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Sudhanshu Mani

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Privatization of trains: Chop and change?

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Ever since Indian Railways (IR) announced that bids were being called for privatization, i.e., operation of certain trains by private operators, there is a strong narrative that this would hit the common man because of increase in fares. Let me start by allaying these fears. This discourse has arisen either out of lack of information or merely as a red herring. And this not because of a clear intention but because the exercise of privatization would succeed only in segments where you have travelers willing to pay more in return for value and therefore the common lower class travellers need not have any fear; privatization of trains with a large number of lower class coaches is not going to succeed. Once a cluster/route is privatized, as it seems, IR would get adequate revenue, perhaps more than what it gets now. So the question is not whether IR would lose passengers and revenue but whether good number of investors would be attracted to the business. One aspect is clear, no concessionaire could possibly make money from the lower class travelers. A worrying aspect is whether a concessionaire would be able to charge the upper end traveler enough to make the business fruitful, particularly as there would be value only in improved services only and not in travel time and punctuality.

Intended or unintended, the common passenger is not going to be hit

After I conducted a couple of panel discussions with people knowledgeable in the field, many worthies told me that all that was an attempt to give the dog a bad name and hang it. That all the staus-quoists had grouped together to derail a game changer conceived by the ministry.

Far from it. I start with a clear abnegation. A caveat that in my personal view, I am in favour of privatization of IR trains, per se. In today’s world, privatization cannot be a taboo. Government is ill-equipped and usually indisposed to handle amenities and services efficiently and running of trains entails a fair share of this, like booking of tickets and reservation, dynamic pricing, cleanliness in trains, catering, Infotainment and so on. At the same time, since passenger services are subsidized in some form or the other, unlike freight services, it is difficult to have private concessionaire bring in train technology.

Added to that is the age-old dichotomy of running a commercial enterprise while meeting a stupendous level of social commitment, albeit misplaced at time in its various forms. An identity crisis between the so called facilitator of world-class travel on one hand and provider of an inexpensive mode of travel to our teeming millions and helper to expand the network to far-flung corners of the country on the other. Although you cannot run an oxymoronic model of business without profit, it is pretty inconceivable that these social commitments can and should be abandoned. Willy-nilly, therefore, there has to be a mix of government and private participation to improve train travel experience while enduring the pressures of inexpensive travel demand and continuing with its social and strategic outreach.

So, I welcome the move as such. It should improve services, it would relieve IR (Indian Railways) of a part of its investments in new trains, albeit of the existing design and if privatization is done without any loss of revenue to IR, or even a small gain in revenue, it would be good for the health of Indian Railways. Why? Because, no surprises there, when it comes to services like ticketing and on-board services, IR is not efficient as it is saddled with typical government shackles. We have an army of very highly paid staff or bloated inefficient contracts managing all this today whereas serious concessionaires can provide these services more efficiently at a lower cost. 

But there are a lot of misgivings about the model proposed as well as the timing of the project. I can understand that the timing of the project is not good as our economy struggles in the prevailing Covd-19 situation and may continue to struggle in its aftermath. But considering that the proposal was mooted much before Covid-19 struck, this is as good a time as another.

It is also relevant that, in a recent announcement, IR has clarified that while the bidding process is on, actual launch of these trains may be done only in early 2024. The announcement also talks of running 160 km/h trains and that infrastructure would be ready for private trains by early 2024 but I see it as mere posturing as nothing significant can be added to the infrastructure by that time except perhaps commissioning of the Dedicated Freight Corridors. The major trunk routes of Indian Railways, by their own admission in the Project Information Memorandum, are saturated, operating at near full capacity and it would be relieved only with the commissioning of DFCs, which are nowhere near completion and that these DFCs would relieve only the Delhi-Kolkata and Delhi-Mumbai sectors. Saturation of routes is a dampener and therefore the objective of 95% punctuality on privatized trains is too far-fetched. The investors would have to take the less costly option of purchasing existing type of trains. The entire running of trains would be in hands of IR and not the concessionaires, even if they have their own certified drivers and guards as the punctuality of trains seldom suffer due to the train running crew; it is mostly due to some capacity or infrastructural problem. So there would be no positive impact on running time and punctuality. As for capacities, since these are new trains, the intention is to add capacities but the questions would remain about IR’s ability to handle new trains in the existing system seamlessly. Since IR does keep introducing new trains, this can be done but there would definitely be some more strain on an already saturated system

The disastrous experience of British Rail in privatization is being quoted frequently as a forewarning. But I would use that only as a learning exercise and not a deterrent. There have been many successful experiences too of corporatization followed by privatization as in Germany and Japan. One of the safeguards would be to avert emergence of private monopolies as while privatization may be good, a private monopoly is worse than a public monopoly.

Coming to the bidding process itself, let us not forget that this is a first-time attempt by IR. It cannot really hope to get ahead in the game by writing a document sitting in a cocoon as if private investors are drooling all over at the prospect of running trains. I really do not know how the RFQ documents were prepared but it does not seem to have been done after wide consultation. It is all very well to say that the concerns would be addressed in pre-bid meetings but let us not forget that the initial document sets the pitch. So while the bidding process appears to be fine, the basic bid document does not seem to be investor-friendly at this stage.

Why do I keep saying that the investors would choose the less costly option of purchasing existing type of trains? The investment in a 16 coach AC II train, or a mix of AC II and III, or other variations of AC coaches, the cash cow for IR today except the AC 1, without any technological improvement, with one locomotive, on Power Car, Pantry/SLR etc. would be approx. Rs 55 crores. Although maintenance pit and shed would be made available by IR on chargeable basis, the concessionaire would need to some to make investments pertaining to maintenance facilities also so the total investment would be more in the range of Rs 60 crores. With an earning of 1000 km per day, the revenue would be in the range of Rs 10.5 lakhs per day with 10% hike in fare. 

In the pre-bid clarifications, provisionally, the indicative access charge has been assessed as Rs.512.31 per train km for a 16 coach train for 2019-20 and it works out Rs 5.12 lakhs per day. (Indexation of the charges over the concession period shall be as pre-specified in the concession agreement; the charge will be proportionately increased for trains of longer length and the final access charge will be specified in the draft concession agreement). With committed share in gross revenue to IR, service man power and O&M costs, energy cost to be paid to IR, overheads and insurance, very little head room would be left for service of debt and return on equity, let alone profit. While debt would be difficult to raise, there may not be many to roll up with large equity. So while this makes any investment in modern trains very unattractive, the key even for deploying existing type of trains lies in how the access charges are brought down to a realistic level.

Then there is this business of twelve clusters. Every cluster has some routes with promise of good patronization and some without it. Why burden the investors with social obligations of IR? For economies of scale, you would like to have bigger clusters. On the other hand, we should not eat more than we can chew at this stage of initial attempt of a watershed change in train operation. It is a matter of opinion but I would have liked the clusters to be so chosen that the concessionaire would not require to deal with multiple train formations; this would help in obviating any need to regroup coaches at terminals, which otherwise could be a killer in train operations. In any case, matching rakes in diverse locations in links and also matching them with locomotive links is going to be quite a jigsaw puzzle for a concessionaire as even IR with all its massive resources is still unable to maximize utilization through optimum links.

The contract period of 35 years, without any flexibility, also appears to be too long and investors would not be willing to get tied to a dud contract for this long. The exit clause, on the other hand, may remain open to misuse by the investors. A more realistic time period would be in the range of 15 years with a fair exit clause.

At the same time, there are many votaries of train sets, not because I created the first one in India, but because train sets are inherently far more efficient and friendly to train operation and passenger amenities as compared to conventional locomotive-hauled trains; this has been proven by Train 18/Vande Bharat express already on IR. So I would have liked to throw in a mega cluster of say, Delhi-Bhopal-Jaipur-Ahmedabad-Mumbai routes to be operated with train sets such that some investments also start in train sets for a truly world-class travel experience.

At least one cluster must encourage deployment of train set

There is another drawback that I see in the model. The concessionaire would quote for a share in the Gross Revenue at RFP stage, with Gross Revenue comprising amount accruing from passengers or any third party, including ticket, preferred seat, baggage and parcel tariffs, amount from on-board services like catering, bed roll, Infotainment and revenue from advertising, branding and naming rights etc. There is nothing left for the concessionaire to innovate and earn. The share in gross revenue perhaps arises from the fear of manipulation in Profit & Loss Accounting by a concessionaire but in today’s world such fears should not dictate regression to an unworkable provision. Let us look at the model in totality. Having invested hugely in rolling stock, a concessionaire would be dependent on IR essentially for the entire operational infrastructure like track, OHE, signaling, stations and operating crew as well as maintenance infrastructure and therefore fixed costs would need to be met ahead of any cash flows thereby rendering huge imbalance between the risk and the reward.

Private freight trains, mainly Container and some Automobile-stock trains, have been in operation on IR for more than a decade. It started with a large number of operators but today only a handful remain viable. The experience of this sector must be built into this new effort to enhance the chances of its success.

The extent of liabilities and penalties remain a gray area and they have to be so designed that they do not scare away investors. Accidents occur mainly due to a weakness in infrastructure or human failure on which the concessionaire would have no control. In a scenario where investments would not be easy to mobilize, mitigation of risks is even more important. Some concerns have been raised by impact on integrity and safety of railway assets when used by concessionaires but I do not foresee any problem in this utilization. On the other hand, since operation of passenger trains is a different ball game from safety standpoint, certain safeguards would definitely need to be put in the contract. But I am sure that this issue can be suitably addressed by IR.

The stillborn proposal to appoint an independent regulator has to be revived. With multiple interfaces and complex contracts of accessing infrastructure and revenues, the project cannot take off without an independent regulator in place.

The data of Tejas train run by IRCTC is not available in a transparent manner so it is difficult to comment on. It is, however, known that after the novelty of smart hostesses and add-on services wore off, the patronage had started going down before the Covid pandemic stopped all passenger train operation. The data should indeed be shared with all bidders to help them make a competent offer.

No rail system in the world has such heavy cross-subsidization of passenger services by freight earnings. IR earns 55 paise for every rupee spent on passenger services. No such luxury would be available to concessionaires. We must look at all these experiences and then draw a model more suited for India. I doubt if this has been done yet. There are rail travel models which have given tough competition to air, for example, Frankfurt to Köln and Madrid to Barcelona, with such travel time that flights on these routes almost disappeared. This gives the operator, be it private or state-run a good leeway to charge handsome fares and sustain itself comfortably. Privatization of trains is a right step towards improving efficiencies in train-running but this right step would better be a baby step. It has unfortunately, or perhaps unwittingly, been announced by IR itself as a panacea; something that would bring in a quantum jump in technology, punctuality and services and therefore the sights have been set at an unattainable level. It appears today that IR would look after it leaps. The term world-class travel experience is being bandied about freely whereas the reality is that private trains may bring in only improved on-board and support services. But there is enough time as prospective bidders ready themselves. It is time that the issue be approached afresh in a pragmatic way such that it promises to be a win-win for IR, the prospective concessionnaires and the travelling public.

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Make in India to Atmanirbhar

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Readers, I am not going to traverse the beaten path of, by now, the incontinent narrative on Atmanirbhar Bharat. Enough has been said and proclaimed. It may or may not be a discourse full of sound and fury, signifying nothing, the thought of Shakespeare, uttered by Macbeth. We will know in good time. In this post, however, I will try to bring in a simple, but hopefully, a pithy and meaningful message.

Let me get the déjà vu, the been there done that away. I will not talk about the PM’s economic package worth Rs 20 lakh crore or 10 per cent of GDP or in reality merely 3 lakh crores and so on. Time will tell how significant the package was and whether it indeed helped every section of the society including workers, farmers, middle class and industrial units through various sops and measures.

In an interview to ET, the new CII president Uday Kotak emphatically says getting growth back is non-negotiable and a demand side push is needed and if that is done strongly, the trend of growth month-by-month can arrive at a level close to normalisation before the end of this year. Further growth will, in any case, require stronger push. Once again, even as we do not see a strong push by the government, let us wait and watch.

Let us gloss over the impassioned pitch by the government for Atmanirbhar Bharat intertwined within the global platform with the spirit of Vishwa Kalyan and wonder whether it could actually altruistically cater to its own and indeed the world aspirations. Whether our Yoga and manufacture of medicines would make us a vanguard in global path to help mankind or we remain what we were, a factory for inexpensive medicines whereas all the R&D to develop new medicines would be done, as usual, in the west, or now-a-days, even in China?

We will soon begin to see whether the so called global opportunities that were or are staring at us actually boosted for Indians to capture them so we will wait to make a judgment on that. Specific to China and amidst all the hullabaloo, we have to wait and see how our attempts to blank out China from our industrial and consumer space pan out; these are early days. India has not been a favoured destination for global investments because of several reasons and not many of them have changed for the better. We need to shed all semblance of a centralized command economy to let entrepreneurial innovative spirit be freed from bureaucratic hurdles. It is about self-confidence & pride in not local brands per se but local brands of value. Structural problems like cost of capital, manufacturing eco-system and supply chain, corporate labour laws, some permanence of policy and not frequent changes, infrastructure and skill levels remain and we talk of sustained reforms to address these areas but will the government walk the talk? The government does appear to be unapologetic about privatization of PSUs, which is good, but do we see perceptible progress? We wait and watch. 

Industry has to do its bit; more built-up of stories of, let’s say the one by Srinivas Kantheti, MD WheelsEMI. He has written thatwhile he had no quarrel with the discourse on the unfair practices of China, he talked aboutan industry where China had been beaten by India, the two wheeler segment. Yes, Indian industry has to rise to the challenge and deliver the way Hero and Bajaj did but enough has been said about that already, isn’t it?

We have spoken ad nauseam about lack of and therefore the requirement to develop skill sets among our workers. I take you to an interesting interview of Tim Cook, the CEO of Apple, at the Fortune Global Forum in 2017. He said that it was unthinkable for any country to reach the level China had reached because they have acquired a level of extraordinary skills, an intersection of craftsman skill as well as sophisticated robotics. Well, everyone is talking about skilling of our workmen and we have to wait and see how meaningful our actions are going to be in this area. 

Everyone’s job is cut out. But there is something which is missing or at least not come to the fore with the same significance and purport. It is the spirit of innovation and creation, a pride in products and technologies developed by Indian minds.

I have always said that Make in India has not really taken us far. This model defines local content as the total value of items procured excluding the domestic tax minus value of imported content including custom duties as a proportion of the total value and if you are at 50% or more, there are sops in government orders. Unfortunately, this is open to manipulation and even misuse. USA also has an equivalent Buy America policy and all overseas manufacturers have to go through a stringent audit verification at component level. Our audit, if at all, is perfunctory.

But that’s not the point. True Make in India must have a makeover. It must envisage and encourage development of concepts and designs as an essential, else we remain an importer of technology or a leased manufacturing space. I can tell you of umpteen appalling instances of lack of government and corporate support for new home-grown technologies and products. If we don’t develop our own, we will continue to hop back to where we were, every fifteen years. There are a million minds in India, if I may say so, with a bee in their bonnets with new ideas, and I use it in a positive sense, but institutional support prevents us seeing these dreams turn into a vision followed by action and fruition.

What should we take pride in? We have developed a fighter aircraft, the ill-fated Tejas, after nearly 35 years of struggle. I am no one to defend the mess created by HAL and the Air Force in the delays. But today, a handful have been deployed and further orders would need significant tinkering. I hope it turns out to be really gainful. Yet, as it is, it is our own and a matter of national pride. But, national pride sprung out recently in all its stupid elation and posturing with the landing of the first batch of Rafale aircrafts at Ambala. All the news channels went gaga over it. The refrain on national channels was, “Rafale aaya, Cheen tharraya. Goodness! How juvenile a discourse can get? As if the achievement matched that of our Chandrayan or Mangalyan successes or perhaps even more. I am not saying even for one minute that Rafale aircrafts should not have been purchase. Sure they should have been purchased and this government did show decisiveness in procuring them. But these aircrafts have been shopped, not developed by us.

Talk about all the chest-thumping and back-slapping about manufacture of ventilators, PPEs and masks in large numbers. Does that make us great innovators or manufacturers?  We cannot set our sights so low that for a country of our size, such marginal feats be celebrated as great achievements. I am neither underplaying this accomplishment not am I the devil’s advocate but we have to guard against becoming a victim of our own rhetoric and buzzwords. Do we want to limit our manufacturing competence in screw-driver technology from imported SKD/CKD kits under license production, with almost no value addition in terms of design, technology or process engineering?

We are where Japan was in the fifties or China in the nineties? And it’s time to take that bull by the horn and invest in development of our own products and technologies. My cliché now-a-days is that Transfer of Technology (ToT) contracts can take us only so far. Our acquisition of technologies from developed nations was needed for us to learn and assimilate the latest trends in product design and technologies. But ToT is, in reality, an oxymoron. Because technology is much more than a set of documents, drawings, specifications, test plans, vendor qualification protocol etc., classroom training and meetings to make it amenable to any transfer. Technology is a creation. It lives in the mind and heart of the creator. This ToT business has gone on for too long, it has now become a crutch, an albatross around our neck, making us a slave of superior intelligence. But our intelligence would remain inferior unless we mutate it to the next level and nurture it. It is time now to unleash the creator in us. I am not advocating the foolishness to tread in areas where we are still miles behind, I am talking of areas where we can tread and succeed.

We must act. Development of our own products and technology, has to be the soul of self-reliance in long term. Industry and similar institutions should do their bit. But the primary role in this effort has be that of the government. Only the government can exploit large projects and the attendant huge investments to drive indigenous effort, private entities with their own bottom lines can only do so much. Only large projects and huge investments can drive indigenous effort. One example, rolling stock, or simply said, development of trains, in China. After inviting all world majors to set up shop, they learnt the technology, even refined it and they now challenge these majors. We have also invested heavily in Metro and even Indian Railways trains but we manufacture either 25 year old technology coaches or current technology trains with low-end assembling. India has gone for massive investments in renewable energy sector with solar installations. But why is it that all solar installation equipment, be it panels, electronics and the Lithium Iron batteries are sourced almost entirely from China? Talk of Battery Buses for which there is a great push but the heart of the technology, the electronics and controls, apart from the batteries, are all imported. There are other areas of government spend which have unnecessarily been made holy cows with practically no growth of home-grown technologies

The government must support the industry morally and financially, through subsidies and incentives and more than that, preferential orders. Subsidies and incentives like cheap land, specially-sourced raw materials, export facilitation, even enabling government manpower from laboratories and design centres. And ordering with clear reference to Indian companies who believe in R&D. Government has to underwrite the risks for emerging companies and believe me, there are many straining at their leash for the government to embolden them to experiment and flourish. I quote the poet Ali Sardar Jafri who covered it well in some other reference:

Naya chashma hai patthar ke shigafon se ubalne ko,

Zamana  kis  qadar  betaab  hai   karvat  badalne  ko

(A new stream is bursting forth to boil from the stones, the world here is passionately impatient to turn a new leaf.)

We have ISRO and DRDO which worked under a regime of denial of technology by developed nations and but freed from stifling bureaucracy and restrictions, they gave us Chandrayaan, Mangalyaan and missiles. We need wide replication with a sense of purpose and I express it here poetically:

Ab falaq yun kare ki  sach ye khwab ho jaaye

Barson  ka  mera  shafaq  ab aaftab ho jaaye

(Let the sky make this dream come true and after years of twilight, let the sun shine) 

This is not a matter of dimagh alone, it is a matter of dil, dimagh aur jigar; dimagh for talent & skill, dil for passion & intensity and jigar for boldness & chutzpah. With the support of the government, India can develop thousands of home-grown technologies in a matter of years and that is what would make us truly atmanirbhar.

…

References:

The entire article of Srinivas Kantheti can be accessed at:

http://www.cnbctv18.com/views/how-one-indian-industry-beat-china-at-manufacturing-and-created-a-global-footprint-6135001.htm

The full interview with Tim Cook can be accessed on YouTube at:

In the recovery phase, we must have the demand side push coming in: CII President
https://economictimes.indiatimes.com/news/economy/finance/in-the-recovery-phase-we-must-have-the-demand-side-push-coming-in-cii-president/articleshow/76254246.cms?from=mdr

Pride of India, Tejas fighter jet finally takes to the skies

https://www.financialexpress.com/economy/pride-of-india-tejas-fighter-jet-finally-takes-to-the-skies/305465/

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Our labour laws – Have we thrown the baby with the bathwater?

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The issue of our labour laws has come into focus recently. Revision in these laws has always been a crying need but successive governments only paid lip service to it. Any proposal for changes in these laws would be looked at with hawk’s eye not only by labour unions and allied interest groups but by the entire opposition as well. It is therefore, not surprising that the political will to address the issue is not easy to come by. The subject is in focus now-a-days as states try to woo investors in the industrial arena and somehow the Covid pandemic has acted as the catalyst to lead these states towards labour reforms. So far so good, just as Petruchio invokes in The Taming of The Shrew, “Come my sweet, Kate. Better once than never, for never too late”. Indeed it would be better to be late than never and also it is never too late to change. So, exactly on expected lines, the votaries of modifications in Labour Laws gave it an initial thumbs up just as the opposition and the trade unions cried foul.

One would have liked that the subject of reforms in the labour sector came to into focus as a significant building-block as our country progressed. Instead it has happened like any port in a storm and that was a dampener. But be that as it may, there it was, a good news for the industry. Good news that the dirty bathwater of our labour-related consciousness was being thrown out. But there was an accompanying bad news as well. The baby had also been thrown away. They moved fast to beard the lion in its lair, and while bearding it, also turned it into a vegetarian beast of burden.

Let us examine further as this issue is being debated for decades. On one hand, militant labour unionism, arising out of workers’ rights as enshrined in these labour laws and the same followed in word and not spirit, is blamed on rapid de-industrialization in certain regions. Kanpur is one big example which has seen unprecedented depletion of thriving factories and products, reducing it to a state of industrial graveyard, a rump of the famed Machester of East of yore. I am not saying that it all happened because of aggressive trade unionism. I am sure there were other factors like poor infrastructure, harmful inspector raj and some unscrupulous handling by the industrialists but intransigence of labour was certainly a major factor. On the other hand, there were numerous instances in the past, and some even today, of exploitation of labourers by certain industries; our labour force has been through the wars in spite of these labour laws on many occasions though such instances have reduced in the recent past. 

What would be a good middle path which would be equitable and would also not be a hindrance towards investments in industries? While we cannot deny that compliance with the maze of laws has been a stumbling block for industry, there is also a need to make sure that a knee jerk change in laws should not result in the workers getting a raw deal. A region or a country cannot advance industrially on the back of an exploited work force.

Labour is a concurrent subject in India. That requires that the states do not overstep their domain and infringe the central laws; if there is any conflict between a central and a state law due to a modification or suspension by a state, it would be open to legal challenge. There would be the risk of a good initiative becoming stillborn, even counter-productive, due to hasty and ill-thought out actions to tinker with these laws. 

There are some 45/50 laws at the level of the Centre and some 150 to 200 depending upon the state. The central govt. has streamlined the central laws into four codes: Conditions of Work, Wages and Remuneration, Social Security & Occupational Safety and Industrial Relations & Employment Security.

Conditions of work: Shops and Commercial Establishment and Factories Acts lay down in the respective areas the rules with regards to regulation of payment of wages, working hours per day and week, spread-over, rest interval and paid day off, opening/closing hours, overtime, closed days, annual leave and holidays, overtime, employment of children, young persons and women. The Factories Act applies to direct labour, subject to a minimum number of workers in a factory, and this provides for rigid and exhaustive working conditions in factories to regulate health, safety, welfare etc. and has many special provisions. The Contract Labour act is an all-encompassing act covering prevention of exploitation of indirect labour and stipulates similar conditions of work although the same are not that restrictive.

The Minimum Wages and Payment of Wages Acts are self-explanatory. Social Securities and Occupational Safety area has Employees Provident Fund, Workmen’s Compensation and Employees State Insurance Acts. The Industrial Relations and Employment Security domain is covered by Industrial Disputes and industrial Establishments Acts.

So what have the states done so far? Uttar Pradesh, Madhya Pradesh and Gujarat are in the forefront. Yogi ji has summarily suspended almost all Labour Laws, including the Minimum Wages Act and the only laws remaining applicable are Building and Other Construction Workers Act (regulates the employment conditions); the Workmen Compensation Act (compensation in the event of injury or accident), the Bonded Labour Abolition) Act; and Section 5 of the Payment of Wages Act (extrapolates provisions relating to wages). Gujarat, too, has done the same by suspending all but three labour laws. MP has been a little more circumspect but not too far behind.

Such actions remind me of these memorable lines from poet Faiz,

Jo ruke to koh-e-garan the hum, jo chale to jaan se guzar gaye,

rah-e-yaar   humne  qadam  qadam  tujhe   yadgaar  bana  diya.

(When we were static, we were like solid rock, but when we moved, we passed out of life. Step after step, we have made the path to our beloved memorable) 

Are these earnest governmental efforts to modify the labour laws to revive the industry and the economy? Are these the long-pending reforms of the labour market that economists and industrialists used to talk about? Or are these suspensions and modifications of Labour Laws an ill-timed and retrograde step that critics have made it out to be? The truth lies somewhere in between.

Let us first check out this business of time-barred proposals. States have taken up modifications and suspensions as a temporary measure for 3 years or 1000 days and so on. Now, this in itself is defeatist. Let the modifications be of a permanent nature. Doing it temporarily conveys the impression that the original laws were fine and just but because of the Covid complications, the labour simply has to bite the bullet. This will not work. If the laws need changes to facilitate investments, then these investments are not going to be guided by a three-year reprieve. If there is an immediate need to boost industrial employment, states must whittle down the temporary modification to the bare minimum. Rest of the proposal of modifications should be there to stay, removing any uncertainties and imponderables for the investors; they should favour long term profitable employability and actual gainful employment without giving the labour a bad deal. 

Let us start with The Minimum Wages Act which covers more workers than any other legislation for labour and I absolutely do not see any reason to touch it. Can a progressive society ever do without the provision of minimum wage? I would think that since there already is blatant disregard of this in certain sectors, the provision for direct transfer of wages has to be strengthened, especially for casual and contract workers. There is today a problem that industries and other employers are not being able to pay minimum wages but the solution lies in looking at the minimum wage itself, albeit for a temporary phase, and not in suspending the law. 

All acts related to conditions of work, including safety measures on factory premises and promotion of health and welfare of workers need not be touched at all. Our standards in these areas are far lower than the West, in provisions, and even more in implementation. We already have our workers dicing with death in work areas and we just cannot lower the safety and well-being of the workers further. The compensation for disability caused at work must obviously stay; the recent Vizag gas leak case clearly shows occupational safety should not be messed with. 

Let us also see the acts which govern the working hours, specifically the 12-hour shift. These provisions do need some practical changes. A 12-hour shift is harsh but not inherently so. A 12-hour shift with regular wages, instead of overtime, gives the employers the option to run a longer shift. I know of many industries which practice it already except that the rolls are manipulated to show only 8-hour shift. It does make some sense to make what is de facto into de jure,given that certain intense works should be excluded from this relaxation. There is, of course, another view that if the intention was to ensure more people had jobs, we should not increase the shift duration from 8 hours to 12 hours but allow two shifts of 8-hours each instead, so that more people can get a job. The discussion is endless but to my mind, some adjustments here would, by and large, help the industry without any significant strain on workers.

One of the most contentious issues has been the Industrial Disputes Act which certainly needs a hard look as it relates to terms of service such as layoff, retrenchment & closure of industrial enterprises, strikes and lockouts. Because of very unfavourable provisions, companies with more than 100 workers are hesitant to hire new workers because sacking them requires government approvals. Even the organized sector increasingly employs contractual and casual workers with no formal contracts or only loose contracts which are followed more in violation; such workers are seldom on any formal rolls. This, in turn, the argument goes, has constrained the growth of companies on the one hand and exploited a large group of workers on the other. The viewpoint of those seeking reforms in labour laws in favour of making the companies free to hire and fire as they expand and contract following market conditions has been that it is aimed at helping to bring more workers in the formal sector. This would help bring more employment in formal from informal economy with attendant benefits of better salaries, social security benefits and improved working conditions. To cut a long story short, let us be clear about one aspect: employment follows a need for employment but employment itself cannot be an end. While the government has the responsibility to improve employability and employment, this burden of job security cannot rest with the industry. Industries must employ as per their need but during the employment, there should be no let up on the provisions related to wages, working conditions, safety etc.  

The hire-and-fire model for availing a workforce will add to the growth of seasonal employments but if the demand is seasonal in some sectors, we have to put up with seasonal employments. This, of course, has a flip side. In the backdrop of seasonal employment, more workers will face eroding wages or less work, which will further push them off the cliff of poverty. This will, eventually, come back to bite businesses as lower wages would lead to a decrease in consumption, a double-edged sword.

But view this in the light of suspension of the Minimum Wages Act. This move would, instead, lead to formal workers being given up in favour of informal ones. That cannot be the intention or the aim of the reforms in labour laws. In the scenario of no regulation on minimum wages, how do you ensure that there would be no blatant exploitation; once you strip the labour of its basic rights, it can easily drive down wages by first firing all existing employees and then hiring them again at lower wages.

Look at the irony. The govt. at the start of the Lockdown stipulated that companies should not fire workers and pay full salaries at the start of the lockdown. Suspension of Minimum Wages, Industrial Disputes and Social Securities Acts makes it look like the government has done an about turn,  depriving the workers of any even-handed negotiating exchange. In recent years, the growth in wages has already been sluggish and that is understood because there was already a downturn in the economy. In addition, the gap between formal and informal wage rates has already and always been huge, based on gender, type of setting (urban, semi-urban or rural), type of work, cost of living and so on. With the removal of the crucial labour laws which provide protection and a semblance of invulnerability to workforce, there is a big risk of the informal sector growing in strength replacing the formal workers. These replaced workers would have no scope of any expedient remedy. In the last 15 years or so our informal sector strength has gone up from approx 36% to nearly 56%. With these so called reforms, the percentage of informal workers in the total workforce would climb substantially. 

Theoretically, it is possible to generate more employment in a market with fewer labour regulations. But to what extent, such that governments have gone ahead and banished so many laws. There is a need to examine clear evidences from the states which have relaxed Labour Laws and make an informed opinion before starting to dismantle the age-old regime of protection to workers. Did we see any upsurge ininvestments and increase in employment without causing any increase in worker exploitation or deterioration of working conditions in such states? It would need some analysis and it would not be a straight cause and effect scenario.

Maharashtra had earlier amended the Contract Labour Act extracting some units from its applicability. Trade unions had opposed it saying that even large units would work around this act by employing multiple contractors’ entities, each below the new barrier of 50 men. In any case, this amendment sought to improve employment of informal workers and facilitate ease of doing business. How much has this helped?

MP has abolished the necessity of multiple registers and returns for getting a business permit. The state has also made provisions that ensure licences will be issued within 24 hours. Renewals of licenses/registrations would have a validation for a decade, not one year. MP has removed the requirement for inspections at factories that employ less than 50 labourers and inspection of SMEs can now only be done with the prior approval of a labour commissioner or if there is a complaint. Kerala and Maharashtra, too have simplified the returns and application procedure for permits. In the short-term, these reforms may help improve India’s place in the World Bank’s ease-of-doing-business ranking, for instance. It may even help somewhat in an earlier-than-expected economic recovery.

Yes, there is a need to transform the current inspectorial regime to one with less infrequent audit but harsher punishment for violations. The devil’s advocate would say that since sizeable part of the reforms involve eliminating inspections and verification by government authorities, it could lead to increased misuse, for example, deployment of poor child labour or manufacture of counterfeit goods as there would be no. merchandise. I would, however, treat this as simple negativity as world-over countries have migrated to a system of more and more of self-certifications and the new India cannot treat itself as an exception.

Let us see the short term impact in the current Covid and the immediate post Covid scenario. This suspension and resulting fall in wages will further depress the overall demand in the economy, thus hurting the recovery process. So while the act of suspension of these laws has been done to facilitate the supply side, it may lead things in an exact opposite direction of making the demand sluggish. Employment may not increase in short term because of several reasons. Companies are slicing off salaries and cutting out jobs already as many of them have unutilized capacities. The overall demand has continued to fall. Will companies hire more employees in such a scenario?

Were these Labour Laws indeed a handicap in the growth of our industries’ economy? To some extent but by and large, no. There are so many other factors, which we would discuss on some other day, like infrastructure. Building infrastructure needs sincere and sustained government efforts and it is not as simple as bringing an ordinance by a majority government.  What we do know is that labourers have been the biggest sufferers in this pandemic. We can forget their cause at our own peril as India now has to rely on them to prevent it from going to seed.

It is also true that there is an unnecessarily complicated maze of laws which are not even amenable to meaningful and effective implementation and this needs simplification. The labyrinthine catacomb of these laws is a major wellspring of corruption and venal deals with inspectors. Facilitated by fewer and easier-to-follow labour laws, formalization of the labour force would certainly be helped.

What else could the governments have done? There is a view that instead of creating exploitative conditions for the workers, the governments should have done what the governments have done in the west – allocating 2 to 5 % of their GDPs towards sharing the wage burden with the industry. That is easier said than done in respect of India as our government has other priorities like catering to the poorest of the poor through DBT and higher allocation to MNREGA.

In conclusion, let me see what has emerged from this analysis today:

Reforms in labour laws are required but let it not be done for temporary periods. Let us think of reforms which would stay. Some temporary relief may be thought off for one or two provisions, depending upon the extreme situation presented by the Covid problem.

Do not throw the baby with the bathwater; time-tested laws which ensure that labour force is not exploited must stay.

There are too many laws and some even contradictory to each other. Let there be a comprehensive exercise for reduction in the number and simplification of the laws without diluting them.

Inspectorial regime for licenses and permits should be dismantled to more and more self-certification and less frequent preventive audits with stringent punishment for irregularities.

There is definitely a need to review the Industrial Disputes Act and move towards a liberal hire and fire policy.The provisions in working hours should also be relaxed to regularize what has been happening in many MSMEs.

Beyond the regulations for labour, companies face a lot of other hurdles like the shortage of skilled labour and the weak enforcement of contracts etc. This should be the next focus.

I hope things move in the right direction because it is like now or never. Having disturbed the hornet’s nest, governments cannot abandon these reforms with a whimper and have Macbeth declare it from above as, “a tale told by an idiot, full of sound and fury, signifying nothing”. (The author’s views can also be heard on weekly news analysis section Straight Drive of YouTube channel thepublic.india)

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All lives matter!

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One of the biggest international news this week has been the racial unrest in the USA. And another great tragedy which has been playing out for the last 2 months in India is the way our migrant laborer have been treated. I will try to go into these two recent happenings, draw parallels and look at the reality of what remains to be done.

I am sure you know about this, but a quick recap: George Floyd was a 46-year-old African American man who worked as a bouncer at a music club until he was laid off when the pandemic hit and Minnesota went into Lockdown.

On the 25thof May, a grocery-store employee called the police on Floyd around 8 p.m. and alleged he had tried to pass a counterfeit $ 20 bill. Derek Chauvin, a 44-year-old white police officer was one of the officers who responded. He, along with three other officers, apprehended Floyd and although the police claimed that Floyd “appeared to be under the influence” and resisted arrest, bystanders captured video of Chauvin restraining Floyd by kneeling on his neck, for as much as nine minutes, even as he kept saying that he could not breathe. Floyd was later pronounced dead at 9:25 p.m. at the hospital. The officers was fired on May 26th After some days of dilly-dallying, Chauvin was charged with second-degree murder and if convicted, he could face more than 12 years in prison.

In Minneapolis, protesters took to the streets in the days after Floyd’s death to denounce anti-black racism and police brutality. The slogans of these protests, ‘I can’t breathe’ and ‘Black Lives Matter’ evoked a long history of similar police-related killings of black men,  such as the 2014 deaths of Eric Garner in New York and Michael Brown in Ferguson. The protests continued to grow and spread to cities around the US and took a destructive turn from May 28 when a police station was set on fire. By the end of the first week, demonstrations and protests continued which claimed large-scale destruction of property.

The unrest comes at an especially perilous time during the Covid-19 pandemic, which has infected and killed more people in the US than in any other country and  black Americans have suffered causalities disproportionately. The protests began just as many states were beginning to ease their stay-at-home measures. But our concern today is not about Covid-19; it is about race relations in the US.

President Donald Trump has inflamed the protests by calling protestors ‘thugs’, threatening to send in the military and suggesting in one tweet that ‘when the looting starts, the shooting starts’, an infamous phrase used in the 1960s by segregationist presidential candidate George Wallace and a Florida police chief who threatened a violent crackdown on civil-rights protests. Trump, a Republican who is running for re-election in November, has a history of inflaming racial tensions. He blamed ‘both sides’ for violence between white supremacists and left-wing counter protesters in Charlottesville, Va., in 2017 and has been repeatedly castigating the immigrants crossing the US-Mexico border.

But knowing President Trump, what he said is not news. The news is that Trump had to be briefly hidden in a bunker under the White House as hundreds rallied nearby. It is news that he had to walk back some of the outrageous remarks when, for the first time ever, Twitter censured one of his tweets as “glorifying violence” and blocked it from view. It is good news that Houston police chief criticized Trump for his handling of the ongoing protests and advised him to ‘speak constructively or keep his mouth shut’. And it is indeed welcome news and undeniably powerful imagery when a number of white people join black folks in solidarity. 

The discourse this time in the US seems to be that a death like this happens, and they rage about it, then the headlines recede and the world moves on. A few weeks later something else happens and they are outraged again and then they move on, again and that they have to stop this cycle.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. 1776, Declaration of Independence! Does all men here mean all humanity? Or white males? A struggle between pragmatism and emancipation? There is a thought that while equality here was itself limited sense, it was more in rebellion against the British crown with reference to representation and taxation. You would hear frequently that the spirit was feebler than the French Declaration. This can be another debate in a historical perspective but is not central to the purpose of my message today. And in spite of this strong foundation of liberty and life, it was only in 1865 that slavery was abolished. Then it was nearly 150 years before white women were allowed to vote and nearly 200 years before universal suffrage became a reality and all African Americans could finally vote. 

This in a country which was born out of the concern for equality and liberty. 200 years! The underlying concept was the European philosophy of Enlightenment and a belief in this concept made people like Elizabeth Stanton, Abraham Lincoln and Martin Luther King derive the moral and historical high ground for equality and achieve what they did. And yet the soft underbelly of racial divide is exposed frequently. Obama wrote on the protests that called on a new generation of activists to demand change. An extract, “If, going forward, we can channel our justifiable anger into peaceful, sustained, and effective action, then this moment can be a real turning point in our nation’s long journey to live up to our highest ideals”.

While there is a rush of empathy and outrage for ‘Black Lives Matter’ in India as well, similar alignment of forces of public at large against caste, class and religious violence in India is largely absent. Is this not performative wokeness? People are more involved in promoting themselves, social media ‘likes’, or selling books and lectures, than about actual deliverables. Should woke be selective? Let me say something which may sound scandalous as the happenings in US go through censure and critique. Not good. The US, as so many other countries, has its undercurrents of racism yet we do not need to show solidarity with them but to learn from them. We in India only embraced these principles 70 years ago and have a long way to cover. There is no gainsaying that the Indian freedom movement and its constitution were more potent attempts for social change; they must be viewed with the perspective that these changes evolved by drawing upon the concepts and wisdom, liberty and equality learnt from the west. Ours not being a natural progression towards a truly free society, we have a long way to go in spite of strong intervention by the governments and politics.

I thought for long whether it was correct to talk of these issues in the same breath, but a lack of empathy for the migrant labourers in our country could not be ignored or sugarcoated. One could see spontaneous outpouring of empathy and angst for ‘Black Lives Matter’. Standing in solidarity with other downtrodden communities seemed so meaningful; why are we not shaken by similar horrific violence right in our midst? Is there a double standard, a hypocrisy? Do privileged Indians speak out with similar alacrity about the apathy of the state towards the plight of migrant labour, violence against lower caste communities and religious mayhem? Lynchings. Police brutality. Absolute denigration of the underprivileged in our everyday life. 

It does appear as if true solidarity has been replaced by a performative one. Bereft of sincerity, it is a ride on the bandwagon of a fashionable cultural movement to emulate our western counterparts. Add to that the recent fad of calling out racism with anti-Trump sentiments which is like a new status symbol for Indians.

The comparison between American and Indian affirmative action systems becomes even more interesting upon observing that blacks in the US and lower castes in India share similar histories of discrimination. But there is a difference: in India, the government has legislated quotas and reservations, whereas in the US it is the society at large – including universities and colleges and corporations – which encourage wider participation of minorities through various outreach programmes instead of a quota regime. But have we reached even close to where the US is today? I am not at all speaking against our system of quota and reservations. Those are necessary. 

I also do not intend to make this political. Disturbing that they are, I do not want to berate merely the recent happenings in our country alone. What I am talking about is you and me. Us. Have we changed the discourse in these 70 years? 

We have countless videos of similar nature in circulation in India. Why is the debate on our stark societal infractions so binary, so politically-motivated. Why is the plight of all the underprivileged not met with the same anguish and pain? Do we need to check if we have a minority of good liberals and a majority of sham liberals? Why this litany of angry or insincere rhetoric from these so called liberals in India flowing with a political colouration?

Violence, physical or verbal, is the norm in India. We have to shred apart our collective subconscious and the explicit political tools which justify all instances of violence and indignities. Why have the gross cases of inequality and execution of repressive actions become so invisible to the privileged? Would the average Indian upper caste or class respond with the same empathy and shock to any institutional murder of a lower caste or underprivileged class person? Examples abound. I will steer clear from naming instances as most of these incidents have assumed a political prism. My point is that numerous instances exist but the debate is derailed in some form of political one-upmanship.

Genuine empathy can never be zero-sum and so outrage over injustice in India and the US are not mutually exclusive, so a comparison between them is not reductionist. The asymmetry with which these incidents of violence are received, the selectiveness with which people react, are good indicators for comparison. Just as black lives are treated as less valuable, are Dalit lives more disposable?

In India, we have another problem. Our colonial legacy has conditioned us to emulate the west and racism is no exception. Consider the treatment frequently meted out to African and even North-East Indian students in the rest of India.

We conveniently ignore the fact that we, all the educated well-to-do, benefit from a power structure that oppresses all those on lower levels of a forced socio-cultural hierarchy. Take for example, our police. No one can deny the police have a tough job. But they are peace officers, to protect all of us. But what is the lasting image of police during the migrant labourers’ crisis and that of others with no means to survive without daily work? The baton and the lathi. Those not privileged enough are the ones who bear the brunt of police brutality. The ‘order’ in ‘law and order’ does not mean the deadly suppression of underprivileged people; when will it start to mean transformation to a society so we can all feel free and safe to live in peace with each other?

Let me make a reference to the book Sapiens by Yuval Harari. Ever since the Cognitive Revolution, Sapiens have been living in a dual reality. On the one hand, the objective reality of landscape, animals and perceivable racial differences and on the other hand, the imagined reality of nations, corporations, religions. As time went by, the imagined reality became ever more powerful. One such imagined reality is equality of all humans, universal liberty and demolition of racial divides.

Intersubjectives exist for good reason. Laws exist for the benefit of society but they are made up by humans. Money is useless on its own, but if we say it holds value, it does. Gods and nations are some of the most powerful coordination technologies out there, allowing Sapiens to work, trust, and even die for complete strangers. Unlike all other species, humans can cooperate in flexible ways with countless numbers of strangers. That is why we rule the world. I quote, “Humans have no natural rights, just as animals have no natural rights. But don’t tell that to our servants, lest they murder us at night.” Existence of human rights is a result of growth of intersubjectivity constructed by humans themselves.

We in India have to construct a new imagined reality for ourselves. We have to keep repeating it till becomes a powerful force like so many other imagined realities of our world. Instead of perfunctory sympathy and performative resistance, we ought to learn from the bravery and resilience of all those on the frontlines of this fight. To do justice to the communities protesting this oppression the world over, we need to do more than just pay lip service to these movements and take up the fight against systemic casteism and classism and racism here in India. We have to dismantle the structures of power that keep us from reimagining a collective future.

The all-pervading caste system in India has its roots in some form of racism or colourism in the past; the caste system has been institutionalized in India since ancient times. In later medieval period it was called in question by Muslim invaders and later Christian missionaries, providing an alternative to the Dalits who converted to Islam and Christianity to get rid of the curse. But the system of discrimination was actually cemented as the rulers in medieval period as well as the Britishers were lighter skinned. We as people have not been motivated enough to impugn the clear divisions along caste or racial lines. But the issue is largely intersectional. The oppression people face due to casteism is paired with, and magnified, by gender, social status, financial status and education. Despite the longevity of the issue, why is the civil society not seriously beginning to dismantle entrenched discriminations?

The presumption of equality is a manufactured belief, agreed upon among reasonable persons for a practical political purpose; it is based not on some natural fact that all humans are truly equal but on an attempt to eliminate the risk of destructive disagreement that would arise when natural inequalities are used as a justification to rule or dominate. Only equality can be agreed to be an undoubted right on which to found government. So far so good. But this manufactured belief must pervade and overwhelm our thinking too, our mind sets, for it to totally eliminate the periodic fissures between races, castes, classes, religions.

Movements against beliefs held over centuries must start to gain momentum if Indian society has to head strongly towards a more inclusive and progressive future. Many organizations centre their education initiatives on younger generations, because they are the future, open-minded and willing to change their imagined beliefs which we can also call their worldview. Most of the activists leading movements against obvious disparities are based in cities and while their work could be a vehicle for change and liberation, those in remote rural villages, especially young women, are not necessarily granted the same opportunities. Effective and lasting change for the entire country will only be made possible when everybody is liberated from the deeply-ingrained societal racism.

Friends, India is not at all immune to the disease of racism and inequality. The conversation I am trying to provoke now on inequality is one which is either sidestepped or lost in a maze of politics. It can be difficult, but it is a conversation we need to have with our children, our neighbours, our co-workers, our classmates, our community and our leaders. We need it to happen and we need it to start now.

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