Bruno Valanzuolo had met slain Graziano Transmission CEO LK Chaudhary several times at events held by the Italian Embassy in the Capital. As the implementer in chief of a 3-million euro Unido programme in India sponsored by the Italian government, Valanzuolo?s job is to create partnerships between Indian and Italian small & medium enterprises like the one Chaudhary was running, in the auto and leather sectors.
Valanzuolo spent Wednesday afternoon with a senior manager of an engineering construction firm from Turin, which builds plants for Fiat and its suppliers in Italy and India. The same firm had built the Graziano Transmission plant in Noida. While the manager from Turin didn?t seem to be aware of Chaudhary?s murder yet, Valanzuolo says the ?unfortunate and scary? incident could have repercussions on foreign players? willingness to come to India. ?It?s definitely not a good advertisement for India,? he says.
The Noida incident is not the only trigger for a fear psychosis, though it?s a compelling one for companies considering investing in India as well as deputing foreign workers to train Indian counterparts. On Wednesday, in New York, US-India Business Council president Ron Somers said apart from the incident in Greater Noida, the attacks on churches in Karnataka and Orissa as well as the Singur episode ?would affect? foreign investments.
BMW India president Peter Kronschnabl has been getting calls from across Europe since Chaudhary?s murder on Monday. ?It?s obviously not a very positive news. However, I don?t think companies that have decided to invest in India will change their decision.? But new foreign investors would certainly add a fresh red cross against India?s name on their investment destination list.
The timing couldn?t have been worse with the global economy already under turmoil and Unctad predicting that investment flows to emerging markets would slow down. But then militant trade union leaders have a knack of timing it horribly?Datta Samant brought Mumbai?s textile industry to a halt in 1982-83 when the industry was already in turmoil and ensured its demise in the process. Similarly, he led a strike at the Premier Auto plant just when it had launched the Uno and Peugeot cars in an attempt at turnaround. In recent years, the auto sector seems to be attracting the most labour trouble, though the reasons have changed.
The licence raj, which required companies to take government permission for increasing capacity by even one unit, was abolished in 1991. But the labour laws that required similar consent for laying off workers still remain, forcing companies, including public sector units, to hire workers on contract ? the simplest route for legislative arbitrage.
For instance, the Honda Motorcycles and Scooters India plant in Gurgaon, which was locked out for 21 days due to violent worker protests in July 2005, had hired nearly 2,500 of its 2,700-strong workforce through contractors. That was the only year that HMSI, which had launched a new product every year since 2001, didn?t launch a single product. In 2006, a smaller section of its contract workers again went on strike, but production remained unaffected.
Not all worker protests turn violent, but they affect India?s industrial production nevertheless. In 1999, Escorts Yamaha?s Surajpur plant didn?t function for months when two union leaders were sacked by the management. Dealers didn?t get fresh stocks till long after the incident was over.
Much time may have passed and contractual workers? agitations may not be reflected in official data. Yet, in 2007-08, Indian industry lost 11,44,719 mandays due to strikes, as per Labour Bureau data. Ironically, mandays lost in Uttar Pradesh were one of the lowest (3,179). West Bengal, which is about to lose the Tata Motors? investments in Singur due to local unrest, lost 35,217 days. Tamil Nadu, which is home to many auto companies, was the worst hit, losing 3.83 lakh mandays.
Labour law experts point out that the key problem is clauses like Section 25 (O) and Chapter VB of the Industrial Disputes Act of 1947 that not only set stringent conditions for industries to retrench workers but also set elaborate procedures for winding up units with mandatory government approvals at each stage.
The unions? vehement opposition to any change of the status quo prevalent since Independence has meant that the government of the day has little political inclination to move on reforms.
UPA?s labour and employment minister Oscar Fernandes may have apologised for insensitively linking Chaudhary?s killing on India Inc?s insistence on hiring workers on contract, but the root cause is the inertia that fosters archaic laws. These can only be fixed if Fernandes? ministry expedites changes that have been recommended for years.
Though the labour ministry, in 2005, mooted changes to the 1947 Industrial Disputes Act and the Contract Labour Act of 1970 to mainstream the employment now happening in the informal sector, Prime Minister Manmohan Singh had asked the National Commission of Enterprises in Unorganised Sector to examine the entire basket of 43 central labour laws. The Arjun Sengupta-led NCEUS is yet to turn in its report, though the prescriptions needed are obvious and have been spelt out by several expert panels in the past.
Pravin Sinha, vice-president of National Labour Law Association and labour advisor for German Development Foundation Friedrich Ebert Stiftung, says, ?(some) trade unions are in agreement with the need for changing the laws in tune with the times, but there?s a disconnect between their leaders and members. Today?s workers are well-informed compared to a few decades ago and are open to change, but their leaders aren?t.?
?Whether it?s the case of Honda or Graziano, the cause is a mismatch between changes in the economy and the administrative systems in place. Unless we remove interest groups beyond the employer and the employee, it wouldn?t help, as third parties (politicians, labour commissioners) have led to a complete breakdown in employer-employee relations. Of course, political reluctance to change is here to stay. Earlier it was the left parties, now even the Congress minister is speaking their language,? he points out.