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Missed reform Bills face the prospect
December, 19th 2009

The Lok Sabha was adjourned sine die on Friday, a day ahead of schedule, after the Opposition walked out in protest against the government determination to clear seven legislations without any discussion.

Political one-upmanship aside, the end of the winter session raises doubts about the ruling coalitions commitment to financial sector and labour law reforms as laid down in President Pratibha Patils inaugural address to the Lok Sabha and reiterated several times by Prime Minister Manmohan Singh. Finance minister Pranab Mukherjee had even said that reforms in the labour and financial sectors hold the key to returning to 9% growth.

But their actions dont match their words and some of the missed reform opportunities in this session will most likely have to wait till 2010 monsoon sessionwith the Budget session largely focused on getting the Finance Bill cleared.

The Bill to amend the State Bank of India Act, so that the countrys largest bank can merge with its subsidiaries, was cleared on Friday, but a much more important bill that has been hanging fire from 2004the Pension Fund and Regulatory Development Authority Billwas kept off Parliaments list of business.

My government will bring legislation to establish a regulator for the pension sector, the President had said. The Bill was high on the finance ministrys priority list for the winter session, but wasnt listed or introduced by Mukherjee despite a nod from the Cabinet. UPA-I had refrained from pushing the law, thanks to tough posturing from its Left allies. And the communists exit from the coalition was expected to pave a smoother path for reforms.

But the fate of a simple labour law amendment Bill to encourage smaller enterprises to hire more workers and file their compliance reports electronically indicates that the UPA hasnt put its fear of the Left behind. Unlike the PFRDA Bill, the labour reform bill was cleared by the Cabinet and listed for introduction in the Rajya Sabha seven times, including on Friday.

The Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Amendment and Miscellaneous Provisions Bill of 2005, according to a senior government official, is peanuts compared to the bigger changes needed in Indias labour legislations.

While the original 1988 law allows small industries with up to 19 employees to use a single compliance form for nine laws, the labour ministry has been seeking to bring more firms under this to boost job creation. The amendment Bill increases the number of labour laws for which a single return can be filed to 16, and allows firms hiring up to 40 workers to use the simpler compliance regime.

With 95% of new employment being created in small and medium enterprises, the Prime Minister-appointed Task Force on Micro, Small and Medium Enterprises was recently assured by the government that the Bill would be cleared in Parliament. Planning Commission member Arun Maira, who is part of the task force, told FE recently that labour law reforms and simpler compliance processes are more important for smaller firms.

But on the first day it was listed in the Upper House, labour and employment minister Mallikarjun Kharge was forced to backtrack as Left MPs cornered Congress leaders in Parliaments Central Hall and warned them against introducing the Bill. UPA-Is labour minister Oscar Fernandes had also backed out of tabling the Bill for the same reasons, when it was listed last in 2007but then the Left could topple the government.

The Left parties said that the Bill is anti-labour. But rather, it is pro-labour as it will encourage firms to hire more employees without worrying about the increase in compliance paperwork and costs. The Left wants us to expand social security coverage to firms employing 10 to 19 workers, but it doesnt want firms to grow and hire more than 19 workers so that they automatically get PF benefits. How does one reason with such obstinacy? a senior government official lamented.

While the governments dithering on reforms reflects poorly on the collective responsibility of the

Cabinet and its decisions, it also means that bigger reforms being worked out----like changes to the Factories Act, Industrial Disputes Act, Contract Labour Act, etccould be stillborn.

The UPAs hesitation in this session may have stemmed from its lack of a majority in the Upper House and the fear that the Bhartiya Janata Pary may gang up against it with the Left. And a BJP MP did hint that to the government as much.

With just 80-odd seats in the Rajya Sabha, the government will need the BJPs support to get key reform bills cleared, and the tabling of the Liberhan report in this session didnt make it the best time to seek them out.

Ironically, work on the labour reform Bill had been initiated under the NDA regime when late labour minister Saheb Singh Verma decided to act on the recommendations of two high-level panels, including the National Commission on Labour.

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