Companies in the micro, small and medium enterprises (MSME) sector may legally challenge the Haryana government’s new law which mandates 75 per cent reservation of jobs in the private sector for locals.
“We had earlier gone to the high court against this law, but the court said that it would hear the matter after the law was notified,” said Manoj Tyagi, general secretary, IMT Industrial Association.
Industries and associations feel that the law will not benefit the state and will hit MSMEs that are just coming out of the crippling effects of the lockdowns owing to the Covid-19 pandemic.
Haryana is a highly industrialised state with a large automobile manufacturing hub, containing multiple small component manufacturers that supply to large companies like Maruti Suzuki.
Unlike the MSMEs, however, an auto major like Maruti will be much less affected by the law since the state government has said that the quota would apply only to jobs with a gross monthly salary of up to Rs 30,000. The draft bill had set the salary ceiling for the reservation at Rs 50,000.
“Such restrictive policies are not at all welcome. However, due to our negotiations, the salary ceiling has come down. Almost all of our employees earn more than Rs 30,000. So, we are happy that the negotiations have shown some results. We will go ahead and finalise the new land where we will move within this calendar year 2021,” Maruti Suzuki chairman, RC Bhargava, told Business Standard.
Bhargava said that the major reason to set up the plant in Haryana was that Maruti’s vendor base is situated in the state and relocating them would be difficult.
The Haryana State Employment of Local Candidates Act, 2020, lays down that private companies, societies, trusts, and partnership firms in the state which employ more than 10 people have to reserve 75 per cent of their jobs that offer a salary of 30,000 or less, for locals. Notified last week, the law will kick in from January 15, 2022.
Stressing that auto component companies will be severely hit by the law, Sunjay Kapur, chairman of auto component major Sona Comstar and president of the Automotive Component Manufacturers Association of India (ACMA), said that the salary ceiling of Rs 30,000 will primarily hurt the MSMEs which are just recovering from the downturn caused by the pandemic.
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“This is a restrictive practice which will challenge hiring of the best and skilled employees. This will also set a wrong precedent for other states. The government should find some other means to increase employment and livelihood,” Kapur said.
“More than 800 ACMA members are MSMEs trying to find their feet after the pandemic. This law is going to seriously impact them,” he added.