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India sets out long-overdue clothing sector labour reform

Indian garment exporters have widely welcomed a series of financial and labour reforms announced by the government last week to generate 1m jobs and boost exports by $9.5bn over three years.

The cabinet has earmarked additional funding of US$880m for a duty drawback scheme and to also refund state government levies paid by the garment exporters.

It has also increased subsidies provided to garment manufacturing units, under an amended Technology Upgradation Fund Scheme (TUFS), from covering 15% of costs to 25%.

But most importantly, the government has also introduced labour reforms that will enable factories to take on temporary workers for core clothing manufacturing work. Until now, this right was restricted to non-core tasks like security, gardening, cleaning, building maintenance, transport and loading/unloading.

The reforms do, however, insist that clothing manufacturers offer the same pay, daily hours and benefits to fixed term contract workers as with permanent staff.

Moreover, overtime caps will be increased from four to eight hours a week. And the government has also made paying to India's Employee Provident Fund Scheme optional for the garment workers who earn less than US$224 a month.

The government hopes that a more efficient garment sector will emerge as a result, with a resulting increase in garment exports of US$9.5bn, 950,000 more jobs and US$2.7bn in additional investment over the next three years, according to a notice from the central government's ministry of textiles.

Unions resist plans

But unions have opposed the move and described the changes as "anti-worker measures" that impose "slavery on the workers." They have also called a general strike for 2 September.

In a communiqué, Tapan Sen, general secretary of Centre of Indian Trade Unions, said: "The government has put forward the bogus argument that the garment industry is 'seasonal', to find a plea to introduce the 'fixed term employment' and facilitate 'hire and fire' of workers as per the convenience of the employers."

Efficiency gains

The clothing industry has backed the package, however. "The new measures will bring down the cost [of the Indian garment industry] by 3% to 4%," A Sakthivel, president of the Tirupur Exporters' Association, told just-style. "This will enable us to achieve the target of US$20bn worth of garment exports for the current financial year [ending March 2017]," he says.

Sudhir Dhingra, chairman and managing director of Orient Craft, a garment exporter in Gurgaon, near New Delhi, says the reform's encouragement of temporary labour would help the apparel industry given its uneven level of orders.

"Companies were very fearful of engaging more people as they could not fire them [under the existing labour laws]," he told just-style.

As a result, manufacturers have tended to engage labour contractors to source workers for short time periods, but this has generated labour relations difficulties, says Dhingra. "Contractors are infamous for not giving labour their benefits," he explains, adding: "They will claim it from us, yet not pay [to the workers]."

And this can make manufacturers fail on their social compliance obligations to foreign buyers, especially when combined with previous tight overtime limits.

"Labourers leave their home towns to make extra money and would not work without long overtime hours, while the regulations permitted only 45 minutes a day [of overtime]," he says.

Meanwhile, making provident fund payments optional will also allow companies to avoid unnecessary costs. Workers, especially tailors, keep moving from one city to another and resent being told to pay into a provident fund scheme, says Rahul Mehta, president of the Clothing Manufacturers Association of India (CMAI), in Mumbai.

"They want full money according to their per piece rate," he told just-style. As a result, employers have often ended up paying employees' contributions in addition to their own share, he explains.

Darshan Lal Sharma, a member of the Confederation of Indian Industry's national committee on textiles, argues that with these labour reforms, India will be better able to compete with Bangladesh and Vietnam in the global garment export market.

"India can provide full value chain supplies but local companies were not able to compete on cost," he told just-style, noting Bangladesh's least developed country status and associated market access; and Vietnam's free trade agreement with the European Union.

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