Votes vs Notes - (Indolink.Com, 03/10/2002)

-- By Dasu Krishnamoorty

The disconnect between labour demands and the readiness of the industry to accept them is so wide that the 38th Indian Labour Conference ended without reaching an agreement on the recommendations of the second National Commission on Labour. It recommended prior government permission for units employing more than 300 persons and higher retrenchment compensation. Workers of all unions rejected these proposals despite Prime Minister Atal Behari Vajpayee´s call for consensus.

The government has so far failed address several concerns of the workers. It is very radical to proclaim globalization is inevitable. Inevitable for whom? Why should the labour support a process that hurts them? Are workers alone responsible for the sickness of the industry? Has not the world scene how corporate vultures destroy great profit-making units through fraud and self-aggrandisement? Neither the government nor the industry has come forward with plans to handle the fallout of these reforms: colossal loss of jobs.

Undoubtedly, the Government today faces the unusual problem of achieving a balance between votes and notes. The votes come from the people who toil and suffer and the notes from people for whom they toil. It is this dilemma that the bill to amend the Industrial Disputes Act of 1947(IDA) symbolises. Liberalisation needs a free hand for the economy to operate without legal restraints. When economy flourishes under such benevolent weather, its benefits accrue to all sections of the society. One of them is growth in employment. There is really no problem if that were the truth.

To challenge the relevance of liberalisation today is irrelevant only because it has struck deep roots. All remedies to soften its blow will have inevitably to be within the prevailing permissive economic framework. What is the bill about? The bill aims at exempting employers hiring less than a thousand workers from seeking government permission to fire them and close the establishment. Under the IDA, any unit employing 100 or more workers needs government clearance for retrenchment or layoff.

The Union Cabinet has approved the bill to amend the IDA, clearing the way for its introduction in Parliament. Though there is no official word about it, it is believed that the government is prepared to increase the ceiling on retrenchment at between 200-300. This means that establishments employing more than 300 persons will have to seek government permission to retrench or retire them. This is also the recommendation of the second labour commission.

Let us now see what the workers and employers have to say about the bill. The present IDA offers cast-iron guarantees of a lifetime job security and encourages both the workers and their unions to resist labour reform essential to propel the economy. The old IDA also demanded that the employer give a 21-day notice to the workers if he were to make changes in job specification or even in technology. Retrenchment procedures were complex and time-consuming and did not allow an industrial unit to close down, thus freezing capital and capacity. Without IDA, it is possible for sick units to redeploy their assets while they still have value and could be made productive.

Unable to perform viably, industrial units have switched over to capital-intensive resources to escape the consequences of encouraging employment and face its consequences. In reality, old IDA provisions have frustrated growth in employment. Industrial worker growth has been only 10 per cent of industrial growth. No employer would like to hire more than 100 workers because it would block all mobility of resources. A Supreme Court judgement freed the employers from the onus of absorbing contract labour. Manoj Mitta (The Indian Express, 24 Feb. 2002) says the government should have taken the IDA issue also to the Supreme Court when it was in a favourable mood.

The employers have discovered new fallout of the bill, which did not figure in any one of their earlier arguments. The old IDA indirectly prevented the employers from taking decisions that needed to be taken to restore its profitability. The IDA provisions came in the way of cutting losses or increasing profitability because they prohibited the required restructuring and downsizing by factories employing more than 100 employees.

According to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance Bill 2002 if a corporate borrower defaults in its debt servicing for six months, the bank can demand repayment within 60 days. If the employer fails, the lender can enforce the security against the debt, all assets mortgaged or hypothecated to the bank can be sold and all personal guarantees can be enforced. This means the personal assets of the guarantor also will be attached and sold.

The borrower cannot even appeal to a court before he has deposited 75 per cent of the money demanded with a debt recovery tribunal. Complying with the provisions of the IDA and yet not remain sick is an impossible task. Sickness inevitably compels the borrower to default and the wolf at the door will insist on its pound of flesh. You are damned if you start an industrial unit and damned even if you close it.

Now the arguments on behalf of the labour: The workers maintain that the new provisions will not apply to 99 per cent of the industrial units because of the 1,35,551 industrial units, only 1120 employ more than 1,000 persons. The remaining 1,34,431 units will be free to sack workers without government permission. Why did the Cabinet hurriedly approve the bill without waiting for the recommendations of the Second National Commission on Labour? The workers claim that this is surrender to the globalization forces at the cost of the labour.

The bill is the culmination of several anti-labour measures the government had taken in the last one year. The BJP-led government has a majority in the Lok Sabha and therefore may win approval for it. But the union leaders are counting on the Congress and Left parties who have a majority in the Rajya Sabha. Congress may find it awkward to oppose the bill because it is the architect of economic reforms. However, political compulsions overrule such ethical niceties.

At a parliamentary party meeting presided over by Atal Behari Vajpayee himself, BJP members of Parliament attacked the bill because it is likely to increase unemployment in the country. Other partners of the BJP government also have voiced their misgivings about the proposed labour reforms. The result of the dissidence needs to be seen when the bill comes before the Lok Sabha.

There is no doubt that the kind of job security workers had enjoyed so far has resulted in loss of productivity, accompanied by a rise in the cost of production and price of the finished product. Press button strikes also have interfered with the pace of economy. The remedy, however, does not lie in abrupt switch to the law of the jungle. Giving a free hand to the employer means that the state has no interest in the concerns of the workers. Economy matters and economy does not mean the producer only. Technology has nearly eliminated labour from the triangular land-capital-labour matrix.

If the government is ready to abdicate its mandate in respect of organised labour, what about the millions of unorganised and ill-paid workers? Labour reform itself keeps foreign investment at bay. Government has to look for alternatives within the existing economic and industrial realities. To start with, the limit can be hiked to 300 from 100. Exit policies must be linked to reasonable retirement packages for the workers. Strike laws must be tightened. At the same time, any employer intending to retrench or lay off will have to provide valid reasons for such an action.

Politics in this country, both of left and right varieties, have fouled every sector of public life. Governments become victims of their own intrigues and end up placating both labour and capital because from the former come the votes and from the latter the notes. The economy becomes a white elephant and a burden on the common man who has done nothing to deserve it. What is certain is the industry that benefits from the amendment to the IDA will not share the benefits either with the society at large or with the government.