Indian Labour Conference 2010: Contract Labour need a better deal

The 43rd session of the Indian Labour Conference, which concluded in New Delhi recently deliberated on issues like global financial downturn and its impact on employment and measures to protect the labour force. It had also focussed on the problems of contract labour, social security, employment generation and skill development. The thrust of the conference was "a united step in true spirit of tripartitism towards better industrial relations and welfare of labour force."

The history of Indian Labour Conference dates back to 23, Nov 1944, a forum set up by the Ministry of Labour &n Employment for tripartite consultation amongst social partners--workers, employers and government at various levels, on issues relating to labour. It is also referred to as "Labour Parliament of India." The latest session was held under the chairmanship of Shri.Mallikarjun Kharg, Union Minister of Labour and Employment.

The conference was inaugurated by Prime Minister Dr.Manmohan Singh. Senior level representatives of the stake-holders participated in the deliberations of the two day conference. A press-release issued by the Press Information Bureau(http://pib.nic.in/release/release.asp?relid=67422) quoted Mr.Mallikarjun Kharge, Union Minister of Labour & Employment as having emphasised that we have to make our millions productive and ensure some form of social security net to them. It further added that deliberations by the Conference provided new ideas in the areas related to economic slowdown, contract labour and skills to help the government's efforts in working towards improving the conditions of workers in all sectors.

The Conference Committee on 'Problems of Contract Labour, Social Security, Wages and Amendments in the Contract Labour Legislation recognised the pressing need to protect the interests of the contract workers. A Tripartite Group was constituted by the 42nd Conference to suggest amendments to the Act. The report submitted by the Group was deliberated upon.

The Committee after a detailed discussion, passed the following resolutions, unanimously:(1)All efforts should be made to ensure that the existing provisions of the Contract Labour(Regulation and Abolition)Act, 1970 and Rules made there under are implemented in letter and spirit;(2)The labour enforcement machinery in the Centre and States should be strengthened by providing requisite manpower and other logistic facilities so as to ensure effective implementation of labour related legislation.(3) State are mandated to constitute Tripartite State Advisory Boards under the Act. However, it was pointed out that a number of States do not have such Boards constituted. It was unanimously resolved that such States should be asked to constitute such Boards under the Act at the earliest;(4)Payments should be made to the contract workers through banks. Necessary amendments should be made in the Act/Rules.

The following proposals were also considered by the Group:(1) In case where the contract labour perform the same or similar kind of work as the workmen, directly appointed by the Princial Employer, the wage rates, holidays, hours of work, social security and other conditions of service of contract labour shall be the same as are available to the workmen on the rolls of the Principal Employer. This provision exists substantially under the existing Rules. This needs to be incorporated in the principal Act;(2) The threshold limit of 20 workers for applicability of the Act should be dispensed with.

The proposals were supported by the workers' representatives as well as those from the State Governments. However, the representatives of the Employers did not agree with regard to both the proposals on the basis of the documents submitted by them. A suggestion was also given by the Workers' Group that in the even of abolition of contract labour under section 10(2) of the Act, the workers should be absorbed/regularised. This was agreed to by the State Governments but disagreed by the Employers' Group.

The Conference Committee on Global Financial Downturn--its impact - Job losses - Comprehensive Package for Protection of Labour Force etc was of the unanimous view that the recommendations made in the 42nd ILC session including short-term and long-term strategies should be followed more vigorously particularly in areas of:(1) strict implementation of labour laws on lay-offs, retrenchment, job losses, closure etc;(2) broad-based social security including unemployment insurance should be devised; (3) the availability of credit at concessional rate of interest to micro, small and medium enterprises besides traditional and export oriented industries by banks/financial institutions; (4) consideration of Urban Employment Guarantee Scheme; (5) statutory fixation of National Floor level minimum wage to cover all employments; (6) extending employment guarantee from 100 days to 200 days.

The Conference Committee on Employment Generation and Skill Development recommended that "for employment generation, agriculture sector should be given more importance. Agriculture based industries and cold storage should be set up at village levels. More industries and skill training centres should be set up in rural areas so that people don't migrate to cities."

India is a country of more than a billion people (1027 million as in 2001). A major part of this population is mainly dependent on agriculture, while the total labour force is estimated to be around 340 million (as per 2001 census). Further, out of the total labour force, only 29 million or 8.5 per cent are employed in the organised sector, rural areas account for about 270 million (79 per cent), whereas almost 93 million (27 per cent) are engaged in industries as contract workers. About 92 per cent of the workforce is employed in the unorganised sector that contributes 65 per cent value to the country's economy.

"There is gross violation of existing labour laws and contract workers are not even being paid minimum wages," said Dipankar Mukherjee, secretary, Centre of Indian Trade Unions (CITU), in a recent press statement.

Employers, on the other hand, maintain that giving privileges to contract labour could act as a disincentive to the industry to employ. "We do not want a situation where the industry is forced to go in for increased mechanisation," an industry representative said on conditions on anonymity as he is part of the discussion process initiated by the government on changing the law.

Shri Harish Rawat, Union Minister of State for Labour and Employment recently stressed the need to arrive at a consensus between the workers’ organizations and the employers’ associations with regard to use of contract labour so that Government can focus on regulation of contract labour which is a part of India’s massive unorganized labour who are more vulnerable to exploitation.

Third Party Administrator's Role in Health Insurance

Ernakulam Insurance Institute recently(11.12.2010) organized a national seminar on 'Evaluation of TPAs in Health Insurance'. The seminar invited lots of attention in the context of public sector general insurance companies removing leading hospitals in metros from Preferred Provider Network(PPN) list, for fraudulent practices like inflating hospital bills.

Mr.P.J.Joseph, General Manager, United India Insurance Co. Chennai, who was the key speaker, observed that a comparison of prices charged by metro hospitals with Central Government Health Scheme(CGHS) governed major hospitals showed huge variations. For example CGHS charges just Rs.15,000 for a caesarean delivery compared with Rs.1,35,000 charged by leading hospitals. He said, the data collated by the insurance companies revealed that a majority of the tertiary-plus-care hospitals in the country have formed a cartel and are stoking medical inflation.

While health-care costs have been rising, health insurance premium rates haven't risen at the same pace. This situation leads to a bleeding health insurance portfolio of the insurance companies. General insurance companies have a claim ratio of around 140 per cent on health business, which means that for every Rs.100 earned, insurance companies spend Rs.140 to service service the claims, Mr.Joseph said. General insurance companies garnered more than Rs.8,000 crores during the financial year 2010 as health insurance premium.

The Third Party Administrators-Heal Services(TPAs) was introduced in health insurance as part of the reforms in insurance sector by special notification of the IRDA, in 2001. TPAs are mandated to perform functions like arranging cashless claim service, speedy and effective claim processing, controlling claims cost, reducing incurred claims ratio etc by use of special expertise.

Dr.George E Thomas, Secretary(General Insurance), Insurance Institute of India, Mumbai, in his presentation explained that a Committee under Regulation 23 of the IRDA(TPA) Regulations, 2001, was constituted with the terms of reference such as:1)To examine the role of TPAs in the current health insurance market scenario and to make suitable recommendations clarifying their utility to the furture growth of the health insurance industry, 2) To evaluate the performance of the TPA system till date, with particular reference to the objectives behind the introduction of the TPA system and specially with regard to the provision of Cashless facilities, data management, timely settlement of claims and reducing claims ratios, 3) To suggest standards of best practices for TPAs, 4) To devise customer service bench marks for TPAs including TAT for ID cards, settlement of claims etc. with optimum and maximum time lines for different process.

Quoting the report Dr.Thomas said the Committee recognized the lack of standards for grievance redressal in the health insurance delivery system and sought to address the same. The core of this task was to keep the process simple for the consumer and also guide him to the right level for the most efficient redressal of his/her grievance. Standardization of discharge protocol is also suggested by the Committee, after consultation with hospitals and TPAs, he said.

Quoting the CAG report No.10 of 2010-11(http://www.cag.gov.in/html/reports/commercial/2010-11_10PA/chap5.pdf), Dr.Thomas pointed out that the cashless settlement has been achieved to the extent of 55 per cent only and cases of delay in issue of ID cards, and claim settlement beyond working days were noticed in respect of 72 per cent of the cases.

CAG report has further recommended:1)To review and introduce a system of payment of service fee with suitable incentive/disincentive differentiating between group and individual policies; 2) To develop a mechanism to evaluate the performance of TPAs on issue of identity cards, settlement of claims on cashless treatment/reimbursement; 3) To strive to achieve standardization of the hospital charges and clinical procedures through negotiation with the service provides to contain cost.

CAG Report has concluded that "the main objective of introduction of TPAs for providing cashless services to the policy holders, remained largely unfulfilled."

In their research paper titled “Third Party Administrators and Health Insurance in India: Perception of Providers and Policyholders” Ramesh Bhat, Sunil Maheshwari and Somen Saha(http://www.iimahd.ernet.in/publications/data/2005-01-02.pdf) of Indian Institute of Management, Ahamedabad, observed that, “General awareness about TPAs existence and services they provide is low. Policyholders relay more on their insurance agents than on the insurance companies or Third Party Administrators.”

Mrs.Ajitha Menon, Senior Manager, TTK Healthcare TPA Pvt. Ltd. highlighted services rendered by TPAs and argued that they performed value-added services in the health insurance industry. Best way to control the cost of hospital treatment is for the insurance companies to set limits for specific treatment, Mrs.Menon said. The New India Assurance Co. recently, set the limit for cataract surgery and is accepted by most hospitals. Mr.Sharad Shrivastava Secretary General, Insurance Institute of India, Mumbai, highlighted the efforts of the Institute in promoting research and education activities, by assisting the regional centers. The Institute has initiated a thorough restructuring of the academic programmes, he said.

Reform Lessons for Indian Labour

Continuing job-loss of workers, violation of labor related laws and disinvestment of shares of public sector units are some of the issues that agitated trade unions around the country for some-time now . These issues have aggravated with liberalization policies pursued by the central and state governments, for the last two decades.

Economic Survey 2008-09 and Union Budget 2009-10, demonstrate how the burning issue of job losses--involving retrenchment, layoffs, redundancy--in the time of the global financial crisis and economic slow-down, is perhaps the least understood of the economic, social and political concerns.

“The Global Economic Crisis: Assessing Vulnerability with a Poverty Lens,” counts India among countries that have a “high exposure” to increased risk of poverty due to the global economic downturn.

One of the most significant attack of industry has been on employment tenure. With the decline in tenured employment, came a decline in trade union strength. A major casualty of this resulted in an attack on the right to collective bargaining. Instances of refusal by employers to negotiate with unions, or even recognize unions, chosen by workers, are extensive and range from large Indian corporates to MNCs.

International Labour Organisation’s(ILO) World of Work Report records that from 1990 onwards, wage inequality has risen across the globe including in India. It was also a period when contract employment became the norm. Legislation for abolishment of contract employment stands diluted. Projections by the ILO point to a worsening global unemployment in coming years.

How neo-liberal policies have affected the industrial relations(IR) climate in the country can be had from the gruesome killing of of Lalit Choudhary Cheif Executive Officer and Managing Director of Graziano Transmission India Pvt.Ltd. in September 2008, allegedly by dismissed employees and the more recent murder of the VP--HR of Pricol, Joy George, under similar circumstances in September 2009, and a spate of other IR incidents in many of the manufacturing belts across the country.

The International Trade Union Confederation(ITUC) in its annual survey on violations of trade union rights in India observed that "Barriers to organize trade unions continued in law and practice, and the government maintained strong restrictions on the right to strike. Workers at two garment factories faced a systematic anti-union campaign, while Unilever closed down a factory to remove the union. The government remains committed to a policy of creating greater flexibility in labor law which would be detrimental to workers and their unions."

Under the 2001 Trade Unions Act, a union has to represent a minimum of 100 workers--which is excessive by international standards--or ten per cent of the workforce, whichever is less. The act also sets limits on the number of "outsiders" (those not employed at the enterprise) allowed to sit on a union executive and requires unions to submit their accounts for auditing.

Under the 1947 Industrial Disputes Act(IDA), industry workers in public utilities have to announce a strike at least 14 days in advance. Workers in the banking industry have to give five six months' notice before going on strike. The industry has been declared a public utility under the IDA. The Essential Services Maintenance Act(ESMA) enables the government to ban strikes and demand conciliation or arbitration in certain "essential" industries. The Central Civil Services(Conduct)Rule, 1964, stipulates that no government servant shall resort to, or in any way abet, any form of strike.

The ITUC survey has pointed out that the government has aimed for a number of years to create a more flexible labor market in which employers could hire and fire employees at will and easily hire workers on contracts. The Ministry of Labor drafted amendments to the labor laws in 2003, and in 2005, developed a policy proposal entitled "Making Labor Markets Flexible " to explain its initiative. The Ministry also recommended that export oriented activities, including those in special economic zones, and support services for those zones, should be on the list, which would make contract labour available for these sectors. The proposal to raise the threshold(from 100 workers to 300 workers) of the size of enterprises that do not need government permission to lay off workers, also invited strident opposition of India's trade unions.

Investigations by labor rights organizations based in Bangalore, discovered a pattern of systematic and grave abuses of workers' rights at two ready-made garments exports units. Workers were not allowed to form unions, and were intimated to prevent them from engaging in any collective activity to stand up for their rights. In clear contravention of the labor laws, workers were employed without written contracts. In response to these abuses, international campaigners led by Clean Clothes Campaign and its Netherlands national affiliate, raised concerns with European and North American brands. The factories set up a management-run grievance committee but refused to recognize the workers rights to freely associate with unions or other groups to seek assistance.

New employment sectors such as call centers, the visual media and telecommunications are not covered by any explicit employment regulations and employers obstruct the formation of unions. High level of casual employment were built into the structure of the call centre/business process outsourcing(BPO) industry, affecting many of the approximately 400000 of these workers in India, and making it difficult for them to organize.

Even governments are resorting to use of contract labor. In 2004, the government of Tamil Nadu ordered its health department to recruit personnel, other than doctors, on a contract basis through private agencies. The government also refused to recognize or negotiate with unions of government employees and teachers.

Globalization and economic liberalization have created a climate in which there is further pressure to dilute labor standards, in particular labor inspection and the enforcement of labor legislation. For example, the Haryana State government created a "State Labor Policy 2006" to reform the way that the State Government enforces labor laws. The State now forbids more than one labor inspection per factory per year.

In May 2006, the government of Maharashtra State introduced a new policy applicable to EPZs in the state that allows industries and/or export oriented units to employ certain categories of services on a perpetual contract basis. The regulation supplants the law that currently prohibits industries from retaining employees under 'temporary' category beyond 240 days(after which such employees can claim the rights of permanent employees) in the EPZs.

By forming the Indian Labor Conference, the State Labor Ministers Conference and the Standing Labor Committee, the country recognized that the workers in the organized and unorganized sectors can only achieve the right to work and the rights at work, along with the right to organize and agitate, if positive conditions are created together by the State and the employers. The Union Minister of Labor and Employment Mallikarjun Kharge, and the Minister of State Harish Rawat, both had to mention the inevitability of contract labor in their speeches, at a forum(February 2010 New Delhi meet) which is primarily meant for the defense and expansion of labor rights is unfortunate.