Trade Union Act is a bane of Indian industry

While politicians have ostensibly claimed to extend such support to safeguard the well being of workers, many a time this has proved to be their ruin, with factories shutting down after incurring irreparable losses because of suspension of work by unions.
The Indian scenario is no different, with trade unions openly affiliated to major political parties that act as benefactors, promising to protect the interests of labourers. Such affiliations have spelt serious trouble for many factories, at times leading to permanent closure, injuring both employees and the local economy it supports.

A classic example of such political intervention in industrial disputes leading to closure of firms is the Jute Industry in West Bengal in the 1970’s and 80’s. The erstwhile profit making jute industry was reduced to severe losses by the CITU which enjoyed unconditional support of the ruling party in the state.
Not only did the jute industry face such a fate, but so did many other industries like Heavy Engineering, falling prey to the pressure exerted by their respective unions.
The result is evident on West Bengal’s economy currently facing an uphill task in luring new manufacturing units to set up shop in its domain.
The situation is not unique to West Bengal. Prolonged labour unrest during the same period of 1970’s and 80’s virtually wiped out the Cotton Textile Industry in Maharashtra.

Unfortunately, this situation of expectation of political parties and government to redress grievances has stemmed from a culture of Welfare State where the government and ruling political party pledges to establish a socialist pattern of society, viewing the labour class as perpetually oppressed by the business community.

The Trade Union Act of 1926 grants the right to form a union and negotiate wages and fringe benefits which can lead to increase in cost and lower competitiveness.
While fair wages and healthy working conditions are a prerequisite for a good industry, protests in the form of stoppage of production can backfire on the workers by reducing revenue of the business unit, prompting cost cutting measures like lay offs.

In countries like Japan and Germany, discontent with the management is evinced through protests during lunch hour, wearing black badges, increasing production. Production in the factory is never stopped. While the scene is diametrically opposite in the Indian industry, lately, employees are exploring possibilities of forming unions even in the IT sector and export processing zones where Indian laws do not permit unions.

 Here, the Industrial Disputes Act 1947 is invoked to circumvent the non-provision of unions.

Currently, the prevalence of such unions in these sectors is either insignificant or non-existent in most cases. However, if a union is formed, it can have serious repercussions on the foreign investment front as well as in the export earnings of the EPZs.

Surprisingly, public utilities and public services such as hospitals have the provision to form unions and stop work on prior notice. The consequences of such strikes need no explanation. The recent strike by Jet Airways pilots is a case in point where the public was put to acute inconvenience. Incidentally, in this case, the law barring a formal strike was not broken with all the pilots reporting sick.

Interestingly, the management was powerless to take action against the erring pilots as technically the incident cannot be termed as a strike because of mass sick leave.
Added to this are the Indian labour laws, rated amongst the most rigid by the World Bank, with strict limits on who can be hired and how they can be fired. While rigid labour laws prevent weeding out of erring employees, interference of political parties and leaders into the working of industries through trade unions compound the woes of industry.  The recent Rico Auto Industries Ltd is a case in point. With over 3,000 workers, this factory faces a locked out situation with a political leader supporting the union. A matter that should have been resolved between the union, management and state labour department, now stands at loggerheads, with the political factor entering the scene.   With industries currently surviving on thin margins, it can be suicidal for trade unions to shut down work to redress grievances.
What is urgently needed is a re-look on our vintage labour laws and a change in attitude of unions where grievances are not voiced through stoppage of work. Most importantly, interference by political parties and leaders need to be arrested if any positive change in the attitude of unions is to come about.
(The writer is Head Regulatory, TeamLease Services P Ltd.)