COMMENTARY

Deregulation and the Fading

Labour Agenda
Evidence from Transnational
Automobile Companies in India
Sobin George

The report of the International

Commission for Labor Rights on
the precarious workers in the
automobile companies in Chennai
reminds us of the inferior state of
labour in Indian industry. While
India is already in for a second
round of labour law reforms, it is
important to discuss the nature of
the employment that the citizens
are offered, often at the cost of
their fundamental rights.

Sobin George (sobing@gmail.com) is with the

Centre for Study of Social Change and
Development, Institute for Social and
Economic Change, Bengaluru.
Economic & Political Weekly

EPW

november 15, 2014

he initial phase of labour market

deregulation in India subsequent
to the trade policy reform project
made labour laws considerably flexible
to facilitate trade and investments (Nath
1994; Despande and Despande 1998).
Among others, it enabled the widespread use of contract employment in
organised sectors and registered enterprises, including public sector, and dismantled provisions of retrenchment under
the Industrial Disputes Act. It also provided exemptions in the Special Economic Zone Act, 2005 by overpowering
the provisions of the Trade Unions Act,
Industrial Disputes Act, Minimum Wages
Act, etc, to facilitate special economic
zones.1 As Prime Minister, Narendra Modi
vehemently reiterates in his speeches
inside and outside India, the country is
now prepared to make its labour laws
more flexible to advance the agenda of
deregulation to ensure a better investment climate.
However, the question is what should
be the nature of employment that the
state is asking its citizens to take up? The
report Shiny Cars: Shattered Dreams by
the International Commission for Labor
Rights (ICLR) on the precarious workers
in the automobile companies in Chennai
(Gopalakrishnan and Mirer 2014) documents the nature of the employment that
is available. As the report details, these
jobs are highly precarious and contractual, involve long hours with compulsory
overtime and are absent of fundamental
rights and other rights of workers such as
minimum wages and freedom of association. Such accounts of labour rights violations are not surprising from those
parts of the world that have embarked
on the neo-liberal path. The purpose of
this discussion here, therefore, is not to
vol xlIX no 46

highlight the pervasive subjugation of labour in a market-oriented regime, but to

spell out the internal contradictions of a
state, which sets the ground for discounting labour in the name of investment and growth by dismantling labour
laws that protect the minimum rights of
workers and yet claims to combine market reforms and inclusiveness as a project of development.
What are the dominant discourses set
by industry, state and other interest
groups that create these contradictions?
How are they propagated and realised?
How do they silence labour space? Are
the existing forms of workers organisations capable of addressing or resisting
the outflow of such ideologies and actions? And finally has the labour question lost significance in the national
agenda of development?
Discourses of Contradictions
One can easily locate the logic of a minimal
state, curtailment of welfare measures
and flexible production in the present
deregulation policies (trade liberalisation,
export promotion and labour market
deregulation) in India. It is also important
to note that labour cost comparison has
become an inevitable component in the
literature of foreign direct investment
and international trade, which provided
a logical as well as moral explanation
for labour market deregulation in the
more imposing language of economic
gains, and economic growth and development. Thus, axioms such as labour cost
advantage, labour productivity, peaceful
industrial climate, and efficiency have
found place in the trade and industrial
policies of several Indian states. For instance, the major thrust of the industrial
policy of the Government of Tamil Nadu
(2003), a state where the ICLR reports
rampant violation of labour rights, is on
creating an investment friendly climate
in the state. The industrial policy of Tamil
Nadu is also persuasive on its easily
available skilled and peace loving labour
force at a cheap cost. The policy says
Tamil Nadu has a peaceful industrial
climate, abundant availability of skilled
and committed workforce and extremely
competitive wage rates that offer substantial cost savings (GOTN 2014: 8).
19

COMMENTARY

Similarly, the Andhra Pradesh industrial

policy has a separate section on deregulation of labour with the subtitle simplification of regulatory framework. It includes self-certification on labour and
factory regulations, maintenance of only
wage and attendance registers, inspections with prior information and public
utility service status for export-oriented
units, which prevents workers from
striking work.2 It is important to note
that the automobile sector enjoys special
status as a priority sector in several
states. Tamil Nadu, apart from tax exemptions and other subsidies under the
industrial policy, provides a 10% rebate
in procuring government land and 50%
concession on stamp duty under the separate automobile and auto part policy,
2014.3 The most important one pertaining to labour relations is the public utility
status given to automobile and auto parts
manufacturing sectors in Tamil Nadu
under the policy, which stop workers
from going on strikes and protests.
Another major source of this discourse is
the investment climate reports regularly
prepared by the World Bank and other
industry organisations. Among others
one of the major indicators of investment friendliness of the World Bank
report for India is the degree of regulation regulation of industrial relation
and business. The report discusses at
length how regulation of industrial relations such as the Industrial Disputes
Act and Contract Labour Act and the
service conditions stated in these Acts
work against investments in India. The
report, for instance, notes that these
provisions in the acts increase the
protraction of insolvency procedures
(World Bank and IFC 2004: 28). The
investment reports by various interest
groups are therefore nothing but, an
indication to the investors to locate the
most labour- and resource-compromising
states vis--vis acquiring easy, free
and subsidised resources such as land,
electricity, water, tax benefits and most
importantly a docile and disciplined
workforce.
Labour unrest is yet another indicator
of investment and business climate in
the official discourses of the state and industry, which again directly refers to
20

regulations. Employers association such

as All India Organisation of Employers
(AIOE) could successfully pursue their
agenda of equating legitimate protests
of workers for their rights as labour
unrest and loss of man-days and income,
partially because of the acceptance of
the theory of efficiency and cost minimisation. For instance, AIOE (2012) estimates that 431 disputes in 2010 resulted
in the loss of 18 million man-days! (The
source of such information as given in
the report is also murky.) Such reports
are also instrumental in creating public
opinion against the legitimate resistance of labour, through media reports
on production loss, man-days loss and
law and order crises. It should be mentioned that the dominant discourse on
the strikes of workers in Maruti, Honda,
Hyundai, Mahindra and Mahindra, and
Toyota was not on the legitimate demand
of workers, but on the loss of income of
the industry.4
However, such discourses are completely silent about the underlying
causes of strikes and protests. It must be
noted that while issues like wage revision
and bonus were causes of strikes earlier,
these are now issues related to precarious
work, service conditions, freedom of
association, contract employment and
wage revision, which are emanating
from the flexibilities of related labour
laws as part of the initial phase of labour
market deregulation.
Organisation and Informality
The major focus of the ICLR report on
automobile and auto component sector is
on precariousness and associated labour
and human rights violations. Precariousness in the auto sector cannot be separated
from the larger agenda of neo-liberal
reforms. Criticisms of the Fordist production organisation, which gained currency
in the welfarist paradigm, were to do
with inflexibilities, huge costs of production due to centralisation, and welfare
provisions for employees. Flexible specialisation, which is an integral component
of the neo-liberal production paradigm
hence focused more on lowering of
production cost, decentralisation of
production and division of work into
core and periphery (George 2014). The
november 15, 2014

obvious option was nothing but informalisation of production by engaging

casual workers who were conveniently
termed temporary workers, apprentices,
trainees, and probationers as the ICLR
report points out in the automobile
companies in Tamil Nadu. Automobile
companies have two levels of core and
periphery divisions.
The first division is based on the production of parts of the vehicle. While the
parent plant produces core parts like engine, gear box and exteriors, other auxiliary parts such as air conditioning, seat,
plugs, wiring, lights, etc, are outsourced.
Though such parts are prepared for the
parent company, the company does not
keep any formal relationship with auto
part suppliers. This helps the parent
company minimise its labour costs. The
second level of division is within the
main assembling unit, where managerial
and highly skilled technical staff constitute the core workforce and the rest are
contract workers. For instance, the ICLR
report says that out of 5,918 workers in
the main factory of Hyundai in Chennai,
1,409 are trainees, 2,269 are apprentices
and 254 are probationers therefore contract workers form as much as 66% of
total workers. Similarly 56% workers in
Renault-Nissan and 43% in Ford are contract employees. The report also highlights that more than 90% of the workers
and in some instances 100% are employed on contract basis in the auto part
manufacturing firms, which are suppliers to these companies. There is also no
significant difference in education, skill
levels, and the nature of work between
workers in the periphery and the permanent workers in the major automobile
companies in Chennai. However, there
were notable differences in their conditions of work, service conditions and
wages, which imply that the underlying
philosophy of this division is the minimisation of the cost of production.
Another important trigger of precariousness is the production techniques
adopted in factories. There were several
studies that linked production systems
and intensification of work in automobile companies in India (Shrouti 2004;
Das and George 2006). While each automobile company has its own unique
vol xlIX no 46

EPW

Economic & Political Weekly

COMMENTARY

production system, the common philosophy is flexible specialisation and defragmentation of production. One of the
important aspects of production in automobile sector is Takt time, which is religiously followed as a strategy for ensuring efficiency. It is a ratio of total available task time to the total demand. Since
the setting of TAKT time is based on
market demand and availability of workers
it often leads to work intensification and
thereby additional shifts and compulsory
overtime for workers. The burden of
TAKT up (increasing TAKT time, if there
is higher market demand) again would
fall on workers in the periphery because
permanent workers are relatively better
protected due to unionisation and provisions of the Factories Act. It should be
noted that in some instances permanent
workers also bear the burden of overwork as reported in the case of workers
at Toyota Kirloskar and Maruti.
Precariousness and Trade Unions
It is true that the trade unions, which
have considerable presence in the automobile sector in India, could not successfully organise casual workers. The reasons are several, ranging from the conventional ones of victimisation by the
employer, legal issues, and difficulty in
establishing employer-employee relationships, to resistance from organised
union workers as they consider contract
workers as potential job takers. The image of a casual worker among the organised workers in general and automobile
sector in particular, irrespective of their
designation such as trainee or apprentice, is that of a bully or defector to
the solidarity of workers due to their
lineage with the management for accepting to work when there is a call to
strike work. The contract workers thus
suffer from the informalities of production and the forced alienation from the
main workers, which makes them voiceless and more vulnerable.
It is in this context of higher levels of
precariousness even in the relatively
better organised sectors like automobiles
that one should look at the ongoing
labour law reforms in India. Though the
proposals of reducing the number of employees for canteen facilities, rest rooms
Economic & Political Weekly

EPW

november 15, 2014

and eligibility for annual leave seem to

be acceptable, most of the amendments
proposed in the Factories Act 1948, the
Apprenticeship Act 1961 and the Labour
Laws 1988, are aimed to further informalise work. For instance, the proposed
amendment to increase overtime work
from 50 hours to 125 would also enable
the employer to come up with practices
of huge compulsory overtime. The proposed amendments in the Apprenticeship Act would allow employers to undertake much of the production with
trainees on a nominal cost of stipend,
thereby significantly reducing employment opportunities. Also, as the ICLR
report shows, a traineeship or apprenticeship does not help workers get permanent employment; conversely one
has to take up employment as a contract
worker in the same company and subsequently be hired again as a trainee in
the same company or elsewhere and the
cycle goes on. The official arguments of
skilling of workers through apprenticeship therefore do not stand.
Conclusions
The above discussion reflects that the
labour agenda is slowly disappearing
from the mainstream state development
discourses. While labour rights occupied
a major position in the election agenda
of political parties during consolidation
of the period of industrialisation, it completely lost importance in the election
manifestos of all national political parties
except the left parties. As Krishan Kumar
(1995) noted, this could be attributed to
the general decline of class-based voting,
which is a core characteristic of postindustrial societies. The ICLR report and
the like, however, remind us to take stock
of labour conditions before rushing to
conclusions that are informed by mainstream industry and state discourses. It is
important to bring investments, promote
industrialisation and generate employment. Nevertheless it is also equally
important for the state to ensure decent
employment for workers, with full citizenship rights as provided under the Constitution. The dominant discourse of industrial groups, informed by neo-liberalism,
sabotaged the labour agenda. Ensuring
decent working conditions is also a moral
vol xlIX no 46

question before the state along with the

agenda of economic growth.
Notes
1

The Special Economic Zone Act, 2005, which is

applicable to all SEZs in the country says any
modifications of any Central Act or any rules or
regulations or schemes, made relating to trade
unions, industrial and labour disputes, welfare
of labour including conditions of work, provident funds, employers liability, workmens
compensation, invalidity and old age pensions
and maternity benefits are not applicable in
any special economic zones.
For details, see Industrial Investment Promotion Policy Andhra Pradesh (2010-15), http://
www.aponline.gov.in/Quick%20Links/Departments/Industries%20and%20Commerce/
RTI%20Act/IIPP_Final2010-15_LB%20(2).pdf
For details see, Tamil Nadu automobile and
auto component policy 2014, http://www.investingintamilnadu.com/tamilnadu/doc/policy/Tamil_Nadu_Automobile_and_auto_
parts_Policy_2014.pdf
Articles appeared in newspapers like Business
Standard. Reporting that during the strike
Maruti had a production loss amounting to Rs 1
billion a day, Honda had a total production loss
of 10 million, Hyundai had a loss of 6.5 million
over two days and Mahindra and Mahindra
32.5 million over 13 days, For details, see
http://www.business-standard.com/article/
companies/major-labour-strikes-that-shookthe-automobile-industry-113041500150_1.html

References
AIOE (2012): Industrial Unrest: Past Trends and
Lessons for Future, http://www.ficci.com/spdocument/20188/Industrial-unrest.pdf
Das, K L and Sobin George (2006): Labour Practices
and Working Conditions in TNCs: The Case of
Toyota Kirloskar in India in Chang (ed.), Labour
in Globalising Asian Corporations: A Portrait of
Struggle, AMRC, Hong Kong, pp 273-302.
Despande, K L and S Despande (1998): Impact of
Liberalisation on Labour Market in India, What
Do Facts from NSSOs 50th Round Show, Economic & Political Weekly, Vol 33, No 22, pp L-31-39.
George, Sobin (2014): Lockout at Toyota Kirloskar:
The Future Space of Labour, Economic &
Political Weekly, Vol 49, No 18, pp 18-20.
Gopalakrishnan, Ramapriya and Jeanne Mirer (2014):
Shiny Cars: Shattered Dreams, International
Commission for Labour Rights (ICLR), New York,
http://www.laborcommission.org/files/uploads/
2Shattered_Dreams_FINAL_website.pdf
GoTN (2014): Tamil Nadu Industrial Policy 2014,
Government of Tamil Nadu, http://foodprocessingindia.co.in/state_pdf/TamilNadu/TN_Industrial_Policy_2014.pdf
Kumar, Krishan (1995): From Post Industrial to Post
Modern Society: New Theories of the Contemporary World (Australia: Blackwell Publishing).
Nath, G B (1994): Flexibility of Labour Market:
Theoretical Approaches and Empirical Evidences from India, Indian Journal of Labour
Economics, Vol 47, No 4, pp 513-21.
Shrouti, Arvind (2004): New Management Strategies
and Automobile Workers in India in Daeoup
Chang and Ed Shepherd (ed.), Automobile
Workers and Industry in Globalising Asia,
AMRC, Hong Kong.
World Bank and IFC (2004): India Investment Climate
and Manufacturing Industry, World Bank and
International Finance Corporation, https://www.
wdronline.worldbank.org/bitstream/handle/1
0986/14378/31210done0IN00ICA01public1.
pdf?sequence=1

21