labour unions. These Bills are the Industrial Relations Code Bill 2016 and Wage Code Bill, 2016.

If passed, the industrial relations code will facilitate easier hiring and retrenchment in factories and allow fixed-term employment in other labour-intensive sectors after allowing it in the apparel sector last year.

A previous draft of the proposed law had suggested that companies did not need to seek prior approval for retrenching up to 300 employees in case of an emergency.

The draft, in its present form, will also face the ire of the trade unions, as it aims to bar outsiders from holding posts in unions in the organised sector and reducing the number of such people in union activities in the unorganised sector.

A uniform code on wage will see streamlining of regulations and amalgamation of four wage-related statutes — the Minimum Wages Act of 1948, the Payment of Wages Act of 1936, the Payment of Bonus Act of 1965 and the Equal Remuneration Act of 1976. At present, there are about half a dozen definitions of wages in various Acts across the Centre and states.

Under fire from trade unions over multiple issues, the government decided to put its ambitious labour reforms on the back burner. Even so, Prime Minister Modi, in an interview with a foreign publication, discounted the impact of labour reforms on economic growth.

“For nearly two years, the labour law consolidation process has almost been in the cold storage. Though the labour ministry has done a lot of work over these labour codes over the past year, the administration has not been very enthusiastic, perhaps due to political reasons,” says a former bureaucrat who served as a secretary in the labour ministry.

Labour ministry officials say all formalities, including tripartite consultations with trade unions and necessary approvals from the law ministry, have been granted. Both the codes are now with a Group of Ministers. They will make necessary changes, if required; it will then be sent to the Cabinet. The GoM, headed by Finance Minister Arun Jaitley, held a round of discussions last week on the two Bills.

The wage code Bill was sent to the Cabinet by the labour ministry, but it has been returned to the GoM headed by Jaitley for further review. “It’s with the GoM committee headed by the finance minister. If it is not possible to pass these in this session, it expects to definitely do so in the next session, according to a senior labour ministry official.

Trade unions, though, say that they see no visible positive impact of labour law reforms on the job market. “Have we seen the job situation improving in those states? No. Have we seen vigilance going down? Yes. These are attempts to snatch away fundamental rights of workers. We had come out in street in Rajasthan, we will oppose this, too,” Brijesh Upadhyay, genral secretary of Bharatiya Mazdoor Sangh, the trade union wing of the ruling BJP government, told Business Standard.

With a majority ensured in Uttar Pradesh, which sends the highest number of members to Parliament, the Narendra Modi-led government will also be in a strong position in the Rajya Sabha, enabling to push legislative reforms.