Minimum wage debate engulfs embattled garments industry

As the minimum wage debate is heating up in Bengaluru, the garments industry, that is already reeling under heavy imports and lower production, seems to be gasping for government intervention, and a final resolve.

With a contraction of 10-15% in sales and more than 20 factories shutting in Bommanahalli on the outskirts of Bengaluru within the last six months, the slowdown has gripped the industry. The promoters of garments factories, alongside, are keen on suppressing the call for a 45% hike in the minimum wage, which they claim would further their woes. The protest organised by the Garment and Textile Workers Union (GATWU) on September 12, however, suggests that workers and unions are on the combative road, and do not plan to meander. 

Of the 1,031 registered garments factories in Karnataka, 902 are in Bengaluru's urban and rural districts. The industry, which employs 3,53,943 people currently, 2,45,891 of them being women, accounts for 17% of the state’s total employment in factories. 

The big players sail through by moving their factories to semi-rural areas or more economical regions like Bangladesh and Vietnam, the small ones are afraid they might have to shut down. 

Sajjan Raj Mehta, Chairman, Taxation Committee, Karnataka Hosiery and Garment Association (KHAGAS), says, for a factory to close, they need to give notice before three months. “The situation is not that severe as the industry is banking on Diwali, but if it does not help the growth, we will see an acute closure situation.”

He also points out that the opening of new garments outlets has completely stopped in Bengaluru. 

According to the owner of a garments factory in the city, the production capacity of the company is around 1.5 lakh pieces per month, but they are getting orders for only 60,000-70,000 pieces. Five years ago, the company was making a profit of Rs 4-5 crore per year, however, now it’s been reduced to nil.

“We are laying-off all employees for 2-3 days every month. The government may increase wages, but they should amend laws for the management as well. As the buyer is not willing to pay, we need to produce at the lowest rate, owing to increased competition. The big players set-up their factories in Bangladesh and import duty-free, we cannot afford that. If this continues, I might have to shut the factory as well,” the owner says.

The industry front-runners like Shahi Exports, K Mohan and Companies Exports have subsidiary companies in Bangladesh. 

Industry experts say that things will only get worse as India is not competent enough when compared to the other developing countries of the world, which are either giving better incentives or have a lower cost of production.

Clothing Manufacturing Association of India (CMAI) has been pointing it out to the government that it is the free trade agreements (FTAs) with countries like Bangladesh that’s hurting the industry. The import of readymade garments from Bangladesh has been growing at 50-80% per year. Current imports are close to about $375-$400 million. It is the trend and the rate of growth which is alarming. If this continues, the imports, just from Bangladesh, will reach $3.6 billion by 2025. 

Rahul Mehta, President, CMAI, says, “Low-cost imports from countries like Vietnam and Bangladesh are worrying because that is impacting the smaller players of the industry and 80% of the industry is still in the MSME sector.” 

Mehta says, the demonetisation and GST did put a break to the 60-70% cash-based industry, but it is for the first time in 15 years that he is witnessing no growth.

Mehta also explains that the FTAs with Bangladesh are encouraging duty-free imports of Chinese fabrics, with Bangladesh importing duty-free fabrics from China, adding value, and exporting duty-free to India. With Sri Lanka, India has a duty free agreement, but only up to 8 million pieces. Such regulations, says Mehta, seem to be the pertinent course of action. 

The wage war

According to the Minimum Wages Act (1948), the minimum wage rate needs to be revised within a period of five years. The last revision, in Karnataka, happened in 2014 when around Rs 8,000 was fixed.

In February 2018, the government issued 3 final notifications and one draft notification, fixing the minimum wage at Rs 11,580 per month, a steep rise of almost 45% for the unskilled category in Zone 3. It, however, withdrew the notifications after the managements approached the government.

The unions in Bengaluru filed a writ petition against the government in the High court. The verdict concluded that the government has the right to withdraw the notifications, but it should put out the revised notification within six months.

Satyanand M, Secretary, All India Trade Union Congress (AITUC), Bengaluru, told DH, that in the latest meeting of the tripartite committee, which has the power to recommend minimum wages to the government, held on September 5, the government and the employers’ representative outvoted the union representatives, and recommended the minimum wage of Rs 8,880, offering a 9% revision.

Satyanand called it “unholy collusion”, saying the government intervention should be on behalf of the vulnerable section of the society. Referring to the Workmen vs Repkatos Brett SC judgment, Satyanand said, “The Supreme Court in its judgment has made clear that the profitability or the viability of the industry are not questions relevant to minimum wages.”

“The other scheduled employment workers are getting a minimum wage of Rs 11,580. We are not asking for anything more but that which is scientifically concluded to be appropriate,” says K R Jayaram, Vice President, GAWTU.