The Hindu Business Line : Textile players keen on exit policy for labour

Prof Chandrashekhar said there were many parties pushing for legal provisions that would allow a high degree of casualisation. This was driven by manufacturers keen to maintain large profits and competitiveness by reducing labour costs. In the long run, he said, workers would lose out.

Mumbai , May 30

FOR Indian business, liberalisation has been a long road to traverse. But with the new Government now in place, one issue that must be thrashed out, and in some detail, is an exit policy for labour, say players in the textile sector.

With the fag end of the MFA in sight, many organised Indian players are expanding capacities substantially to take advantage of the `free-for-all' in trading opportunities come 2005.

However, there are fears that increased capacities will entail employing larger workforce.

While past experience is holding back some players, some others have been following the past practice of setting up smaller units at different locations, essentially fragmenting their manufacturing base, to take advantage of loopholes.

Indian industry, while seeking concessions such as lower excise and other duties, has often opined that labour policy changes would have to come if manufacturing activity is to improve.

According to Mr R. L. Toshniwal, Chairman and Managing Director, Banswara Syntex Ltd, a number of companies were shying away from enlarging capacities because `labour' has been a stumbling block for years.

New and substantial investments, especially among medium-sized players and even foreign players interested in setting up outsourcing bases in India, were put off by this factor.

One suggestion that is being made by players in the garment industry is that companies be allowed to retain roughly half of its staff as permanent and retrench temporary workers hired during heavy order book positions.

The logic is that keeping the entire staff even during the lean periods will affect the profitability of companies, and indirectly hit employment.

According to Mr Pradeep Bhandari, Deputy Group President, Raymond Ltd: "Primarily manufacturers look at the ability to re-strategise manufacturing, sometimes even at relocating industries, to keep it competitive. So, there is an obvious requirement for a policy to allow you to do that. Right now there are rules regarding factories that employ a 100 people or more."

Ideally, if an industry proved unviable, it should be closed.

However, Mr Bhandari said that in the Indian context closing any sick unit was difficult and so was the issue of compensation.

So, there needed to be a clear-cut policy on labour and compensation issues. Depending on the production flow, contractual labour should be allowed in certain categories of business. He added that if India did not prove competitive globally, future buyers would seek other suppliers.

He said it was necessary to look at the bigger picture - namely creation of employment through the creation and expansion of industries. And in this effort flexible policies needed to be introduced.

However, Prof. C.P. Chandrashekhar, Centre of Economic Studies, Jawaharlal Nehru University, said the number of casual labourers had risen substantially in recent years and now formed a significant share of the total employment, even in agriculture, and there was data to prove this.

He added that contrary to what was being put across, there was a high degree of flexibility in Indian labour. So "the notion that the Indian labour market ensured lifelong employment and benefits is wrong", he said.

He said the benefit of being aligned to the WTO was there would be pressure to maintain at least minimum standards in wages and labour employment.

Prof Chandrashekhar said there were many parties pushing for legal provisions that would allow a high degree of casualisation.

This was driven by manufacturers keen to maintain large profits and competitiveness by reducing labour costs.

In the long run, he said, workers would lose out. In India, even minimum wages could not be ensured and the matter, therefore, was largely an ideological issue.

For example, traditional industries in the US have a high degree of protection and standards on wages and labour.

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