The Vasundhara Raje-led government in Rajasthan has taken the lead in bringing about dramatic changes to Central labour laws, which reformists have long argued are holding back job creation in the country. Labour laws form part of the Concurrent List and the Union government has often claimed pre-eminence in allowing amendments proposed by states to the legislations framed by the Centre.
The Raje Cabinet on Thursday cleared state-level amendments to three critical and archaic Central government labour legislations — the Industrial Disputes Act, Contract Labour Act and the Factories Act — seeking to liberate the corporate sector from the shackles of stringent requirements of the laws. The related Bills will be introduced in the Assembly early next month and then referred to the President for his assent.
When contacted, Raje said, “I had promised 15 lakh jobs and this is one area which desperately needs to be opened up. I don’t have a choice.” Describing it as “creating a habitat for job creation”, she said she would try to find innovative ways to further reforms.
“Policy-level changes require political will. For decades, everybody has advocated an overhaul of labour laws. What we did will change the paradigm,” Rajiv Mehrishi, Chief Secretary, Rajasthan, told The Sunday Express.
According to the changes in the Industrial Disputes Act, government permission will not be required for retrenchment of up to 300 workers. The Act, as it stands now, allows retrenchment of up to only 100 workers. The Rajasthan Cabinet has also introduced a three-year time limit for raising disputes and increased the percentage of workers needed for registration as a representative union from 15 per cent to 30 per cent. In the context of politicisation of trade unions, this raises the bar.
As far as the Contract Labour Act is concerned, the amendments raise the applicability of the Act to companies with more than 50 workers from the current 20. In the Factories Act, currently applicable to premises with more than 10 workers with power and 20 without power, the amendments raise these numbers to 20 and 40, respectively.
Senior BJP leader and former disinvestment minister Arun Shourie had recently said that should Narendra Modi become the Prime Minister, he could bring about genuine federalism by allowing more progressive states to change their laws. When contacted, Shourie said Section 254 (2) of the Constitution of India allows states to enact laws that do not necessarily conform to the Central law provided they receive the President’s assent.
“As Gujarat Chief Minister, Modi has himself complained in the past that the Central government was sitting on many of the changes proposed by his state,” said Shourie. “Such changes to laws can be brought about in a variety of issues and this will ‘unfreeze’ policy environment,” he added.
In the past, Modi has accused the Centre of adopting a policy of “coercive federalism” and pushing states to a subordinate position by monopolising all powers of financial allocations, reducing even the constitutional rights of states. Rajasthan’s bid to reform labour laws will be a test case for the Centre and will set the direction for all 29 states which plan to bring about progressive changes to issues that are part of the concurrent list.
When asked if having the same political party at the Centre would help Rajasthan in obtaining the President’s assent, Mehrishi said, “The Central government is equally keen to create jobs. All industry associations have been saying for decades that labour law changes are a must for creating more employment opportunities.”