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On June 4, Ratan Tata, chairman emeritus of Tata Sons, met the newly elected Rajasthan government officials, to explore investment opportunities. The next day, Rajasthan announced proposals to amend the Industrial Disputes Act, 1947, the Factories Act, 1948, and the Contract Labour Act, 1970.
The incidents are not linked but signal a shift in the state government's approach to attracting investments. The proposed labour reforms will benefit 18 companies, which have or are investing Rs 34,380 crore in several projects across Rajasthan. These investments are taking place under a new Bharatiya Janata Party (BJP) dispensation that won 163 of 200 seats in December's Assembly elections.
"Rajasthan is trying to project itself as an investor-friendly state and has decided to join competition with Gujarat. The other side of the coin is that chief minister Vasundhara Raje wants to outperform other BJP chief ministers and grow in stature among the party rank and file," says a secretary in the state government who does not wish to be named.
Also, Rajasthan is expected to witness an infrastructure boom because of the Delhi-Mumbai section of the Golden Quadrilateral highway project, the proposed Dedicated Freight Corridor (DFC) and the Delhi-Mumbai Industrial Corridor. Almost 40 per cent of the DFC passes through Rajasthan. After the Japanese interest in Neemrana, the Koreans are exploring opportunities in the area.
Raje could not be reached for comment. Since the formation of the Narendra Modi-led National Democratic Alliance government at the Centre in May, there has been a surge of industrialists scouting various Rajasthan cities and government departments.
These visitors include representatives from Saint Gobain, Hero, Honda and Lafarge, which is setting up a Rs 1,600-crore plant at Nimbahera in Chittorgarh district that will employ 350 people. Cyrus Mistry, Tata group chairman, met Raje a few months ago and, according to newspaper reports, his group is likely to invest in solar energy. Tata expressed interest in the health and social sectors.
"Does anyone remember when Tata last visited Rajasthan? It is definitely a good sign," says Gulab Chand Kataria, a senior cabinet minister in Raje's government.
Highly placed government sources said in February, a month before the model code of conduct for the Lok Sabha elections came into force, the state government showed unprecedented haste in clearing projects worth Rs 400 crore.
"The labour reforms are intended to increase investment in the state," says Giri Raj Singh, principal secretary, labour and employment. Around 17,000 labour disputes are pending before various forums in the state. "The biggest problem industries, especially medium enterprises, face is closure of unprofitable units. This will spell a big relief for many industrialists," Singh adds.
According to the Industrial Disputes Act, 1947, an organisation cannot retrench more than 100 employees without permission of the state government. The Rajasthan cabinet has proposed to increase the floor to 300 employees, subject to approval in the Assembly during its budget session next month and President Pranab Mukherjee's nod as the law falls under the concurrent list of the Constitution. The Factories Act, 1948, and the Contract Labour Act, 1970, too, are sought to be diluted in favour of industry.
The move has not gone down well with employee unions, which are awaiting official word from the state government. Mahesh Vyas, president of the Rajasthan Joint Employees and Mazdoor Sangh, says, "The owners can now hire and fire workers. Workers will lose their voice. We sternly oppose it." Two labour organisations, the Bharatiya Mazdoor Sangh, supportive of the ruling BJP, and the Centre of Indian Trade Unions (CITU), which has roots in the Left parties, are also opposed. The unions feel the decision follows strong lobbying by industry leaders.
There are 20 labour laws in Rajasthan that govern the working and relations of employers and workers. The state's officials say these laws will still protect employees' interests and will only come into force when a factory is being shut down. "It will increase productivity and benefit workers. This will also save small industries from the inspector-raj," says a government official who does not wish to be named.
Industry leaders are, naturally, exuberant. "This will ensure a level playing field. Raje has laid down the red carpet for investors, which was missing in the previous regime," says K C Jain, secretary general of the Rajasthan Chambers of Commerce and Industry.
