On Saturday, President Pranab Mukherjee gave his assent to the amendments to three labour laws that had been passed by the Rajasthan Assembly some weeks ago. In doing so, the president - and, thus, the central government - signalled that it would not stand in the way of state governments that wished to carry out major legislative changes that in effect superseded existing central laws. The laws in question are the Industrial Disputes Act, the Contract Labour (Regulation and Abolition) Act and the Factories Act. The Rajasthan government has carried out far-reaching changes to these laws. It believes it can do so because labour is on the Concurrent List of the Constitution - in other words, it is a subject that both the Centre and states can administer. And the framers of the Constitution did indeed foresee occasions such as this, when state and central laws conflict with each other. Article 254 of the Constitution says that the president's assent can allow a law made by a state Assembly to come into force in that state, even if that were "repugnant to" the parliamentary legislation on the same subject. Still, it is not certain that Rajasthan's labour law reforms cannot be challenged - some Supreme Court judgements in the relatively recent past could be seen as questioning the states' ability to unrestrictedly amend central laws. Either way, it is likely that a legal battle is in the offing, as no trade union would want the power of Rajasthan's example to go unchallenged.
What is unfortunate is that a state like Rajasthan has been pushed into bringing about these amendments because the Centre is refusing to take the responsibility to change what are its own laws. Everyone agrees that labour law is a problem. Indeed even the opposition Congress said in its manifesto that labour law should be more flexible, and its vice-president told an audience of business executives that labour-market flexibility should be legislated. The party in power in Rajasthan is also in power at the Centre, with a majority in the Lok Sabha that could even prevail in a Joint Session of Parliament. So what, precisely, is the Centre waiting for? Arguments that this is a bow to federalism hold no water; if the central laws are withdrawn, then states could pass their own restrictive laws if they so desired, and nothing stops them from doing so. The fear is that labour laws will be amended piecemeal across states - and become another way in which Indian companies find their paperwork and compliance change and expand when they cross a state border.
The amendment of labour law is long overdue. It is important to note that even Rajasthan's changes to the Industrial Disputes Act, radical though they appear, actually take the law back only to about 1974. The law in the first quarter-century of independence looks almost unattainably liberal. But it is also necessary to ensure that labour-market flexibility is accompanied with some form of social safety net and adequate compensation for fired workers. The point of labour law reform is not to reduce the bargaining power of workers. It is to allow basic and necessary increases and decreases in size. Now, hopefully, the dangerous casualisation of the workforce will also be reversed.
