Peace at Manesar: Temporary or permanent?

The announcement by Maruti Suzuki to resume production next week after about a month of a bitter acrimony between the management and its workers is bound to bring all round smiles but are these there to stay forever?

Updated: Aug 17, 2012, 13:45 PM IST

Ajay Vaishnav / Zee Research Group

The announcement by Maruti Suzuki to resume production next week after about a month of a bitter acrimony between the management and its workers is bound to bring all round smiles but are these there to stay forever?

While both the warring factions have been under tremendous pressure to restore normalcy with the fight putting a big question mark globally over brand India, a stable and durable resolution to labour unrest in India’s manufacturing sector in general and automobile sector in particular appears nowhere on the horizon.

Maruti Suzuki’s Manesar plant has been under lockout since July 18 when a deadly riot involving the workers and management left a senior HR manager dead and many others severely injured. On August 16 (Thursday), India’s largest car-maker announced its decision to resume production at the plant from next week while sacking as many as 500 workers for their involvement in the July 18 violence at the plant on the basis of police charge-sheet against them. Maruti also promised to look into the concerns of contractual workers – the major cause for discontent and violence at Manesar.

It is tempting to read the resumption as a ‘sign of peace’ in one of India’s manufacturing hub. But, aren’t we rushing into peace and still ignoring the fundamental issue of labour reforms? In fact, like on earlier occasions, peace could be deceptive and transient. Take for instance, the immediate trigger for July 18 violence was an alleged disagreement between the management and workers over reinstatement of a suspended colleague. But there were ominous signs of discontent piling up at the Manesar plant.

Unlike Gurgaon plant which has seen only one instance of workers’ strike in 2000, Manesar had experienced three labour strikes in 2011 alone. The Manesar workers’ demands have ranged from giving recognition to a union of their own to parity in wages between the permanent and contract workers. The latter have outnumbered their permanent counterparts. To further complicate matters, they are being paid much less than a regular Maruti Suzuki worker despite putting in same amount of labour and hours.

To begin with, it would be too simplistic to see the violence as a routine law and order problem. While the killers of the HR manager cannot be condoned and must be brought to book, the violence itself cannot be separated from the larger issue of casualisation of workers in the manufacturing sector especially automobile companies. In recent years, there has been a stupendous growth in the informal sector and casualisation of workforce. At present, 31.7 percent of employed workforce comes under the category of casual labourers while only 19.7 constitute wage or salary earners. The rest – 48.6 percent – are self-employed. These figures are based on the Report on Second Annual Employment & Unemployment Survey (2011-12) conducted by the Labour Bureau.

One key argument against casualisation of workforce is that it is seen as an indicator of deteriorating job quality of the urban workforce. The contrary point of view suggests that given that a company like Maruti essentially assembles the car at its plants while majority of the parts manufacturing is outsourced to vendors hence the quantum of causal employment was bound to be high. This would apply by and large to other auto companies as well.

Casual workers are not only paid less but the disparity in wages between contract labourers versus permanent could run as high as 50 percent. On top of it, they are often the first to bear the brunt of a slowdown. At the lower levels, contract workers suffer due to absence of standard rules and benchmarks covering their employment benefits. They are often terminated without benefits and to the whims of management. What is grossly unfair to workers is that casualisation creates a sense of insecurity and reduces collective bargaining of the workers including of permanent workers.

Not surprisingly, greater casualisation of workers is fuelling labour discontent across the country. The recent violence at Maruti Suzuki’s Manesar plant in Haryana and previously in several other automobile companies is directly related to how companies are hiring their staff. According to media reports, Maruti’s Manesar plant has 2800 contract workers against 3000 permanent. While permanent workers get a minimum Rs 23,000 per month, those on contract are paid only Rs 9,500. The disparity is the root cause of most of Maruti’s problems.

Not only automobile companies, the trend is fast gaining currency in other manufacturing sectors. More and more companies are now creating non-traditional employment structures to circumvent labour laws and regulations. New employment categories such as part-time, casual and contract labour have come in vogue to overcome stringent rules and regulations that come attached with permanent contracts. According to the TeamLease Temp Salary Primer 2011, India has an estimated 90 million temp workforce, of which about 500,000 are engaged by the organised sector. That the trend is growing is evident from the fact that the Indian temp staffing industry has added close to 75,000 jobs in 2010-11 alone.

The reason for growth in contract labour is clearly a post-liberalisation phenomenon. Globalisation has brought changes in the employment structure throughout the world. It is argued that the need to effectively compete in a globalised market requires operational flexibility whether it is related to capital, labour or rules. These variables must enhance and not impede business’ growth in a dynamic work environment. Labour especially in a stringent regulatory framework can not only deter foreign investors but may put domestic companies at a disadvantage. Thus the clarion calls for making the labour market more investment and employer friendly or to put it simply ‘hire and fire’ policy.

Not surprisingly, the trend of engaging labour on contract is fast gaining currency in India as well. It is increasingly being used to engage workers from both higher and lower end of the spectrum and has definitely helped the management to engage talent and meet cyclical shortfall. Not only it provides operational flexibility to companies, but also serves as an effective tool to circumvent labour laws and trade unionism. While the concept of labour contracts ranging from two to 18 months allowing manoeuvring room to employers isn’t bad in itself, the contradictory nature of Indian labour market thwarts attempts to reap maximum dividends from the arrangement.

Indian labour market is at the crossroads. It should either reform or fall into greater abyss. At present, it is swerving between two extremes, like most things Indian. While one extreme is defined by rigid labour laws backed by stringent regulatory framework and militant trade unionism, the other is characterised by a vast informal sector. The latter is governed by vaguely defined multiple set of laws promising a lot but giving little organised access to safety measures. Both need to be reformed and urgently. There is a need to impart greater flexibility to the organised labour market while greater clarity in laws and strengthening of social security and welfare net is required in the unorganised sector.

Labour reforms is a long-pending issue and yet another symptom of policy paralysis that has engulfed the wider polity. Unless our political class shows greater resolve and will to carry forward reforms agenda including in the labour market, there is every possibility that whatever progress India has made in past two decades would be lost. Given labour is a crucial factor of production for India Inc., they must shirk their casual approach towards the issue and lobby with political class to expedite reforms. For starters, they should initiate labour reforms internally without waiting for policy intervention.

(With research inputs from Rashi Aditi Ghosh and Siddharth Tak)