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India: Is labour trouble resurfacing?
S Kalyana Ramanathan
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August 06, 2005

Are the labour unions back? The riot that followed the labour management dispute in Gurgaon over the Honda Motorcycle and Scooter India spat could be the first major sign of things to come.

After a decade-and-a-half of market-friendly policy changes, the unions seem to be sticking their necks out again to ensure they are being heard. Some say the Left parties in power are the force behind this resurgence; the central unions disagree. They see the UPA government in the Centre as a more conducive environment for their woes to be heard.

For now, the battleground has been cleared and the soldiers are back home. A peace pipe is being passed around and the warring factions appear momentarily happy to take a drag as they put behind them the images of mayhem that hit the industrially flourishing Gurgaon-Manesar region in Haryana.

But behind the wall of silence, tremors can still be felt. The question on everyone's mind is how to ensure that what happened on Black Monday in Gurgaon does not happen again.

On July 25, HMSI workers protesting the company's refusal to take back suspended and dismissed workers were about to hit National Highway 8. Eyewitnesses say the Haryana police had merely warned them not to disrupt traffic movement on this arterial road.

Soon, what started as throwing of stones by some sections of the protesters, got totally out of hand. The rest of the day's events, so vividly captured by the television media, will remain permanently etched on our minds.

Police brutality reached new levels as six-foot-long lathis rained mercilessly down on hundreds of workers and protesters. Those rounded up by the anti-riot cops were seen crouching on all fours, many holding their ear lobes and squatting -- much to the agony of human rights defenders.

Militant unions being squashed by the state is not exactly news. But India has not had any serious problems on this front since the shackles of the Control Raj were unbound in the early 1990s.

However, for all their disagreements, both workers and employers see the recent upheaval in the relatively peaceful industrial landscape of the country as a watershed event that has created an opportune moment to take stock of labour laws before moving ahead. Optimists believe the Gurgaon event could well turn out to be a watershed in labour law reforms.

Labour and management do not agree on what needs to be done to reform labour laws. AITUC national secretary D L Sachdev says, "Central and state labour laws continue to be flouted. The implementation of these laws is very, very poor."

The industry appears bogged down by a plethora of labour laws. A recent study by the Federation of Indian Chambers of Commerce and Industry and All India Organisation of Employers points out that there are more than 55 central labour laws and over 100 state labour laws.

Conveying the futility of the labour-management clashes, Toyota Kirloskar Motors's deputy managing director K K Swamy says, "The work culture we have is not conducive to what is needed in an open economy. MNCs regard employees as assets. To be competitive, every bit of mind power is required."

Surinder Kapur, chairman of automotive component maker Sona Group, says, "This incident has brought to light the need to look at labour laws afresh. We cannot have archaic labour laws in a liberalised economy. Compare China and India not just on infrastructure but also on labour laws. It is much more liberal there (despite the Communist regime). Liberal labour laws are not about hire-and-fire at will but about more room for contract labour with a tenure of, say, three years or so, and more temporary workers. If there is a feeling that minimum wages are low, the government must work towards increasing them."

Swamy adds, "The automobile industry, for example, could be among the best paymasters in the country. An ITI pass-out in TKM earns around Rs 15,000 a month, while outside the company he'll only make Rs 4,000 or so. Not just the money, but even in terms of facilities, we offer the best. An employee of TKM can go to any upmarket hospital like any other member of the management team."

What is worrying the industry most is the impact of such disturbances on the competitiveness of the Indian industry, and the manufacturing sector in particular.

"Under the non-agriculture market access negotiations under the WTO's Doha Round, all duties will become zero. Imports will go up. Given that possibility, we cannot afford to be bogged down by issues such as these," Swamy warns.

The general feeling among employers, particularly MNCs, is that labour laws in the country seek "employment at the cost of employability". This is the big-picture issue the industry wants the government to address immediately.

Experts believe contract labour is a necessary evil. Employers find removal of a permanent employee a near-impossible task, which makes contract labour an easier option.

Trade unions, predictably, are not comfortable with this. Sachdev and his supporters oppose the idea of contract labour; the industry, on the other hand, is seeking to expand the scope of contract labour to core areas -- naturally a contentious issue.

"Andhra Pradesh made very clear regulations in terms of engagement of contract labour in core areas. The automobile industry, like any other industry, has its seasonality. It peaks in March and September. The rules of engaging contract workers to suit this cycle should be allowed," says an automobile manufacturer.

Indian laws are such that closing down an industrial unit is more difficult than opening or running one. The law states that establishments that employ more than 100 people will have to seek the permission of the "appropriate government" before closing it down. The industry wants the threshold limit to be increased to 1,000 workers, while unions are fighting tooth and nail to keep the number at 100.

Labour law experts say the legislation is complicated and, in some cases, puts too much power in the hands of the government. J S Saroha, a management consultant on industrial laws, says, "In a few cases, the Supreme Court has judged in favour of the employer, stating just as the right to earn a living or do business is a fundamental right, the right to close a business is a fundamental right too. Legislative changes can be made where the termination compensation can be increased, but make the closure easier. Not doing this only puts power in the hands of a few in the government."

Central trade unions like AITUC and CITU are also under pressure; managements consider them outsiders trying to take advantage of differences between management and workers.  "Why do we need outsiders to tell us what to do?" Swamy wonders.

The FICCI report suggests the number of outsiders in trade union executives should be restricted to a maximum of two, and of the two key positions of president and general secretary, at least one should be held by an internal employee. Sachdev disagrees.

"Central trade unions are still relevant for the unorganised sector. Specific unions within the companies may be able to handle their problems on their own. But there are several common problems. Internal unions should not have a narrow view on this."

Saroha cites the case of HMSI itself to point out the adverse impact of politicising union work. "The Haryana government mandates a minimum wage of Rs 2,300 or so. But I don't think any worker gets less than Rs 10,000 in HMSI. If the union leaders were responsible enough, they should have advised the workers to return to work and not take part in protests."

While India boasts the best in class labour irrespective of the colour of the collar, what worries the industry are the regulations in terms of access to this valuable resource. Trade unions think that the changes in labour law legislation that industry seeks would only end up commoditising labour.

Industry, however, is of the opinion that labour reforms have not kept pace with liberalised economic policies. The success of the Indian IT industry is cited as the best example of how far India can go when controls don't become a full-time job. Question is, who's listening?

'What's wrong with militant labour?'

Eighty-year-old veteran M K Pandhe is president, Centre of Indian Trade Unions, and member-polit bureau, CPI-M. In a free-wheeling discussion on rising union activities, he insists that they are still relevant

Isn't it time labour law reforms moved into top gear?

What employers seek as changes is only in their interest. Today, only 8 per cent of the workers are covered under labour laws. Do you know that Rs 1,500 crore (Rs 15 billion) is due from management on provident fund account? The law provides for imprisonment for this, but how many employers have been sent to jail?

Employers think negotiations with workers can be handled without external intervention.

If management can hire consultants from outside and call them insiders, why can't company unions take the help of central trade unions? This is an example of their double standards.

Why the sudden rise in labour-management clashes?

Employers think that wages are one area where they can cut costs. The effort to crush the formation of unions is a step in this direction. That is why they want a hire-and-fire policy, to bring in contract labour.

Is the rising prosperity of Indian companies making workers ask for more?

What is wrong in asking for a fair share? Why do capitalists want to keep all the profits?

Does that mean that workers will take a pay cut when profits go down?

(Pauses) No. When profits are good, they must create reserves (for rainy days).

What lessons have you learnt after the Gurgaon incident?

Despite police brutality, workers cannot be cowed. The struggle will only get bitter.

Do you condone militant labour?

What is wrong with a militant labour movement?


An unprecedented number of labour related disturbances have surfaced in the last year. Here are some places where they happened.

S Kumar's, nationwide: The company's worsted fabrics plant at Thandavapura, near Mysore, closed on May 31, 2005 as the workers resorted to an illegal strike. Announced on June 27 that the issue was resolved and production back on track. Financial loss estimate unavailable.

Honda Motorcycle and Scooter India, Manesar: Labour-management differences started in December 2004. Escalated in April 2005; went out of hand in July 2005 with the riot in Gurgaon where protesters were lathi charged by the state police. Chief minister R S Hooda stepped in to resolve the strike; it was settled on July 30 after HMSI took back four employees who had been dismissed. Cost the company close to Rs 120 crore (Rs 1.2 billion) in production losses.

Omax Auto, Gurgaon: Along with group company Speedomax (both with units in Haryana) were faced with labour problems that lasted for a month between June and July, but were resolved a day before the police-protesters clash broke out in Gurgaon over the HMSI issue. Cost the company close to Rs 5 crore (Rs 50 million) in production losses.

Hitachi Electric, Gurgaon: Lost two-and-a-half days production in May 2005, but differences were kept within company walls. Financial loss estimate unavailable.

Toyota Kirloskar Motor, Bangalore: Minor spat between workers and management over wage hike in April-May 2005. Issue settled for the time being with a management truce in the form of a 15 per cent wage hike. Shaken company considering setting up its second plant in a location that is relatively peaceful.

Apollo Tyres [Get Quote], Limbda, Gujarat: Operations at its plant were temporarily suspended on May 31 on account of an "illegal strike" by one section of trade unions in the factory. A week later the issue was resolved. Financial loss estimate unavailable.

Tata Motors [Get Quote], Jamshedpur: A minor flash strike on June 7. Three hundred workers attached to the transport section struck work for four hours against the suspension of a union member. Management revoked its plans to outsource general transportation from a contracting firm. No financial loss reported.

What employers seek as labour law reforms


"Central trade unions are still relevant, mainly for the unorganised sector. Internal unions should not have a narrow view on this. They should be aware of the problems of their brothers..."
AITUC national secretary D L Sachdev

"An ITI pass-out in TKM gets around Rs 15,000 a month, while outside the company he'll only make Rs 4,000 or so. Not just the money, but even in terms of facilities, we offer the best."
K K Swamy, deputy managing director, Toyota Kirloskar Motor

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