Restructuring labour laws seems to be back as a priority on the agenda of the Union government.

Soon after it assumed office, the Narendra Modi-led National Democratic Alliance government had proposed amending the Factories Act, 1948, a law central to regulating work conditions in industrial units. This was one of the Union government’s first legislative amendments. However, more than two years later, the factories amendment Bill has still not been passed as it has not got the approval of the Rajya Sabha, and there has been slow movement on other proposed legal reforms such as efforts to codify over 44 labour laws into four statutes.

But recently, the Ministry of Labour and Employment circulated a two-page note among central trade unions as a fresh proposal to push amendments to the Factories Act. The government argues that these amendments are necessary to create new jobs and make it easy for businesses to grow.

However, trade unions and workers’ groups, whose representatives met labour minister Bandaru Dattatreya on February 14, have opposed the proposals. They say that these proposed changes, which push more than half of all factories outside the purview of any regulations, were already rejected by the Parliamentary Standing Committee on Labour in 2015. The unions say the implementation of labour laws in India has already been weakened by successive governments over the years, and the new changes fail to provide for decent work conditions.

The unions, including the Rashtriya Swayamsewak Sangh’s trade union wing, the Bharatiya Mazdoor Sangh, have also criticised the manner in which the government has introduced these changes – labour ministry officials circulated a broad outline instead of making available the actual language and details of the fresh amendments being proposed, which would have enabled meaningful consultation with unions and workers groups.

‘Affects two-thirds of factories’

The Factories Act, 1948, defines a factory based on the number of workers it employs. If a unit uses power for manufacturing, it is considered a factory if it employs more than 10 workers in a year. Units that do not use power for manufacturing are identified as a factory only if they employ at least 20 workers.

The Act also defines minimum safety, health and welfare measures for workers that must be followed by a unit defined as a factory.

In its amendment Bill, introduced in Parliament on August 7, 2014, the government had proposed changing the original Act to double the threshold level of employment from 10 workers to at least 20 workers in case of factories using power, and from 20 workers to 40 workers in case of factories not using power for manufacturing. This meant that units employing less than these numbers would no longer have to follow the standards set out in the Factories Act.

Data from the Annual Survey of Industries shows that about one lakh (or 58%), of the 1.75 lakh factories in 2011-’12 employed less than 30 workers. Of the total, 36% of all units employed less than 14 workers, while 10.6% had workers in the range of 15-19, and 11.6% of the total units had 20-29 workers employed in the previous year.

Taking note of this data that was presented by central unions, the Parliamentary Standing Committee on Labour rejected the proposal to increase threshold defining limits, in its 116-page report presented on December 23, 2014.

The report said:

“..More than 70 percent of the factory establishments in the Country will be out of the coverage of the Factories Act and workers will be at the mercy of employers on every aspect of their service conditions, rights and protective provisions laid down under the Act..,”

In the new proposal circulated on February 14, the labour ministry has stated again that state governments will have the power to double employment threshold limits from 10 workers to 20 workers in units using power for manufacturing, and from 20 workers to 40 workers in units that do not use power for manufacturing, except in factories with “hazardous processes”.

Additionally, the Centre has also proposed that state governments could decide the employment threshold for a unit to be considered a factory under the Factories Act by simply issuing a notification to this regard.

Tapan Sen, a Rajya Sabha member of Parliament with the Communist Party of India (Marxist), who is a member of the Parliament Standing Committee on Labour, pointed out that the government was lying in order to proceed with its proposed amendments.

“Despite the Parliament Standing Committee on Labour rejecting the proposed amendments in the 2014 Bill – on threshold, and on increasing spreadover time and overtime permissible – the labour ministry blatantly lies saying ‘the Parliament standing committee has accepted majority of the amendment proposal’,” he said.

Sen added: “They have organised a hurried meeting and circulated the amendment again to simply create a record that they followed a process of consulting the unions, and push for the same proposal.”

Besides, the proposal on the threshold limit, the ministerial note also proposes:

  • To modify list of industries involving hazardous processes.
  • Replacing the concept of approval and licensing of factories with the “concept of deemed approval” based on “web-based registration, self-certified declaration and web-enabled inspection”. (This means that a unit would be considered registered and ready for business by default two weeks after registering online. These units would be inspected for compliance with the Factories Act according to randomised turns.)
  • Setting up of an Occupational Safety and Health Board of India.
  • New definition of the terms “child”, “adolescent” and “young persons”.

‘No details’

Pawan Kumar, a zonal organising secretary who attended the labour ministry meeting on behalf of the Bharatiya Mazdoor Sangh, said the proposal lacked details.

“The proposal did not even mention the proposed amendments as per which sections were being referred to,” said Kumar. “We asked the minister ‘Which version of the Bill are you now suggesting fresh amendments to since there are two versions of 2014 and 2016?’ But he did not say. We asked for details of the composition of Occupational Safety Boards as it was not specified that it would have government, workers, employers representation.”

KR Shyam Sundar, a professor of Human Resource Management at Xavier School of Management in Jamshedpur, said that while some changes to the 1948 Factories Act, last amended in 1987, may be necessary, the government’s current proposal was a half-done measure.

“It is true that small units may find it difficult to comply with a few provisions of the Factories Act,” said Sundar. “But if the government wants to allow states to double the [employment] thresholds, it must also create a second set of regulations specific or suited to regulating the work conditions inside smaller units.”

He added: “As of now, India lacks an occupational health policy framework. How will the proposed boards create an effective mechanism, when there is no policy framework in place?”

Sundar also questioned the motivation behind the government’s decision to revive the amendments now.

“A World Bank report published in January on the state of the economy had criticised the continuation of India’s restrictive labor laws as adversely affecting investor confidence,” he said. “The government may be reviving labour law changes debate to fare better on international financial institutions business climate rankings, especially following demonetisation.”

Labour ministry officials said they would hold a second meeting with representatives of trade unions and workers’ groups before the ministry finalised amendments to the Factories Act.