Prospects for labour


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SINCE the 1990s, with the launch of the New Economic Policy, several reforms that accentuated the process of privatization and liberalization have been initiated in India. The thrust of almost all the new policies has been to make industry more competitive in order to meet the needs of the global market and export promotion. As yet, no other economic policy has witnessed such stiff resistance from civil society and human rights organizations as the Special Economic Zones (SEZs) Act 2005. Large-scale land acquisition for developing industrial enclaves by corporate units, with the help of state machinery, has led to people’s revolts, police actions, violence and killings, as happened in Nandigram, Kalinganagar and elsewhere.

Even as protests and resistance spread, making the SEZ policy a subject of intense debate and public concern, the Commerce Ministry and the Board of Approvals (BoA) for SEZs are busy with the process of clearing SEZ proposals. By the end of November 2007, the BoA had given ‘formal approval’ to 404 SEZ projects and ‘in-principle approval’ to another 165. The Commerce Ministry is prompt in countering the argument of the Finance Ministry that the promotion of SEZs in the present manner would cause a revenue loss of about Rs 1,60,000 crore by 2010 by asserting that the SEZs would bring in investments of up to Rs 100,000 crore and create 5-40 lakh jobs, and world-class infrastructure.

The current agitations and debates focus mainly on land acquisition, displacement, compensation and rehabilitation. It is equally important to critically evaluate the employment generation capacity of the zones, sustainability and security of jobs, since investment and employment are expected to balance the huge revenue loss, large-scale displacement of the poor and the regional development disparities created by these zones. It should be noted that neo-liberal trade and economic policies have already resulted in the spread of an exploitative work culture in India and other developing countries, especially with regard to unorganised labour. What sort of work culture do the SEZs actually create?


The setting up of a zone is a long drawn out process. Invariably the first victims are the rural poor who are displaced not only from their homeland, but also from their livelihoods. As far as they are concerned land is not merely a commodity, but the provider of employment. The plight of the landless and those who do not possess ownership documents (like adivasi communities) are the worst. They lose their livelihood and do not get any compensation.

The protagonists of SEZ trumpet that the compensation can be used for setting up of new enterprises and also that the money could be invested in the capital market. But these enthusiasts conveniently forget that the compensation disbursed is nowhere near the market value (which is invariably of a different order of magnitude once land-use is changed from agriculture to industry) and that the rural folk do not possess the background, expertise and technical know-how to make use of the ‘opportunities’ opening up in the ‘brave new India’. Once displaced, they would be forced to migrate to cities in search of casual jobs, and would finally end up in urban slums.

Besides, with 60 per cent of the approved SEZs being in the IT and IT Enabled Services sectors, these zones would not create much job opportunities for the unskilled. Thus, even those who get employment end up in menial jobs as contract labourers governed by the ‘hire and fire policy’.

Various studies in the already functioning zones in the country reveal a dismal picture of exploitation of workers. Apart from providing tax exemptions, financial incentives and world-class infrastructure, the zones entice the investors with the promise of cheap labour and peaceful work atmosphere. Since industries in the zones are export-oriented, the emphasis is on minimising production costs so that prices are competitive in the international market. It is the workers who bear the brunt of tight competition in the global market. To meet production targets, they are compelled to work harder and longer until they burn out or quit. They work 10-12 hours a day without overtime allowance, and don’t even get minimum wages stipulated by the state governments. Social security benefits are not properly implemented.


In most of the zones in India (in other countries too), young women between the age of 18-30, constitute the majority of the workforce. Most often they are engaged in the lowest category jobs and very rarely do they traverse up the career graph. They are denied their basic rights, such as maternity leave and benefits, crèches etc. Even pregnant women do not get any consideration while work targets are fixed. Many companies reportedly prefer unmarried women who are assumed to be more docile, more efficient, and more easily available for overtime work.

It is true that some international buyers insist on healthy and safe working conditions and reasonable wages. They play a crucial role in determining the working environment in the firms. Some buyers even visit the companies and place orders only when they are satisfied with the facilities there. There are a few companies in all the zones that abide by labour laws and recognise workers’ basic rights as well as the importance of healthy industrial relations. While some lucky employees benefit from this positive trend, thousands of others try to earn their living in an atmosphere of threat, fear and uncertainty.


Stiff targets, overwork and an unhealthy work environment take their toll on the health of workers. A study on female factory workers, mainly at the MEPZ, done by Padmini Swaminathan, director, Madras Institute of Development Studies, revealed that the women suffered from frequent headaches due to tension and intense concentration at work, acute back pain, joint pains, swelling in the legs, severe abdominal pains, various types of allergies, skin ailments, and piles (the result of sitting in the same position for hours on end). The majority of women working in the garment units suffered from respiratory disorders such as asthma, persistent cough and breathlessness.

While it is true that, unlike in many other countries, in India, labour laws are also applicable to SEZs, in practice these laws are rarely implemented. Workers hardly benefit from labour legislation, not just because the laws are not implemented properly but also because there are many loopholes in the existing legislation. For instance, all zones in the country have been declared ‘public utilities’. This restricts workers from going on strike and reduces the scope for collective bargaining. In effect, the normal structure of labour legislation is rendered inapplicable in SEZs. The State Labour Commissioner does not oversee the zones, the SEZ being regulated entirely by the Development Commissioner heading the SEZ Authority, composed of several corporate individuals, including the main developer.

Although trade union activities are not banned inside the zones, restrictions on the right to join trade unions, the right to collective bargaining and the right to strike are common features of all the zones. Managements threaten employees with dire consequences if they associate with such trade unions. Andhra Pradesh, a frontrunner in the SEZ promotion business, has laid down rules that prohibit external union leaders from entering the zones, which significantly and adversely affects the ability of workers to resist victimization by company managements. By restricting the right to organize, the zones are denying the right to combat poverty, exploitation, and promotion of economic justice, democracy and peace.

Also, the zones are exempted from the Contract Labour (Regulation and Abolition) Act, 1970. This has resulted in the companies in the zones going in for casual/contract labourers than for permanent employees. In many zones, these labourers are provided by middlemen/recruiting agencies and these workers do not even find a place in the companies’ work register and are also forced to surrender a part of their wages as commission.


Despite being the victims of an exploitative work culture, the workers have no real avenues to air their grievances. The powers and obligations of the labour officer has been conferred on the Development Commissioners of the zones. Being the person responsible for maintaining a production-oriented milieu in the zone and attracting investors, the Commissioner invariably tends to go for image-building rather than address the grievances of the workers, who are after all, ‘disposable’ any time.

In fact, the original SEZ Bill, introduced for debate in Parliament in May 2005, had a number of provisions that denied workers even their basic human rights. For instance, Section 50 of the Bill said: ‘Directing that any of the provisions of any state Act relating to trade unions, industrial and labour disputes, welfare of labour including condition of work… invalidity, old-age pensions, and maternity benefits or any other activity relating to the SEZ shall not apply…’ Though this section was later deleted, under pressure from the left parties, the fact that it was even drafted shows that the UPA government actually wanted to keep SEZs out of the purview of the country’s labour laws.


Further, even as the Commerce Ministry insists that SEZs will bring in investments and employment, it is to be noted that neither of these is of a permanent nature. Competition and international trade agreements affect investment decisions and in turn the employment opportunities. For instance, China’s accession to the World Trade Organization and phasing out of the Agreement on Textiles and Clothing (ATC) which allocated clothing export quotas to developing countries, have accelerated the recent trend of shutting down operations in various SEZs throughout the world and relocating to the Chinese zones. The International Textile, Garment, Leather Workers’ Federation (ITGLWF) had estimated that the phenomenal rise of China would lead to a million jobs lost in Bangladesh (an estimate confirmed by the UNDP), another million in Indonesia, around 200,000-250,000 in Sri Lanka, several thousand more in the Philippines and many other countries. Hundreds of factories have closed down in Mexico since their orders have gone to China which offers cheap – and perhaps the most exploited – labour.

Small wonder then that industrial lobbies in India are demanding more liberalized labour laws – like those in China – to compete in the international market. In fact, China’s so-called economic ‘miracle’ comes at a terrible human cost. Since the 1980s, when the communist nation opened up its economy to foreign investments, millions of young workers have been encouraged to toil for low wages for the sake of the country. Rural migrants living in the cities experience the worst kind of abuse in the workplace.

With the number of migrants surging from 2 million to 150-200 million, estimated to hit 300 million by 2015, China is experiencing the world’s largest peacetime migration. Workers at factories in southern China usually labour more than 12 hours a day for 7 days a week, with only a rest day in a month. But recent reports indicate that China is planning to adopt new legislation that seeks to crack down on sweatshops and protect workers’ rights by giving the hitherto weak labour unions real powers to negotiate worker contracts and ground rules regarding workplace safety and protection.


The International Labour Organization (ILO) has over the years made many recommendations towards the improvement of the working of the SEZs. ILO suggests that a tripartite body consisting of representatives of the government, management and workers be formed to monitor the functioning of the zones. Each zone, says ILO, should provide all basic amenities like housing, hospitals and schools for workers and their families. Most importantly, ILO insists that financial incentives and tax exemptions be extended only to those companies which abide by their social obligations and also contribute to local development by using locally available raw materials and transfer of technology. Surprisingly, countries like Dominican Republic and Nicaragua have implemented at least some of the suggestions, while India has made no attempts in this direction.