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Friday, Feb 22, 2002

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Cabinet to clear major labour reforms today

Harish Damodaran

NEW DELHI, Feb. 21

JUST a day after the completion of the last phase of elections to the Uttar Pradesh Assembly, the BJP-led Government at the Centre is set to implement yet another round of big-ticket economic reforms - this time in the politically-sensitive arena of labour and industrial relations.

The Cabinet is scheduled to meet on Friday to approve the amendments to the Industrial Disputes Act, 1947 proposed by the Finance Minister, Mr Yashwant Sinha, in the 2001-02 Union Budget. Currently, under Chapter VB of the IDA, industrial establishments employing 100 or more workers are required to obtain prior approval from the `appropriate Government' for effecting lay-offs, retrenchment or closure.

The 2001-02 Budget had sought to liberalise this provision by making it applicable only to units employing 1,000 or more workers. The Cabinet is expected to formally endorse this proposal, which will pave the way for the amendments to be tabled in the coming Budget session of Parliament.

The Cabinet is also expected to clear a proposal to declare Export Processing Zones (EPZ) and Special Economic Zones (SEZ) as `public utilities', which would require the workforce employed in the units located in these exclusive zones to give a 45-day notice period for going on strike as against the general 30-day norm now.

According to informed observers, there is little new to the proposals that are slated to obtain the Cabinet's go-ahead on Friday. "What is significant are not the proposals per se, but their sheer timing. By taking up the issue immediately after completion of the polling process, the Government seeks to send a clear message that it is back to business and there will no more political hurdles to second generation economic reforms," they pointed out.

The proposal to allow companies greater flexibility in `rightsizing' their workforce has been hanging fire ever since Mr Sinha's Budget announcement, with the amendment Bill in this regard not being tabled in Parliament, despite three sessions having gone by.

Apart from the impending Assembly elections, opposition from recalcitrant labour unions and non-cooperation from the then Labour Minister, Dr Satyanarayan Jatiya, have also blocked the legislation from being taken up by the Cabinet.

Dr Jatiya's successor, Mr Sharad Yadav, too, is understood to have not particularly favoured the proposed move, but has been forced to yield ground to the dominant reformist view prevailing in the Government. The Government is expected to project the proposed amendments as being neither anti-labour nor giving companies unlimited freedom to hire and fire.

In fact, any company seeking to effect closure or downsizing would have to pay the retrenched workforce 45 days' salary for each year of completed service. This is thrice the existing norm of 15 days.

Further, the companies will also have to clear the workers' statutory dues such as provident fund and gratuity. "These would act as in-built deterrents and make managements to behave responsibly towards their labour," the observers added.

Abolishing the prior Governmental permission requirement for retrenchment in units employing less than 1,000 workers will impact an estimated 90 per cent of the country's 28 million organised sector workforce as on March 2001, of which 19.28 million were employed with the public sector and 8.78 million with the private sector.

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