labour laws

There’s a wage crisis in Delhi’s factories – and the Modi government’s new labour laws won’t help

As the experience of workers in Okhla demonstrates, adequate wages and bonuses still remain out of reach.

A major overhaul of labour laws is underway in India. The National Democratic Alliance government has drafted two proposed labour codes, one on wages and the other on industrial relations. Together, they are aimed at shrinking the reach of the state in industrial areas, ostensibly to spur growth in manufacturing jobs. But trade unions warn that they will end up stripping away hard-earned workers’ protections. Away from the high-decibel debate, how do the proposed changes impact the worker-management relationship? This series of reports from Okhla industrial area in South Delhi tries to find out.

Every day, between 8 am and 9 am, at a short distance from Delhi’s Sarita Vihar Metro station, thousands of workers on bicycles and on foot make their way to work in factories in nearby Okhla. The entrance to the industrial enclave lies past the busy Tughlaqabad East railway crossing at the back of the Metro station.

One of the oldest industrial areas in Delhi, Okhla holds more than 4,500 factories. The majority of the units, especially the larger establishments, manufacture garments for export. Besides these, there are printing presses, engineering plants, units manufacturing plastics and making leather.

Many workers cycle to Okhla from Delhi’s satellite towns, Ghaziabad and Faridabad, more than 20 km away. A few minutes' delay in reaching the factory could mean a pay cut. As the clock approaches 9 am, the workers rush to cross the tracks and reach the factory gates, as the trains zip past them.

Factories and wages

Manufacturing employs just 11.5% of India’s workforce, far less than China's 30%. In popular perception, one of the constraints on the growth of manufacturing in India is the profusion of labour laws. In its first year in power, the National Democratic Alliance government has sought to streamline labour regulations.

In March, the Ministry of Labour and Employment drafted the Labour Code on Wages Bill 2015 to replace four existing laws – the Minimum Wages Act 1948, the Payment of Wages Act 1936, the Payment of Bonus Act 1965, and the Equal Remuneration Act 1976.

Under the proposed code, only state governments will fix minimum wages – at present, both the Centre and the states have this power. Trade unions have opposed the change, arguing that this provision will drive down wages, leading to a race to the bottom among states.

But for the sectors in which Okhla factories operate, industrialists point out that the minimum wage is already fixed by Delhi government. What annoys them is that it is 25% to 35% higher than in neighbouring Haryana and Uttar Pradesh. For instance, after the revision of wage rates in April, the wage for unskilled work like loading and unloading trays is Rs 348 per day in Delhi, while in Uttar Pradesh, it is only Rs 259.


Harish Arora, who operates nine small manufacturing units in Okhla that make parts for tyres and is president of the Okhla Industries Association, claimed that half of Okhla industrialists had relocated to Uttar Pradesh and Haryana in the last five years because of the wage differences. According to him, the wage increases have served to make workers in Delhi lazier.

“Every time the government raises the minimum wage, it makes workers less reluctant to stay on and work at continuous stretches for a few months,” he said. “When the wage is high, workers keep going back to their villages.” He added, “Without staying on, workers never make progress.”

Scraping the barrel

At the railway crossing near the factories’ entrance, as the sun climbed higher, the swell of workers rushing into factories gradually thinned. “Do you know about the rules for leave from work? How many leaves can we take in a year after we have been confirmed as a worker by the employer?” asked a young man who got off a bicycle and stayed on to chat for a few minutes. He introduced himself as Bharat. The 26-year-old was returning from a 12-hour night shift at a printing press in Okhla.

The printing press employed more than 1,000 workers, he said, and he had worked five years in its planning and design division. He described his work as setting pages but was asked to do odd jobs as well, lifting the material, inserting pages into the machines.

“Since my work of setting the pages falls in the skilled category, the press owners ought to pay me the highest category wage, Rs 10,998 a month,” said Bharat. “Instead, they make us sign on the 'grade' [a term workers frequently use to refer to three grades in wage rates based on skills], while paying us only as 'helpers' at Rs 9,000 a month - Rs 2,000 less every month.”

A few other workers who had stopped to listen intervened. “At a factory, if a worker knows the wage rates have risen, the supervisors get suspicious. They ask, 'Why do you know the rates so quickly? Are you in touch with the unions?'”

Said another worker, "Even if we reach 10 minutes late, they will deduct wages and sometimes even send us back.”

A Delhi government notification in March 2014 had made it mandatory for all industries to make electronic payments to workers. But in Okhla, most workers report they still get wages in cash.

The Faridabad Mazdoor Samachar, a workers’ broadsheet, is filled with accounts of workers reporting they they aren't paid the minimum wage. In interviews, workers in printing presses, garment and leather units, embroidery workers say wages are delayed, that they are not paid as per their grade, do not get compensated for overtime hours at the mandated double rate of payment.

Bharat, who is a migrant from Haridwar in Uttarakhand, said for most of the last five years, he had cycled two hours each way, covering 32 km, to reach the factory from where he lived near Ghaziabad in Uttar Pradesh. He would leave home at 7 am and return at 11 at night. “The rent in Okhla is very high, Rs 1,500 for a single room," he said. "The costs for buying water, electricity bills, rations are so high, I realised I would save nothing at the end of the month.” But after five years of cycling back 32 km after working 12-hours shifts, Bharat could not cope – last month he moved to a small rented room in Alegaon, a slum in Delhi.

Falling wages

The economic strain many workers at Okhla express shows in the data on average real wages.


As per the Annual Survey of Industries data, analysed by economists CP Chandrasekhar and Jayati Ghosh, profits of firm owners have increased continually in the last 30 years, from 23% in 1990-'91 to more than 50% in 2010-'11. But wage payments, as a percentage of value added in organised manufacturing, fell from 25.6% in 1990-'91 to 19.3% in 2000-'01. In 2009-'10, wages accounted for only 11.9%, one of lowest figures anywhere in the world.

Economists explain this both as a result of the decline in the number of workers and stagnation, even fall, in real or inflation-accounted wages, as the value of output has been increasing.



Data from the last 25 years shows that workers’ wages have barely kept up with inflation. Accounting for inflation, calculating in 2011-'12 prices, if a worker earned Rs 8,154 per month in 1990'-91, she earned only Rs 7,972 per month in 2011-'12. In real terms, workers today earn less than they did in 1990. Clearly then, firms’ profits have increased, but the benefits of economic growth have passed India’s industrial workers by.

Struggle for legal entitlements

Last August, around the same time that Prime Minister Narendra Modi introduced the first of his government’s proposed amendments to labour laws in the Lok Sabha, 350 workers in a garment factory in Okhla were celebrating. The tailors at Wear Well India garment factory had successfully negotiated their yearly bonus to be increased to Rs 5,000 from Rs 4,500, where it had remained for the past few years.

Under the Payment of Bonus Act, employers are required to pay 8.33% of annual wages of workmen as an annual bonus, which comes to nearly a month’s salary, or alternatively, a sum fixed by the government. The law allows workers to negotiate the bonus as per companies’ changing profits and productivity. “While minimum wage rates have increased to over Rs 9,000, the amount fixed by the government has not been revised since 2005,” said Dr Animesh Das, president of the Delhi unit of the Indian Federation of Trade Unions.

Though it is their due under law, workers in Okhla say just one out of four factories pays a bonus, and an increase in the bonus is even rarer – in one of 10 factories.

At Wear Well, in 2013, the tailors recount, they had met the management and requested a bonus before Eid and Diwali but had got nothing except successive dates for appointments. This time, over 300 tailors reported to work at 9 am but sat quietly at their work stations facing the electronic sewing machines stacked in rows, stitching nothing. At six in the evening, they punched their exit time in at the company’s gate and left for the day.

“On the first day of our strike, our manager said, ‘Either work your shift, or take your hisaab [dues] and go.’ We told him, if you ask one of us to leave, 300 of us will quit,” said 28-year old Rafiq, who has worked as a tailor at Wear Well for five years since he moved to Delhi from Betiah in Bihar.

The strike went on for five days. Wear Well factory manager Nishchal Kumar says the company suffered a loss of Rs 11 lakh.

After five days, the company approved an increase of Rs 500 in workers’ bonus, which was lower than their demand of Rs 1,500 hike. It meant an additional cost of Rs 1.75 lakh for the company beginning last year – less than the loss suffered in a single day of strike.

Many young workers such as Rafiq ask, even if they got their legal dues and minimum wage, would it be a fair wage?

“We stitch the garments, we make the maal [goods] and the maalik [owners] supply maal abroad. Kamaate hain hum log, aur khaate hai woh log. We earn, they consume,” said Rafiq. “The staff’s salaries are Rs 50,000-Rs 80,0000-Rs 1 lakh-Rs 1.5 lakh each, and what about us? We get dirt. We earn today and eat tomorrow, and so it goes on.”

Workers and the government

Minimum wages and other worker benefits are meant to be enforced by inspectors of the labour department. In popular perception, such enforcement has led to Inspector Raj – where factory owners are harassed and bribed by labour inspectors.

Among the most discussed and feted changes under the new Labour Code on Wages Bill 2015 is the proposal to free factories of the labour inspectors, replacing them with “facilitators” whose role, as per the draft code, will be to “supply information and advice to employers and workers concerning the most effective means of complying with the provisions of this code”.

But states such as Haryana, Rajasthan and Delhi have long done away with inspections. Fifteen years ago, the Delhi government ended suo moto inspections of factories, moving to a complaint-based system. In 2011, the Congress government launched a labour helpline, with the number 155214. “Delhi has 54 lakh workers spread over nine districts,” said Additional Labour Commissioner Rajendra Dhar. “On an average, we get 30-40 complaints a day but it is difficult to respond to each one of these.”

The department has a perpetual shortage of inspectors. To oversee complaints of more than 13,000 factories with licences (over 5 lakh small units operate without licenses in one district alone, officials say), the department has 13 inspectors. The sanctioned strength is 72. The reduction in staff started gradually, and has persisted for eight years now. “Inspectors are appointed from the Delhi Administrative Subordinate Services Cadre,” said Dhar. “Revenue, Excise, Social Welfare which also draw staff from the same services get priority over Labour.”

At Wear Well, the garment factory in Okhla where tailors stopped work to ask for a bonus, the factory manager said while working for 10 years as an apparel manager, he had never witnessed a factory inspection.

“Frankly, while working in Okhla or in Noida, I have not seen a single inspector visit, or seen anyone being fined for not complying with paper-work. In fact, at the time of the tailors’ strike, we wrote to the labour department office in Pushp Vihar but got no response from them,” said Nischal Kumar, factory manager at Wear Well.

For all the hype surrounding the labour law changes, factory owners and managers said these would have little impact in Okhla. Some such as Kumar at Wear Well were more concerned about a possible increase in their wage burden through another change that the government had made last year. “For us, the biggest legal change so far is that this government has increased the salary limit for provident fund contributors from Rs 6,500 to an upper limit of Rs 15,000,” he said. “Can you imagine how much it will increase our bills by?” Among workers, not many had heard about the expanded coverage of provident fund.

One worker in Okhla, a tailor, shared what had happened when he decided to report a violation. Unaware of the labour helpline started in 2011 the tailor, in his mid-20s, called 1031, Aam Admi Party’s new, more popular anti-corruption helpline advertised on large billboards all over the city.

“A woman operator picked up, and said 'Welcome'. I said I am a worker. I wish to report that the factory owner does not the minimum wage decided by the Delhi government.”

“The operator was patient with me,” said the worker. “She said, I agree non-payment of wages is corruption. But said she could do not do anything about it, the government has not listed non-payment of wages as a category under corruption.”

Workers' names changed on request in the report

This is part 1 of a series, part 2 here.

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