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Saturday, Feb 23, 2002

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Cabinet clears big-ticket labour reforms

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NEW DELHI, Feb. 22

THE much-awaited reforms which the Indian industry was looking for has finally happened. The Union Cabinet on Friday approved amendments to Industrial Disputes Act, 1947, which are required to carry out major reforms in labour laws.

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.

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 2000, of which 19.28 million were employed with the public sector and 8.78 million with the private sector.

During a marathon meeting lasting more than two hours, the Cabinet discussed and approved the amendments to the IDA, proposed by the Finance Minister, Mr Yashwant Sinha, in the 2001-02 Union Budget.

Once Parliament approves the amendments, any company seeking to effect closure or downsizing will have to pay the retrenched workers 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 caveats are expected to act as deterrents and make managements behave responsibly towards their labour.

"These and other labour-related reform measures are likely to be introduced by the Vajpayee Government in the coming Budget session of Parliament," an official spokesperson said.

The Government declined to give further details on the proposed amendments in view of the forthcoming Budget session and to ward-off opposition from political parties and trade unions.

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