As States Race to Woo MNCs Shifting Out of China With Labour Reforms, Will Beaureacuracy Rise to Occasion?

For representation: A labourer sleeps on sacks as traffic moves past him in a wholesale market in the old quarters of Delhi. (Reuters)

For representation: A labourer sleeps on sacks as traffic moves past him in a wholesale market in the old quarters of Delhi. (Reuters)

The Prime Minister Narendra Modi-led government is of the opinion that the negative image of China in the international community may help in getting investment worth Rs 25 lakh crore, if the cards are played well.


Brajesh Kumar Singh

Within a span of 24 hours, three BJP-ruled states have announced major changes in their labour laws. On Thursday, Madhya Pradesh and Uttar Pradesh cleared an ordinance to dilute their archaic laws, while Gujarat chief minister Vijay Rupani took the ordinance route the next day. These announcements assume importance as many companies are planning to move their manufacturing facilities out of China after the outbreak of coronavirus. These states are trying to woo companies to their region in a bid to attract investment.

As several countries have blamed China for the Covid-19 pandemic, companies are now looking forward to relocate from the country. Sensing an advantage here, India is looking for opportunities to attract foreign investors. And New Delhi, here, has an advantage as labour in our country is cheaper as compared to China.

The Prime Minister Narendra Modi-led government is of the opinion that the negative image of China in the international community may help in getting investment worth Rs 25 lakh crore, if the cards are played well.

According to the plan, the Centre, through its various departments and officers, have contacted around one thousand companies in the past two weeks. Presently, these companies have manufacturing units in China and now they are planning to relocate from there. India is trying to lure them. This may also help boost the Make in India campaign of the Centre.

Most of the nations have started realising that China cannot be trusted. According to them, after becoming a global manufacturing hub, China started dictating terms to the world. But the most serious charges being levelled against China these days are that it hid the information related to coronavirus from the world for several weeks. This belief has lowered the prestige of China in the world. For them, China is a villain who has thrown the world in the mouth of pandemic.

Also, the countries have now realised that they should not keep all the eggs in one basket. This means, they should not depend on just one country for all their needs. The truth is that China has developed itself as the largest manufacturing hub of the world. In this case, if something happens to China, the whole world will come to a grinding halt as for everything essential in life, they are dependent on just one country.

As a consequence of this, countries like US, Japan and Australia have advised their companies to stay away from China. Japan has even proposed a fund of $2.2 billion to encourage its companies to leave China so that they do not suffer economically if they decide to relocate back to Japan and even some other countries.

The diplomatic stubbornness of China has made it a villain in the eyes of the world. It’s relationship with US and Japan has gone from bad to worse, and its expansionist attitude in South China Sea, has angered its neighbours and they are not very happy with China.

China’s high-headedness could be gauged from the fact that when the Australian prime minister blamed China for the virus outbreak and said that China should pay them compensation, Beijing rebuked Australia saying its worth is not more than a chewing-gum stuck to the sole of its shoes. Now all these things are going against it and this is provoking global community to end its dependence on China.

India sees, an opportunity for itself when the whole world has turned against China. Even all the states of India are trying to lure these companies. Apart from a state like Gujarat, which is developed, Madhya Pradesh and Uttar Pradesh are also trying their luck who were not so lucky earlier and were left behind in the race.

Shivraj Singh Chauhan, the Chief Minister of Madhya Pradesh has been eagerly waiting to take advantage of this situation and was the first state to announce many reforms in its labour laws. Shivraj is playing his fourth innings as Chief Minister of the state. During his last stint, he was successful in bringing industrial investments in many areas through investment summits. But now, at the time of the pandemic, Shivraj thinks, there is an opportunity for Madhya Pradesh and wants to go for a long jump on the basis of the ground works he had done previously.

Shivraj knows that labour law reforms have been one big obstacle that keeps coming in the way of foreign investments in India. That is why on Thursday, he announced changes in the state’s labour laws.

While announcing this, he did not mince his words and invited companies to his state from China. Announcing reform in the labour laws, is considered a step towards giving impetus to industrial activities in the state along with creating conducive conditions for foreign investments as well so that employment opportunities are created in the times of Covid-19 pandemic by making good use of the opportunities available. But as is obvious, this is possible only when the labour laws of the state comply with the international standards and are made competitive. They need to be so transparent that it is easier to take decisions.

As per the changes introduced in the labour laws by the ordinance, companies will require to spend less than 24 hours in obtaining labour-related registration which took months earlier. Not only this, now licences for factories will not be renewed every year, it will be renewed for ten years now. Companies will not be made to run around offices for getting renewal licence and all these things will be done online now. In case of start-Ups, renewal will not be required after the registration.

To make the adherence of labour laws in factories smooth, a new slogan of ‘one register, one return’ has been given. Earlier, factories had to maintain 61 registers related to labour laws and and had to file many types of returns. But now this has been done away with and only one register will be required to maintain. Self-attestation will be sufficient for the return.

Factory inspector will not be allowed to inspect factories time and again and system of third party inspection has been made easy. Industrialists will not be required to visit labour courts at the drop of the hat and the management will be allowed free hand to recruit workers and labours as per their needs. The government’s interference has been completely done away with.

Women will be allowed to work in the night shifts in IT companies. The aim of all these reforms in labour laws is to attract maximum foreign investments in next thousand days by giving concessions to industries. Shivraj knows that red tape is the biggest hurdle in the ways of foreign investment. The previous labour laws were considered a huge drawback, that is why big reforms were announced.

Madhya Pradesh is looking for investments in an area that is labour intensive. The state boasts of having a large number of skilled labour force and millions of jobs are expected to be available in labour-intensive industries here. Textiles, garments, food processing and IT sector companies are already in Madhya Pradesh.

All these companies are labour intensive. For example, in textile and garment industries, the share of labour is around 50% in the total cost while in IT sector, it goes up to 70-80%. So, these industries are good for MP. The availability of cheap and skilled labour in MP will reduce the operation cost of the companies if they decide to come here, especially now when labour laws have been changed.

Apart from taking policy decisions like reforming the labour laws, MP has also organised webinars in the midst of coronavirus pandemic to talk to a large number of companies who may be interested to come to the state. Officers of Madhya Pradesh have used US-India Forum to establish contacts with companies like Walmart, Amazon, Pepsi and Coca Cola and told them how investing in MP will help them.

The Principal Secretary of MP, Rajesh Rajora, is set to contact Japanese companies. For this, Japan’s industrial forum JETRO will come in use. Germany and UK are also on MP’s radar. The companies in these countries are being contacted through Embassies and High Commissions. They are taking the help of all the units of the government of India, who are aggressively advancing the campaign of Make in India for last many years.

Apart from those investing with new machineries, plan is afoot to provide incentives to those companies who wish to relocate to the state from China with their old machineries. All the preparations are aimed to not allow the opportunity slip from their hands.

Madhya Pradesh has no dearth of water, electricity and minerals. The state is also trying to ensure availability of land which is very crucial component for establishing factories. The state government has already identified 1.20 lakh acre of land and more than 150 industrial parks have been developed. State administration is fast tracking works of companies, including production by plug and play.

Even Gujarat is doing the same thing. The Rupani government has been preparing for this for last several months. Anger against China due to Covid-19 pandemic has made this opportunity available to them. And the state does not want to be left behind.

Keeping this in mind, the state has announced reform in labour laws and has directly invited companies who wish to relocate to India from China. As per the announcement made by Rupani, if a company brings a project of 1,200 days, they will be given relaxations in adhering to most of the labour laws. They will only have to ensure safety to labourers, minimum wages and compensations to the dependents of his family members in the event of death of a labourer.

Rupani has announced that companies from Japan, Korea and US, who are planning to exit China, may be relocated to the special economic zones in Sanand and Dahej and in the industrial parks of Gujarat Industrial Development Corporation where they are ready to provide them 33,000 hectare land.

Dholera, which is being developed keeping in mind the foreign investment, is being upgraded with infrastructural facilities at a fast pace so that companies from abroad can be attracted.

The Gujarat government is going to appoint a nodal officer for those companies planning to relocate from China. MK Das, the Principal Secretary in Chief Minister’s Office and also Principal Secretary, Department of Industry, says that for the past few years, Gujarat has been able to maintain top position as far as FDI is concerned. He says that during the pandemic also, Gujarat is ready to convert the crisis into opportunity to advance the efforts of industrial development and investments to create huge employment in the state.

The state government is in touch with all the agencies of the Centre such as embassies and foreign trade organisations. The Rupani government has been trying to follow the roadmap developed by Narendra Modi — the chief minister of the state for 13 years — to attract FDI.

Even UP government is also not far behind. PM Modi is representing Varanasi in Parliament for last six years. Yogi Adityanath, who was made Chief Minister in 2017, is treading on the path shown by Modi. Following this, even Yogi Adityanath announced major reforms in the labour laws of the state, the same day when another BJP-ruled state Madhya Pradesh did so and issued ordinance.

The UP government has said that the new labour law will provide incentives for the next three years to the companies establishing industries in the state. These laws include industrial disputes, issues related to trade unions and contract workers. Only laws related to timely payment of wages and compensation laws remain. The state government has already issued the ordinance in this regard.

It is clear that Yogi Adityanath is very much eager to attract FDI in the state. The state had already missed an opportunity to reap benefits from foreign investments in 1990 during liberalisation. But CM Yogi does not want the state to be left behind this time as well. Due to bad law and order situations in the state, no companies were ready to come to the state with the proposal of big investments. But Yogi has changed the situation and has implemented the rule of zero tolerance for crimes and criminals successfully.

UP is full of potentials. Noida and Greater Noida are already established IT hubs. In this situation, if companies from China wish to relocate in UP, they can be accommodated in Noida, Greater Noida and Meerut as well. UP has the major share in the National Capital Region. This region is fast emerging as economic capital of the country like Mumbai. A new airport is coming up in Jewar. All these could go in favour of UP and companies exiting China may opt to come to this state.

There was a time when a lot of industries were in UP. Kanpur was an industrial hub but law and order problems, redtape and corruption compelled industries to leave UP and go to other states.

But now the Yogi government has the opportunity to improve the industrial scenario of the state once again. He has the blessings of PM Modi, who is a member of Parliament from Varanasi.

By announcing reforms in labour laws, CM Yogi has given the impression that he is willing to take the challenge and he has taken steps in the direction of attracting FDI. By improving the law and order situation in the state, Yogi has already created an image for himself. In the times of pandemic, he has given the impression of being an able administrator also. UP has the advantage of having a huge number of cheap and skilled labour available in the state, which may help in establishing labour-intensive industries.

The only challenge that Yogi now faces is to ensure things required for proper functioning of the firms are in place. These are cheap electricity and water, better environment, better infrastructure including road, better transportation facilities and system to treat effluents coming out of factories, easy availability of land on cheaper rates, fast tracking of investment proposals, and contacting the potential investors and not allowing them to get disappointed.

Sunil Parikh, an industry watcher, who was formerly associated with CII and is strategic advisers of many companies, says that today several Indian states are competing with each other by providing better facilities and if UP is left behind, then it will not be able to reap the dividends of this opportunity by attracting FDI.

The biggest challenge for Yogi is to tame the bureaucracy so that they keep the state on course. It’s not just the population that makes UP biggest state of India, but it also has the largest number of officials and bureaucrats. These officers still have a feudal mindset and have not been able to consider themselves as servants of people. PM Modi has to remind them about this time and again. It is not possible for a potential investor or a company to bear this feudal attitude of officers.

Yogi will have to learn this from PM Modi, especially the path he has shown as Chief Minister of Gujarat. In 2003, when Modi started Vibrant Gujarat investor summit to attract investments in the state, he projected himself as CEO of the state and not the Chief Minister. He acted as a global CEO of a company who could take decision without wasting much time.

Modi also taught his colleagues and officials to be a ‘Karmyogi. He made them attend a short term course in IIM Ahmedabad and kept running the special training programme throughout the year to change the attitude of the officials.

He paid attention to each project, approved their investment proposals and monitored and tracked each of them from beginning to end. This was visible when Ratan Tata decided to take away his Nano factory from Singur in West Bengal as Mamata Banerjee opposed it. Without losing even a minute, Modi sent him a personal message of 'Welcome to Gujarat'. After reaching Gujarat, when Ratan Tata was signing the agreement with Modi in Gandhinagar, officials of the state government were busy repairing the road which led to the site where the Nano factory was to be located. This was not less than a wonder even for Ratan Tata about which he spoke in Vibrant Gujarat summit.

Yogi too, will have to fine-tune his bureaucracy to achieve this goal. Merely conducting meetings will take him nowhere. He will have to strengthen the communication and make it more effective. If you have to understand the attitude of the bureaucracy of the three states which have announced big ticket reforms in labour laws, then my experience will be a glimpse into it.

The Information and Industrial departments of Madhya Pradesh and Gujarat took just five to 15 minutes to tell me about the possibilities of companies relocating out of China and FDI that these states may attract and what preparation these states have made. But the officials of these two departments in UP have not been able to provide details even after 36 hours despite reading the message.

This difference is that of attitude. One needs to remember that any CEO of a company will not wait even for five minutes for your response when other states are better prepared and waiting with garlands in their hands. PM Modi’s slogan of Cooperative Federalism has assumed the shape of Competitive Federalism in respect of attracting FDI during the times of virus pandemic. States ruled by BJP and non-BJP governments, all have busied themselves in preparing for this. Any state who is going to be slack on this score, will not be able to forget this nightmare of missed opportunity in next 30 years for a chance that has come to them after three decades. And history is witness to it.

The largest state of the country is making big noise under the leadership of Yogi Adityanath to remain ahead in the race. But he will have to act constantly to change the ground reality and he, of course, is famous for that. One should learn from history as well. TSR Subramaniyan, who was Chief Secretary of UP and retired as Cabinet Secretary of India, has mentioned why UP has slipped on the front of industrialisation in his book “Journeys through Babudom and Netaland”. He has written that after leaders, officers have contributed greatly to this. It is hoped that this story is not repeated and at least Yogi would wish so, but then nothing can be said about his babus.

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