Textile Industry Needs Flexible Labour Laws, more Favourable Free-Trade Pacts: Expert Panel

To give a boost to the labour-intensive textile sector, a high-level expert panel constituted by the Commerce Ministry has recommended a review of free-trade pacts with countries such as Bangladesh that have zero-duty access to the Indian market, amendment of labour laws to allow flexibility in hiring and firing and fast-track disbursal of subsidies for technology upgradation.

“Modify labour laws (such as the Industrial Disputes Act, 1947) to remove limitation on firm size and allow manufacturing firms to grow,” the 12-member panel headed by economist Surjit Bhalla recommended in its report submitted to the government last week.

The textile industry, which is the second highest job generator after agriculture and directly employing about 45 million people, has been demanding removal of rigid labour laws that hurt operations. The bone of contention has been the law prescribing that any firm employing 100 or more workers has to seek permission from the Labour Department, with jurisdiction over the firm, before any layoffs or retrenchment.

“The high-level group has suggested that limitations on firm size that need not take permission from the Labour Department before terminating employment should go and all firms given the flexibility to decide on the matter to encourage efficiency,” a government official told BusinessLine.

Free-trade pacts like the South Asia Free Trade Agreement (SAFTA) have led to intense competition from countries like Bangladesh which have zero-duty access to the Indian market. The expert group recommended that the government should take a re-look at such pacts and try to work out a solution.

The panel also recommended that the government should aim at driving scale across the textiles value chain by encouraging large investment, consolidation of firms and enlargement of clusters

The panel suggested that there should be fast-track disbursal of subsidies for technology upgradation under the TUFS scheme to help the industry modernise operations.