Strike over: Environment must be created for early end to labour disputes

In a welcome development, following successful negotiations between the workers, the company management, and the Tamil Nadu government, the 37-day strike at Samsung Electronics’ manufacturing facility in Sriperumbudur ended this week. The strike was fuelled by workers’ grievances over excessive workloads paired with low wages, strenuous overtime targets, and Samsung’s policy of not recognising their union. The demand for recognition of the Centre of Indian Trade Unions-affiliated Samsung India Workers’ Union (SIWU) was a key friction point between the striking workers and the company’s management, and the matter is now pending before the Madras High Court. Both parties now await the court’s verdict regarding union recognition.

Meanwhile, on a positive note, the company management decided to accept the demand related to wages and working conditions. It is encouraging that the dispute has been resolved amicably and the issue of the worker union is in court. Hopefully, both sides will abide by the court ruling in this regard. However, on a broader level, there is always a risk of industrial disputes escalating as has happened in so many instances in the past. This can affect the image of the country as a manufacturing destination. Trade unionism in the past decades and the nature of Indian labour laws are seen to be one of the fundamental reasons for India’s repeated failure to build a manufacturing base on a global scale. As a result, firms try their best to avoid getting involved in such disputes by either remaining small or distributing production across multiple plants.

Recent research by economist Arvind Subramanian and others has shown that manufacturing firms choose to distribute their workforce across multiple factories in the same state — or “multi-plants” — rather than scale up a single plant. This has meant that Indian manufacturing has not been able to leverage efficiencies arising out of economies of scale and has also lost out on competitiveness and export performance. Besides, contract labour has increased sharply in manufacturing plants, and they do not possess enough collective bargaining power to organise themselves and participate in strikes. Thus, having multiple plants with fewer workers and recourse to contract labour endow firms with greater flexibility to respond to economic or political shocks. In this case, contract workers, who make up a significant portion of the Sriperumbudur plant’s workforce of around 5,000, were not part of the strike.

It is well known that industrial disputes can scare away potential investment. This could be particularly damaging at this stage, when India is aiming to benefit from the China-plus-one strategy of large multinational corporations. It is thus important that differences among workers and management are amicably resolved. The state concerned and the Union government will also have to play an active role in ensuring that expectations from workers are reasonable and they are adequately compensated. In this context, reforming India’s labour laws will be necessary. The Union government has done well to simplify labour laws and put them in four codes. However, they are still awaiting implementation. They must be taken forward with consensus building with states. To build a global manufacturing base, which is desirable, India will need to build large-scale production facilities. How labour relations are managed will be crucial for success.