Laboured delusion

BS OPINION

Earlier this month, Air-India (A-I), was forced to take a decision that highlighted once again all the infirmities of the labour laws that hobble India's companies.

The flag carrier froze plans to recruit cabin crew for a subsidiary, Air India Charters, under pressure from the airline unions.

Had the airline gone ahead with its plans, it would have been able to operate low-cost flights to short-haul overseas destinations, and thereby compete better with its leaner and more efficient competitors.

Air-India was not violating any labour laws by hiring contractual cabin crew. True, the airline is barred from hiring cabin crew on contract, but there is no such restriction on its subsidiaries.

Thus, Air-India Charters was well within the law when it hired contractual cabin crew at Rs 25,000 a month with no night-halt allowances.

The crucial point for A-I was that this represents a huge saving on the Rs 70,000-plus-night-allowance package that senior A-I cabin crew earn in a month, salaries that contribute to the airline's unviable and burgeoning salary bill.

At one level of course, A-I could be accused of unfair labour practice against its permanent staff, thereby violating the spirit of the law. But the very fact that it has had to fall back on a practice that has become fairly standard among corporations that are trying to streamline their operations says something about the rigidities in Indian labour laws.

Indeed, as the airline's long-standing inability to cut back on staff strength has shown, it is the enormous protection offered to employees in the organised sector that is driving companies to opt for the relative freedom that hiring contractual labour offers.

That is why most companies are eagerly waiting for Parliament to pass amendments to the contract labour law, which will allow them to assign non-core activities on contract and pare costs.

It is no secret that organised sector labour in India is legally among the most protected in the world. What the unions and politicians have yet to understand is that this protection actually benefits no one "" not the organised sector workers, since organisations are increasingly opting for their contractual brethren; nor contract workers, who stand to enjoy none of the benefits of permanent employment.

The diminishing powers of unions themselves is testimony enough that organised labour's bargaining powers have been weakened considerably since liberalisation, and the growing competitive pressures will only worsen the situation.

No one has demonstrated this in quite so spectacular and draconian a manner as Tamil Nadu Chief Minister Jayalalithaa in recent weeks. More flexible and sensible laws that reflect the concerns of labour without impinging heavily on corporate goals would go a long way towards accelerating reform in India and negate the need for a complicating contract labour law. Union leaders should look to the developed West to understand how this synthesis has worked successfully for years.