SEZ Policy in India and Issues with Labour Law

Source: Bangla Mail

To achieve an instant and overall sense of the content of Indian labour law, the Industrial Disputes Act 1947 (IDA) can be read as a metaphor for Indian labour law in general. The IDA is the essential legislation associated with ‘industrial relations’ in India, covering labour disputes, strikes, lock-outs, lay-offs and retrenchments. Clause 2(n) (vi) of IDA gives the government the right to notify in public interest, any industry specified in the First Schedule of the IDA as a ‘public utility service’. A ‘public utility service’ is associated with railways, ports, post, telegraph, telephones, power, light, water and sanitation etc. Since labour is a concurrent issue in the Indian Constitution, individual states have by amendment put in a host of industries such as polyester, resin, flour and rice mills in the First Schedule and dubiously labelled them as a ‘Public Utility Service’. Special Economic Zones (SEZs) fall in this category as well.

Even before the SEZ movement had reached the levels of current enthusiasm, ‘Hundred percent Export Units’, particularly those located in Export Processing Zones (the smaller precursors of the SEZs) were listed in the First Schedule by a number of Indian states. With the initiation of an explicit SEZ policy in 2005, one of the key devices sought to be used to circumscribe labour rights was to have the establishments located in a SEZ to fall in the First Schedule.

There are three significant features regarding the regime governing labour in SEZs. Firstly, labour laws in SEZs are not covered under formal sector labour laws but under labour laws meant for ‘public utility service’. By classifying employment in SEZs as formal sector employment, labour costs would rise, thus dampening national and international investment. This would go against the overall desire of the SEZ endeavour to push for labour intensive export oriented consumer goods. Secondly, the law is implemented by the office of the Development Commissioner rather than the Labour Commissioner unlike in other industries. Thirdly, the ability of the workers to organise strikes is curtailed in SEZs on account of being labelled as a ‘public utility service.’

Concentration of power in the hands of the Development Commissioner and not the Labour Commissioner has been criticised even by supporters of SEZs. Firstly, it leads to conflict of interest. Indian labour legislation is structured to give the Labour Commissioner enormous voice in determining labour market outcomes, whether it is in relation to work conditions or firing decisions – all this power now comes to vest with the Development Commissioner, whose job, unlike that of the Labour Commissioner is not primarily to look into labour matters but to ensure that the SEZ is able to attract sufficient investment and generate earnings. This clearly generates a conflict of interests and there is no in-built guarantee that labour interests will be privileged efficiently in relation to those of employers.

Secondly, will the office of the Development Commissioner be able to learn about the implementation of the plethora of labour laws in place, if so, it is essential to acknowledge that this will be costly in resources and to the extent such learning is not invested in, it will be costly to the degree the units slackens in the implementation.

The circumscription of labour rights has been reaffirmed by a survey of The International Trade Union Confederation (ITUC). According to its findings, trade unionists are not able to enter the SEZs in India because entry in to the zones is restricted to the workers who are transported in by their employers, making it very hard to organise workers and rendering union activity virtually non- existent. It also notes that that the bulk of the employment in these zones is confined to young women who are too frightened to form unions. These women are subjected to bad working conditions and compulsory overtime. Also, workers face the constant threat of immediate sacking if they make demands to implement labour laws.

Section 49 of the SEZ Act empowers individual states to modify the SEZ Act and other related laws and regulations that enable the delivery of fiscal benefits envisioned by the SEZ policy, however, it excludes labour laws from its purview. It states that such powers of modification are not applicable to “matters relating to trade unions, industrial and labour disputes, welfare of labour including conditions of work, provident funds, employers’ liability, workmen’s compensation, invalidity and old age pensions and maternity benefits applicable in any Special Economic Zones.” In other words unlike fiscal laws, rules and regulations, the set of labour laws, rules, regulations and orders relating to labour matters cannot be modified by invoking the provisions of the SEZ Act. Needless to say, there is a definite case to reform the laws in a manner such that both labour and producer interests are adequately balanced.

In the end it may be noted that India has signed some of the Conventions associated with the International Labour Organisation (ILO) Declaration on Fundamental Principles and Rights at Work, but it has not ratified the critical Conventions regarding Freedom of Association, Right to Organise and Collective Bargaining*.

Note
* India has ratified a total of 39 Conventions adopted at different sessions of the International Labour Organisation. These include conventions on hours of work, unemployment, night work, minimum wages, weekly rest, workers’ compensation, forced labour, labour inspection, child labour, underground work and equal remuneration for men and women for work of a similar nature.

By Karishma Mutreja