Govt proposes to include manufacturing sector under Industrial Disputes Act

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Will this move have any significant impact on the manufacturers/employers?

By Srabani Sen

Govt proposes to include manufacturing sector under Industrial Disputes Act

Thursday, September 22, 2012: The Ministry of Labour and Employment has recently proposed the inclusion of the manufacturing sector (in addition to the existing mining sector) under the provisions of Section 25FFF of the Industrial Disputes Act, 1947. Will this move have any significant ramifications on the manufacturers or employers due to additional liability?

Why it is necessary

The National Manufacturing Policy recently formulated by the Government of India aims to accelerate the growth of the manufacturing sector to achieve a share of 25 per cent of the GDP within a decade, and in order to create 100 million additional jobs. The Department of Industrial Policy and Promotion (DIPP), under the Ministry of Commerce and Industry (the ministry piloting the new policy) has suggested certain action points to all concerned ministries and departments including the Ministry of Labour and Employment, for the early implementation of the new policy.

One of the actionable points relating to the Ministry of Labour and Employment is to include the manufacturing sector, in addition to the existing mining sector, under the provisions of Section 25FFF of the Industrial Disputes Act, 1947. But this move requires a formal amendment to the Act, which can be done after tripartite consultations with all the stakeholders.

A positive move?

Under Section 25FFF of the Industrial Disputes Act, 1947, there is a mandatory requirement to pay compensation to workmen in case of closing down the undertaking, equivalent to 15 days’ average pay for every completed year of continuous service, or any part in excess of six months. Section 25FFF (1A) says, “Where an undertaking engaged in mining operations is closed down by reason of exhaustion of the minerals in the area, no workman shall be entitled to any compensation if the employer provides the workman with alternative employment w.e.f. the date of closure at the same remuneration and on the same terms and conditions.”

In the new National Manufacturing Policy, there is a provision of asset deployment by the special purpose vehicle (SPV) set up as a legal entity to administer the national investment and manufacturing zones (NIMZ), which will undertake the role of re-deploying the labour of such units to others in the NMIZ that have a shortage. The re-deployment shall be from the date of closure—at the same remuneration and on the same terms and conditions of service as applicable to the worker immediately before closure, with continuity of service. DIPP has proposed that the existing provisions of section 25FFF (1A), may be extended to the manufacturing sector as well.

According to Vinod Sharma, managing director, Deki Electronics, this is indeed a step in the right direction. “However, its impact on the manufacturers can be properly assessed only after the details come up with the draft guidelines,” he says. Explaining further, Vinod Sharma points out that section 25FFF recognises the fact that like mines, there can be reasons for closure of a unit in the manufacturing sector also. The Act also provides a fair compensation (although debatable) for workers based on years of service.

“Along with an insurance package that can take care of this severance/closure’ compensation, it should be a win-win situation,” he adds.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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