Dichotomy in laws

Reports in the newspapers suggest that the government has decided to review the scheme for special economic zones (SEZ), with a view to fixing a minimum size that is substantially greater than what exists. This would be welcome. China's Shenzhen covers 35,000 hectares, and only Reliance in India is thinking on anything like comparable scale. If the zones are to have real meaning, no new SEZ should be permitted that is less than 10,000 acres in size""so that it is in fact a "zone" with its own special characteristics, and not just a real estate play, or (worse) a tax avoidance scam, in the name of developing a special economic area.

The equally important thing to undertake would be a review of labour laws. At the moment, the law for SEZs that was passed last year leaves this to each state to decide""and the Left Front government in West Bengal (no less) has declared that no trade unions will be allowed in any SEZ within the state. Other states will be tempted to follow suit, because of competition among states. This may be unexceptionable, in terms of the logic of such special zones, but if the laws on industrial labour remain rigidly unreformed in the rest of the country, it would make for a strange and undesirable situation in more ways than one.

First, it becomes hard to accept the argument that the government is unable to undertake any reform of the laws with regard to contract labour, retrenchment, industrial closure and such like, when the government seems to face no difficulty at all in fostering an environment where industrial labour finds itself at the other end of the spectrum, with no collective rights at all and perhaps no job security. The supposed political difficulties in doing the logical thing for the country as a whole (and you could start with untying the easiest of many knots) begin to look like a lame excuse for deliberate inaction. Second, the greater the dichotomy with regard to labour laws, between the special zones and the rest of the country, the greater will be the diversionary effect on investment. In other words, investment that would in the normal course have gone to some other part of the country, will get diverted to an SEZ. The biggest loser will be none other than the industrial worker, for all new jobs will come without collective rights and without job security.

It would make much more sense (and labour would be the net gainer over time) to ease the rigours of today's labour laws, so that fresh industrial investment continues to take place in the country as a whole. Several ready-made proposals exist: ease the patently unreasonable restrictions on the use of contract labour (the courts themselves have begun to shift their stand from the earlier doctrinaire one), make retrenchment easier but costlier (proposed in the past, but not pursued), and raise the qualifying strength for units that have to take government permission before they can show anyone the door (promised once in a Budget speech by Yashwant Sinha!). If these are done, it is hard to imagine that any investor will prefer an SEZ on account of the difference in labour laws.