The Labor Storms: Should The Labor Laws Be Amended?

Published by MBA Skool Team, Published on September 22, 2012

The year has begun on the note of strikes and the movements continue to strike. It all began with the Maruti Suzuki plant at Gurgaon in the industrial belt of Haryana-NCR, notorus for its violent strikes that keep making news every now and then. And now the unrest has moved from the automobiles to something much more fundamental and basic as the textiles.

When Ranchhodlal Chhotalal established the first ever textile mill of India in 1861, he would have had no idea of what impact his actions would have. Little did he know that he was not only shaping an industry but also the identity of an entire city as well as the State. He would have been unaware that he would be snatching the attention from our rulers (Great Britain) then, and pioneer the first “Made in India” brand. The product thus manufactured was perhaps the first Indian product to be in high demand the world over. Two and a half centuries later, the Indian textiles cover and drape all kinds of people across the globe, the kings and the paupers alike.

And despite all this, the Machester of the East, as the city of Ahmedabad is popularly known, is not a story of a roaring textile business today. The bitter labour struggles and the free market economy have put a major dent there. Even the revolution of small mills in nearby Surat played a major role in ensuring the big mills of Ahmedabad never made it so big. But the last couple of decades raised the hopes of the people once again, when the city became home to the largest denim producers and exporters with famous companies of foreign shores like Lee, Wrangles, Tommy Hilfiger and Arrow getting their denims made at the Arvind mills.

The number of members of the Ahmedabad Textile Mills’ Association has gone down from 75 during the independence years, to about 19 in the late 90s, and just about 15 today, which belong to altogether just six management groups.

The Naroda plant of the Arvind mills, which produces 84 million metres of the 108 million metres of denim that the company makes, and contributed to about 37% of the consolidated revenue of the mills in 2011-12. The recent labour unrest at the Arvind mills has seen the production going down by nearly 50%. The strike began with about 4000 workers from the Naroda plant of the Arvind mills on 4 June 2012. Very soon, some 1500 workers from another unit of Arvind, Ankur mills also joined in. And then, around 1200 workers each from two more reputed mills – Ashima mills and Asarwa mills joined in.

Why is there this strike? Why are so many thousands of labours across different mills joining hands to be a part of this strike, even while they are being threatened of being terminated and the mills are going about employing temporary labour to meet its production targets and keep the mill floating? The mill workers are demanding a flat 40% hike in their wages. The workers today earn untenably low wages in the range of Rs 5000-8000 per month. These workers claim that their salaries have not been revised in the past thirteen years and that their basic salaries have remained unchanged since 1965. This sounds unbelievable, but it is indeed quite true.

The workers complain that their salaries are just not sufficient to meet the day to day expenses of their whole family. They claim that almost everyone of them is having atleast a debt of Rs 50000 each. They say they have to send their children to Municipal schools because they can’t afford the fees anywhere else. The labourers also have a case running in the court about their wages which is currently in sub-judice status.

This strike is grossly different from the one that took place at Gurgaon among the Maruti workers. The workers of Maruti were not fighting for better wages. They were fighting for better working conditions and for access to basic minimum facilities and for the highly unacceptable code of conduct that had been laid out by the company as well as to form their own labour union. In contrast to this, the strike of the Arvind mill and other mill workers is focally based on demanding higher wages, and thus ensuring better conditions of life for their families.

The Economic Survey says that the state of Gujarat witnessed the highest number of strikes and other forms of labour unrest, in recent times on account of various financial and disciplinary issues. Wages and allowances, bonus, personnel, indiscipline and violence, and financial stringency were the key issues that were causes of these unrests.

In 2011, Gujarat lost nearly 211 crores on account of labour unrests, while Karnataka lost only about 159 crores and Kerala about 30 crores. However, it is Kerala that sees maximum breaches of the Labour laws. It is said that of the 450 hospitals in Kerala not a single one complies to all the requisite labour laws. And yet not a single one of them has lost a working day due to labour unrest. Similar is the case with the IT companies there.

Experts say that sectors such as the automobile and the textile industries, face a high probability of labour unrest because these industries require a large number of trained personnel, for which a lot of contract workers are employed. But why do these companies employ contract labour and not get full-time permanent labour that would stay and work for longer period while benefitting both himself and the company ideally. In most cases the share of contract labour in such industries is 60-90%.  Why is that so?

In India, labour laws are very rigid. Here, permanent workers cannot be hired or fired easily, and are carefully protected by the Industrial disputes Act, 1947. This act mandates that any firm having more than 100 permanent workers has to obtain government permission for any layoffs, retrenchments or closures.

Thus, these companies hire contract labour on whom such acts do not apply, and they can be hired and fired as per the will and the economic conditions of the company. The problem then becomes that these contract workers want the same benefits and perks as that of contract labourers. And since these companies have such a huge number of contract labourers, if there arises any dispute between the labour force and the management, then the production comes to a total standstill as it did in case of Arvind.

India is in no way new to labour unrests though they tend to have grabbed a lot of eyeballs and media footage off late. The country has seen several unrests in the 70s and 80s as well. Highly progressive companies like Nokia has also seen at least three labour unrests so far. While there is no one solution fits all type of end to the problem, one way things could go easier is by keeping communication channels open.

In case of Arvind, despite a written appeal as well as assurance fo a wage hike, the labourers refuge to budge saying they want a straight 40% hike. In fact, in many companies, even the accountants and clerks receive the same amount of salary that these workers receive and yet the former are not even under the purview of either the labour laws that protect these workers!

 We see that there are such strong variations in the growth of the manufacturing sector. A contributing factor for this is the numerous labour unrests. One thing that has to be understood is that India cannot be a capitalist country with socialist labour laws. Manufacturers have long complained that it takes years to dismiss their permanent workers, leading to bloated work forces and hampering of the company’s abilities to respond quickly to the changes in the external environment. Executives and industry groups make it very clear that relaxing the labour laws would allow the companies to hire more workers and would also attract more manufacturers to India which would ultimately underpin a rise in wages.

But for this perverse transformation to take place, it would be required that the old-school, highly socialist and restrictive labour laws be shunned and newer ones be put in place. That doesn’t mean the country has to become an enemy of the labour. But despite India having one of the cheapest availability of manpower which happens to be one of the biggest advantages for the economy, the country continues to reel under the labour storms every now and then. This would have to be amended so the economy can soar and there can be overall development of the nation.

This article has been authored by Bhavi Patel from IRMA.


Views expressed in the article are personal. The articles are for educational & academic purpose only, and have been uploaded by the MBA Skool Team.

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