Manesar red alert

Savage attack on managers at Maruti plant highlights need for urgent reform of archaic labour laws

The khap panchayat is no longer the only institution Haryana needs to be urgently concerned about. The state, which projects itself as an attractive investment destination, is fast acquiring a reputation for violent labour unrest. There have been at least five outbreaks in recent years, the most significant being the strike at Hero Honda in 2005. Last week, there was a savage attack on managers at Maruti's Manesar plant, with one senior manager brutally beaten up and left to die in a flaming office. Now, with Maruti's scrip sliding in response to the incident, foreign investors may be wary about sinking their money into a state offering insufficient protection.

But violent labour unrest is not just Haryana's problem. It must be addressed nationally. India has developed a strong trade union movement but it has insufficient legal safeguards against unreasonable and militant trade union activity, which is harming the formal sector and discouraging investment. Within two decades of Independence, agitations had severely damaged Maharashtra's textiles industry, and wiped out heavy industries and jute mills in West Bengal. This is because labour laws had excessively valorised labour's right to employment over the entrepreneur's right to security, both personal and fiscal. Today, almost 200 Central and state laws impinge on labour relations and markets including the archaic Industrial Disputes Act of 1947.

Dispute resolution is painfully slow, with tens of thousands of cases pending for years. Besides, as economists have pointed out, laws governing labour markets were written simplistically. Rigid strictures on hiring and firing protected jobs without regard for the implications for productivity, or the strategies that entrepreneurs would use to get around them. Because of this lack of perspective, the formal sector has grown to only a fraction of its potential while the unorganised sector has burgeoned, though it offers no protection to labour or employers. Incidents like the one at Manesar are local red alerts. But the government should recognise that they indicate a structural sickness which must be solved nationally.

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