New Delhi, June 18: The Planning Commission in its draft approach paper to the Eleventh Five-Year Plan has proposed flexible entry and exit norms for export units and modification of the contract labour act, moves certain to generate murmurs of disapproval from the Left.
Further proposals to dereserve the small-scale sector and lease of farm lands to companies may turn the drone of disenchantment to howls of outrage.
In the approach paper, the commission says, “Flexibility in entry and exit of firms in production activities ... is important if firms are to aggressively enter the export trade.”
Advisers say the textile sector is yet to fully exploit the opportunities provided by the phasing out of the Multi-Fiber Agreement (MFA) last year. “Given our comparative advantages we should be a far bigger player in the global trade in textile and clothing ... unfortunately archaic laws, lack of industrial flexibility which would have allowed entrepreneurs to shut shop in one place and move over to a different line in the same trade, perhaps in a more viable location, are holding back the business,” the paper said.
However, government officials said safeguards are needed while tinkering with the exit and entry rules, since the textile industry employs about 35 million people. “Allowing businesses to shut shop with greater ease should not result in huge displacement of manpower in certain states as otherwise the plan could cost the country greater socio-political unrest than the economic gains it could reap from the move,” the official said.
Similarly, the proposal to complete the process of dereserving the small-scale sector is ripe with the possibilities of confrontation with both the Left and domestic industry. Nearly 600 product lines are still reserved for the small scale sector, including textile products. The government feels “the process of dereservation of products for small scale sector needs to be completed ... (to take advantage of) integration with the global economy (which) provides vast scope for expanding manufactured exports of labour intensive products,” the paper said.
The Planning Commission also wants to change the contract labour act. The new legislation may allow employers to hire skilled personnel on contract at wages far higher than prevailing norms.
While industry will be pleased, trade unions and rights groups may be left fuming. However, the new laws are likely to give contract workers some benefits such as retrenchment compensation.
The panel will also impart a fresh thrust to contract farming. Farmers in states having contract farms, such as Punjab, had protested against the leasing out of holdings to companies, fearing loss of livelihoods.
The plan panel, however, argues “since demand for exports and agro-processing requires quality consistency, contract farming with quality seeds, assured price and income insurance need to be developed.”