Macro Economy

Infrastructure must get top priority

| | Updated on: Dec 02, 2014
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Better transportation, uninterrupted power supply required to be competitive

If industry is asked to list its problems, infrastructure will be right on top, probably second only to “ease of doing business.”

As in most other issues, there are too many players involved in infrastructure, the result being that responsibility cannot be pinned on any one agency. For instance, while the Centre takes care of the national highways, it still needs the co-operation of the States to improve them. Roads, other than national highways, are maintained by the States. As far as the power sector is concerned, the regulation is framed by the Centre, but power is a State subject. Both roads and electricity, not to mention ports and airports, are crucial for the manufacturing sector.

The 12th Plan document says manufacturing enterprises require good physical infrastructure to be competitive and this means improving transportation, uninterrupted power and adequate land to build. “The quality and efficiency of the physical and administrative infrastructure are a basic requirement for productive manufacturing enterprises. This is a major weakness in India at present,” it says.

In this context, it is unfortunate that there is not a single infrastructure ministry, either at the Centre or in the States. For the Make in India slogan to really take off and not merely remain a slogan, a first step would be to create a Ministry of Infrastructure at the Centre, bringing under it all the departments that have anything to do with infrastructure development.

L Ganesh, Chairman of the Chennai-headquartered Rane group, which is in the auto component sector, highlights that infrastructure needs urgent attention. Electricity especially should be available 24/7 at competitive rates, he says.

Ramkumar Varadarajan, Managing Director, Shri Govindaraja Textiles, which is setting up a textile unit in the US, says he chose North Carolina over the eight competing States mainly because of the lower electricity tariff. The State offered him electricity at the equivalent of ₹3 a unit. In contrast, in India, the electricity tariff could be ₹6.75-₹6.90 a unit, and a rupee more if his company were to buy power from a merchant power plant. The US Government, says Varadarajan, considers the cost of power a driver for economic development, manufacturing and resurgence.

The other issue for manufacturing to be competitive is raw material availability. Manikam Ramaswami, Chairman and Managing Director, Loyal Textile Mills, says for manufacturing to be internationally competitive, raw material should be available at international prices or lower and there should be a tariff-free access into major consuming markets for the manufactured goods. “We need to have a competitive conversion efficiency than our competitors to become a preferred destination to attract investments in manufacturing. This is a tall task given our higher cost of power, twice or three times higher logistics cost, and much higher cost of doing business, in general, compared to most countries,” he says.

Labour issues Any talk of manufacturing competitiveness invariably turns to labour issues and reforming labour laws. Ganesh feels labour laws in the country need to be made simple and employment friendly. “Today, they are union friendly,” he says. Labour laws, he adds, must be realistic in recognising the need for some mix of temporary workforce, be flexible in downsizing and closure, and give no special privileges to union office bearers when it comes to disciplinary action. The trade union act must prevent multiple unions in one unit and a 10-page Industrial Relations, not Disputes Act must replace all existing legislations, which must then be uniformly implemented across the country.

Sundram Fasteners’ Chairman and Managing Director Suresh Krishna sees no problems with the labour. In its five decades of existence, his company has not witnessed a single go-slow or strike by its workers, he adds. His mantra: keep communicating with the workers. Tell them the truth. It is better they hear from the management what is happening, as otherwise they will get all kinds of stories.

He is of the view that managing the labour is as much a part of the management’s job as managing finances or sales or marketing. “Labour is not divorced, it is part of management. If your labour misbehaves, it is your problem,” he adds.

Employer-worker Surinder Kapur, Chairman of the Sona group, which has companies that make automobile components, feels government has a major role to play in fostering good employer-worker relationship. Agreements with global buyers include stringent penalty clauses if a company fails to deliver on schedule. For this, good employer-employee relations are critical. There has to be discipline in any organisation, only then can efficiency improve. Against the scheduled eight hours of work, workers’ productivity is around five-and-a-half hours, due to which output falls. That is one reason why companies fail to meet delivery schedules.

He argues that when industry talks of labour reforms, it is not asking for a hire and fire policy. Industry only wants productivity norms to be adhered to and discipline enforced strictly.

However, labour leader AK Padmanabhan, President, CITU, differs. Whenever industry says it is not for a hire and fire policy, you should take it with a pinch of salt, he counters. From the early 1990s, when the process of economic liberalisation started, it is labour that has taken a hit. Industry and, at times, even the government have been coming up with new terms for job-cutting.

First, it was downsizing, then it was right-sizing and now it is flexibility. About 60 per cent of workers are on contract system; they don’t get paid the same as those on regular employment nor do they get the benefits, while they have to do the same amount of work. This causes heartburn among workers. Also, contract workers are outsourced, they are not on the rolls of the company.

Padmanabhan points out that industry is prepared to pay a high rate for electricity and for capital, but is not prepared to pay even the minimum wages when it comes to labour. For Make in India to happen, he says there should be decent work practices – safe working conditions, better wages and better living conditions. These should be linked to investments.

(This is part of a series on ‘Make in India’.)

Published on March 12, 2018

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