Haryana's new job quota law may adversely hit small industries

The Haryana State Employment of Local Candidates Act, 2020 has now been notified. The state government says that it will come into effect from January 15 next year. The law covers jobs where the monthly salary is less than Rs 30,000 and applies to private companies, societies, trusts and partnership firms in the state with 10 or more employees. At a time when attracting investments should be the highest priority for the government, the new legislation threatens to hurt the industry’s freedom. This report explains what consequences the law may have 
 
Haryana has thriving tech, finance and automobile industries, where lakhs of migrant workers are employed. According to the 2018-19 Periodic Labour Force Survey, just 4.4%, that is, 15.6 million of the estimated workforce of 356 million in India had monthly incomes above Rs 30,000. The survey also says that only 10.7% of the salaried jobs in Haryana pay more than Rs 30,000 a month.
 
Companies prefer to hire workers according to their capabilities, rather than their place of domicile. Although Haryana lowered the domicile stipulation from 15 years to 5 years for the new law, proving this will still be a hassle since it requires a residence certificate based on a voter ID, Aadhaar or a ration card. The law also seems to be against the spirit of the Constitution of India which guarantees the right to equality and the freedom to reside in any part of the country and practise any occupation.
 
In Haryana, India’s largest carmaker Maruti Suzuki has manufacturing facilities in Gurugram and Manesar and an R&D centre in Rohtak.
 
This is what Maruti Chairman RC Bharagava told Business Standard: “Such restrictive policies are not at all welcome. However, due to our negotiations, the salary ceiling has come down. Almost all of our employees earn more than Rs 30,000. So, we are happy that the negotiations have shown some results.”
 
But a myriad of auto component firms supply material to companies like Maruti Suzuki. And these companies will bear the brunt of the law. Industries feel it will not benefit the state and hit MSMEs that are just coming out of the crippling effects of the pandemic.
 
We spoke with Sunjay Kapur, the chairman of auto component major Sona Comstar and president of the Automotive Component Manufacturers Association of India. He voiced his discontent:
 

• New law can make us uncompetitive
• Govt should take a relook, specifically on technical jobs
• Need a better solution to create jobs in the state

 
The way ahead for the smaller players
 
Companies in the Micro, Small & Medium Enterprises (MSME) sector are planning to challenge the law in court. Meanwhile, the IT industry is evaluating relocation options in nearby Delhi and Noida for fresh growth since the policy applies only to new jobs. According to IT industry body NASSCOM, Haryana is home to about 500 companies in the IT and ITeS sector.
 
A populist move
 

• Haryana not the first state to take the populist decision
• Jharkhand too passed a bill to provide 75% reservation for locals
• Andhra Pradesh too had reserved 75% of jobs in private sector for locals
• But, facing resistance, Andhra gave companies three years of exemption 

 
Haryana is not the first state to take the populist decision. In September this year, the Jharkhand Assembly passed a bill to provide 75% reservation for locals in the private sector with a salary up to Rs 40,000. It has not been notified yet. And in 2019, Andhra Pradesh reserved 75% of jobs in private industries and factories for locals. Although the law was notified more than two years ago, the state has gone slow in enforcing it. Finding sufficient local talent has been difficult for industries in the state.
 
Haryana’s new law hampers ease of doing business, reduces competitiveness and may discourage firms from expanding their businesses. The private sector now fears that more states could take a page out of Haryana’s playbook.