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  1. Labour Laws: Ministry wants garments sector reforms to span textiles too

Labour Laws: Ministry wants garments sector reforms to span textiles too

Changes in labour laws and a Rs 6,000-crore package have recently been announced for the garments sector

By: | New Delhi | Updated: July 4, 2016 8:56 AM
Textile secretary Rashmi Verma said the ministry expects the special package announced for the garments sector to be extended to the textile sector as well, at least things such as fixed-term employment and increase in the overtime limit for workers Textile secretary Rashmi Verma said the ministry expects the special package announced for the garments sector to be extended to the textile sector as well, at least things such as fixed-term employment and increase in the overtime limit for workers

Close on the heels of the government announcing radical changes in labour rules and a R6,000-crore package for the garments sector, the textile ministry has started pitching for extension of at least the labour reforms to the textile (yarns, fabrics and made-ups) sector.

In an interview to FE, textile secretary Rashmi Verma said: “The special package has talked of certain big reforms in labour laws. This is, of course, specific to the garments sector. We are hopeful these will be extended to the textile sector as well, at least things such as fixed-term employment and increase in the overtime limit for workers. We are in talks with the ministry of labour and they are considering it.”

Since both the labour-intensive sectors complement each other, extension of labour reforms to textiles, including spinning, will enable India to better capture the space being ceded by China due to soaring wages costs there, apart from helping create new jobs.

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Late last month, the government decided to introduce fixed-term employment and bring in parity between contractual and permanent labourers in terms of wages and other incentives. It also raised the overtime work limits for willing workers to 8 hours per week (which will translate into roughly 100 hours a quarter), against the current 50 hours per quarter. So a garment factory will now have the flexibility to hire contractual workers for a fixed period and get willing workers to do overtime to be able to meet supply commitments, given the highly seasonal nature of export orders.

Last month, the government announced that contribution to the Employees’ Provident Fund (EPF) will be optional for garment sector employees earning less than Rs 15,000 per month. Such a move will leave more money in the hands of workers and help boost rural demand. Moreover, the government decided to bear the entire 12% of the employers’ contribution to the EPF scheme for a certain category of employees, up from 8.33% at present.

The government now aims at creating 10 million new jobs, $30 billion additional exports (over and above textile and garment exports of $40 billion in 2015-16) and investments of Rs 74,000 crore over the next three years.

Analysts say with the government announcing a 24% hike in salary as recommended by the 7th Pay Commission for even low-ranked and unskilled staff, the need for labour reforms across sectors has become greater than ever to enable private players to hire employees with less or limited skills at reasonable costs.

The fixed-term employment concept marks an important step that can potentially be replicated in other industries (for instance automobiles) that have witnessed protests over pay disparity among workers and are struggling under rigid rules for contractual employment.

Archaic labour rules are among reasons behind slower growth rate in garments exports. This resulted in Bangladesh beating India in garment exports in 2003 and Vietnam in 2011. India’s garment exports were to the tune of $17 billion in 2014, trailing Bangladesh’s $29 billion and Vietnam’s $21 billion. India’s overall textiles and garments exports stood almost flat at $40 billion in 2015-16 compared with the previous year.

Despite being the world’s second-largest producer of cotton in 2014, India accounted for just 5.8% and 3.7% of global textile and garment exports, respectively. China maintained a huge margin with share of 35.6% and 38.6%, showed the WTO data. India’s textile and garments sector employ around 32 million people, the largest jobs provider after agriculture.

According to a recent World Bank report, a potential 10% rise in apparel prices in China could help India create at least 1.2 million new jobs in its garment industry. Women are going to benefit the most, as every 1% increase in wages could raise the probability of them entering the labour force by 18.9% in India and other south Asian countries, the report said.

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