Maruti violence case: Verdict underlines the urgent need for labour reform

Maruti Udyog’s management may have derived some sense of closure from the life sentences awarded to 13 of the 31 former workers convicted for the violence at the carmaker’s factory in Manesar, Haryana, in 2012 that resulted in the death of an HR manager and injuries to many senior executives. But judging from the seething dissatisfaction among labour groups in the automobile hub around Gurgaon, the verdict is certain to be appealed against in the High Court of Punjab and Haryana. This arduous trudge through India’s judicial system is irksome but it is the least of the problems for India’s largest carmaker in particular and the manufacturing sector in general. The strike marked the worst case of labour violence for Maruti, but it was by no means the first. This has been part of a growing story of labour violence in India’s manufacturing sector since the 2008 financial crisis. It is symptomatic of the rigid labour laws that restrain a company’s flexibility to hire and fire and encourage practices that keep workers in a constant state of social unrest. An archaic law, which makes government approval — rarely granted — for laying off workers in factories that employ more than 100 workers, has ended up creating two unequal classes of workers: The minority “organised” sector with almost impregnable pay and job protections and the larger unorganised (or contractual) one that earns significantly less. 

In the industrial sector, contractual workers account for 46 per cent of the total workforce and the differentials in wages and benefits can be more than double. No surprise then that contractual workers’ demands to be made permanent end up in violence against managers struggling to reduce costs in an ultra-competitive environment. Maruti is a case in point. After vowing to reduce its complement of contract workers in the wake of the 2012 violence, it actually raised its contractual workforce by 61.5 per cent between 2013-14 and 2014-15 in response to rising demand. Such “cost-saving” comes with the risk of simmering labour relations but is also the product of seasonal demand that dictates the need for hiring flexibility. In the automobile industry alone, the demand between the peak and lean seasons can vary as much as 25 per cent. Seasonality is an issue for textiles, the other major sectoral employer. 

Since labour is a state subject under the Constitution, state governments need to speedily expedite labour reforms. Rajasthan has made a courageous start by raising the cut-off from those employing 100 to 300 for factories requiring permission to lay off, but this is inadequate for the mega factories that multinationals prefer to set up and upon which the Narendra Modi government is banking. A landmark ruling by the Supreme Court in late 2016 advocated that contract workers should receive the same pay as permanent ones for equal work as a means of ending inequality between different categories of labour. All of this provides a solid base for state governments to work upon to scrap the more egregious sections of the Industrial Disputes Act. With one party now ruling more than half of India’s states, effecting all-India change is at hand like never before. At a time when accelerated automation is providing a handy alternative to large investors, the urgency for labour reform has never been more compelling.