Govt proposes single labour law for MSME sector

Despite its contribution to the country's economy, the sector is disorganised largely due to lack of uniformity of laws across states

There is a proposal for a single labour law for the entire micro, small and medium (MSME) sector to enhance its competitiveness and improve work culture.

The ministry of labour is preparing single law by merging all other existing labour laws regulating the sector in consultation with the MSME ministry. According to official sources, MSMEs contribute eight per cent of the country’s GDP, 45 per cent of the manufactured output and 40 per cent of its exports. However, the MSME sector is labour-intensive and highly disorganised, and different labour laws prevalent in different states have made the sector more scattered and difficult to regulate.

While this decision has already been taken, views have been sought from states as stakeholders.

Some of the issues under active consideration are  registration of MSME, simplification of penal provisions in the labour laws for the small scale sector, clubbing of laws in groups and removing multiple of provisions in different laws. Another proposal is to move from a regulatory system to an incentive-based system  for implementation of labour laws.
 
If a scheme is launched for the sector, its implementation gets affected by the different laws prevalent in each state. While the sector is quite export-oriented, the products hit many non-tariff barriers in importing countries due to labour law issues, which pulls down the overall export competitiveness of the country. MSMEs make a wide range of goods that are both, sold at home and exported, but with teh implementation of the WTO regime, they now have to deal with the prospect of removal of protectionist measures such as reservation for small scale.

The challenge here is to provide grassroot and affordable technologies and ensure at least primary processing at the village or cluster level, in order to add value and reduce the costs of logistics, said an official source.
 
Meanwhile, in its bid to accelerate the labour reforms process, the government introduced two bills in the Lok Sabha last week seeking to revamp archaic labour laws with proposals aimed at jobs and expanding manufacturing. The Factories (Amendment) Bill, 2014, and the Apprentices (Amendment) Bill, 2014, seek to amend laws that came into force in 1948 and 1961, respectively. Once passed, they are expected to make it easier to do business in India, with provisions to allow flexibility in both hiring and working hours.