Changes in labour law will affect half of all factories

Written by Surabhi Rastogi | New Delhi | Updated: Aug 14 2014, 15:06pm hrs
Factory workerAt present, units where power is used for manufacturing must employ 10 workers or more in a year to be identified as a factory.
More than half the factories across the country may be exempt from the restrictive provisions applicable under the current legislative framework, with the Factories Amendment Bill, 2014 proposing to revise the definition of a factory by effectively doubling the threshold of the number of workers employed in such a unit.

The move is expected to ease the labour law burden on most of the existing factories by freeing them from complying with the numerous provisions of the Act that relate to safety, working conditions and welfare of the employees, as well as filing lengthy compliance reports to the government.

The original Act identifies a factory based on the number of workers employed. At present, units where power is used for manufacturing must employ 10 workers or more in a year to be identified as a factory, while units that do not use power must employ at least 20 workers in a year.

Under the amendment, the minimum number of workers in a factory is sought to be doubled to 20 for units with power and 40 for non-power units. State governments will be empowered to prescribe the number of workers up to this limit that a unit must employ to be defined as a factory.

Data from the Annual Survey of Industries the most comprehensive official exercise on the industrial sector reveals that about 1 lakh, or 58 per cent, of the 1,75,710 factories reported to be operating in the country in 2011-12 employed up to 30 workers. While 63,568 units employed 0-14 workers, another 18,763 factories employed 15-19 workers and 20,541 units had 20-29 workers on their payrolls (see chart).

This is backed by the Labour Ministrys data based on returns submitted by factories under the Factories Act, 1948. The statistics reveals that in 2010, of the 67,508 factories that submitted returns (except from Orissa), 52.5 per cent, or 35,208 units, had employed less than 20 workers. However, the number of workers employed by these units was just 3,78,970 workers, as compared to the total 44.96 lakh workforce in factories.

But trade unions as well as experts have opposed the amendment, arguing that it could lead to greater violations by factories. There have to be more discussions with the Labour Ministry on the proposed amendments to the Factories Act. In effect, these factories will be out of the purview of the government and working conditions will not be regulated, said A K Padmanabhan, president CITU.

Michael Dias, secretary, Employers Association of Delhi, and a member of the Council of Indian Employers, concurred with the view, while arguing that there also has to be some modicum of control. This will bring out smaller units from the purview of the Act, though most violations are done by them. It will also lead to unhealthy competition amongst small manufacturers while not helping out bigger factories, he said.