The existing Contract Labour (Regulation and Abolition) Act, enacted in1970, aimed at abolishing contract labour in various jobs and processes under certain circumstances and regulate the employment of contract labour where it could not be abolished The Act, based on the recommendations of various commissions and committees on contract labour and decisions of the Supreme Court, does not envisage total abolition of the contract labour system.

The need for a fresh look at the law has been felt in the light of experience gained in the administration of the Act and the judgements of the courts. It has been seen that there is no uniformity in the implementation of the Act by the Centre and the states. There are cases where an activity has been prohibited by one state while it is permitted in others.

Moreover, the Act is being implemented mostly in establishments where the workers are organised. In smaller private establishments, where exploitation is generally more, workers do not get the benefit of law.

It has also been seen that there are many cases where accepted system of work is such that it is done through labour employed and contractors like construction and maintenance of government buildings by Public Works Departments and collection of taxes through contractors by certain municipalities. Any attempt to apply the law in such cases may lead to the need to completely change the organisational structure of the department.

Big industrial undertakings which are managing their activities party with contract labour may become uneconomical with the absorption of contract labour in case of their retrenchment, as ruled by courts, and turn sick. To avoid such a situation, they may opt for technological restructuring with less number of workers as a survival strategy, the labour ministry feels.

It also apprehends that small and medium entrepreneurs may not take up new ventures as they may fight shy of including more workers on permanent basis with the overall result of reduction in manpower deployment.

Moreover, it is pointed out that having regular workers for all related activities in an establishment is not in accordance with the international practice which stresses on flexibility in manpower deployment.

It is stressed that the need for outsourcing is a recognised global phenomenon to meet the objective of delivery of services of the right quality in time, for right sizing and for competitiveness.