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Development of Special Economic Zones and its Impact on Labour Rights and Livelihood in NCR

Labour Regime within SEZ Law 204

CHAPTER - 4

LABOUR REGIME WITHIN SEZ LAW

4.1 Introduction

This chapter focuses on the labour rights regime established under the Special

Economic Zones Act, 2005 (hereinafter referred to as SEZs Act). Since the Special

Economic Zones Act, 2005 lies at the core of this framework, analysis of labour rights

is undertaken with specific reference to the provisions of the Act along with its

interface with the legislations and policies of different states in India. This is done

with a view to appraise the law from the point of view of the normative commitment

to labour rights. Further, since law is not an autonomous realm, the legislations do not

exist in vacuum but are grounded in the social, economic and political context in

which they are enacted. This necessitates an insight into the context in which the law

was enacted and the rationale behind the same together with the concerns emanating

with respect to the ideological grounding of the legislation especially with regard to

labour. In pursuance of the aforementioned aims the first section of the chapter

unravels the ideological basis of the Act and delves into the implications for labour

that are integral to the same and given the ideological grounding of the Act, the labour

regime established under the Act remains impregnated with those implications.

Comparison of the approach towards labour embodied in the legislations pertaining to

SEZs/EPZs across the world is undertaken in the second section of the chapter with a

view to locate the Indian legislation within the broader international trends. Third

section of the chapter analyses the debates that took place in the Parliament of India

with respect to the SEZ Bill in order to offer an insight into the evolution of the

provisions pertaining to labour in the said legislation. Finally the approach of SEZs

law with respect to labour is sought to be ascertained through an in depth analysis of

the provisions relating to labour embodied in the central legislation, state legislations

and policies.

4.2 Legal Framework of SEZs: Context, Rationale and Implications for Labour

Rights

4.2.1 Context

Purpose of promoting export-led growth by providing “internationally competitive

environment for exports” recognized in the objects and reasons appended to the

legislation refer to the context of economic globalization. This is further buttressed by



reference to the proclaimed necessity of SEZ legislation which seeks to establish

framework “in line with international practice.”1 These references in the objects and

reasons of the Act undeniably indicate the broader international milieu in the

background of which this legislation is enacted. What emerges from these references

is that economic globalization marked by free trade, free movement of capital,

currencies and financial transactions, transformation of labour markets and work

practices2

At the same time in the context of enactment of the SEZs Act one must not lose sight

of the fact that the states are differently placed in the world system which is

experiencing economic globalization and thus the process of economic globalization

is differentially related to the legal changes in different states. As it has been pointed

out by Boaventura de Sousa Santos, in an unequal world system

necessitated the enactment of the said legislation so as to avoid India from

falling out of line with the international practice and thus losing out to others in the

internationally competitive environment. Thus in order to remain competitive in the

world which secures free movement of capital, it is the ability to attract and retain

capital investment within the territory of the state that to a large extent determines the

growth potential of an economy.

3 constituted by core,

semi peripheral and peripheral states,4 the position of the state in this system “affects

its role in social regulation, as well as its relationship with market and with civil

society.” Therefore in order to fully grasp the reasons, context and implications of a

law like the SEZs Act with respect to labour one must not lose sight of the “decisive”

role of global practices in last three decades in determining “the production of law

inside each state territory” depending on the position of the state in the world system.5

A sound basis to explore the rationale behind a particular legislation is the raison

d’etre of the legislation. As reflected in the long title of the Act, “promotion of

4.2.2 Rationale

1 The Special Economic Zones Act, 2005, Statement of Objects and Reasons. 2 Andrew Jones, Dictionary of Globalisation 70-71 (Polity Press, Cambridge, 2006). 3 World Systems Theory propounded by Immanuel Wallerstein. Generally see P.W.Preston,

Development Theory: An Introduction (Blackwell, Oxford, 1996). 4 Countries of the core are sites of global economic power and wealth and associated political influence,

countries of semi periphery reflect mix of characteristics of core and periphery i.e. industry, export power, prosperity and poverty, primary product reliance and vulnerability to outside decision making, periphery is the backwater of the world system which does little but provide raw materials for industries elsewhere and have poor living conditions and bleak development prospects.



exports” is the purpose behind the Act.6 Thus the Act which provides the legal, fiscal

and administrative framework for the establishment, development and management of

Special Economic Zones in India for the purpose of promoting exports is thus

definitely based on the belief that these zones give a fillip to exports. The assumption

is that this fillip, however, does not emerge in a vacuum but has to be facilitated

through the creation of these zones which are governed by laws, administrative and

other facilities different from the general or even export based industrialization in the

rest of the economy. The promotion of exports by providing incentives to attract

foreign and domestic investment in SEZs is with a view to promote export-led

growth.7

In the contemporary world exports have been proclaimed as a “very major engine of

growth.”

8 Cling and Letilly point out that “the adoption of export-led growth

strategies by developing countries is directly responsible for the considerable

expansion of export processing zones in recent years.”9 SEZs Act was thus an attempt

to attract foreign direct investment, which cannot per se be directed, alongwith

domestic investment in a global competitive situation on SEZs.10

1980s, when many developing countries were faced with a debt crisis, the cause of the

crisis was attributed to the excessive govt. regulation whereby “too much govt. spent

too much money to implement import-substitution-industrialisation” and therefore a

common policy advice came to be tendered to the developing countries i.e. to follow

This rationale which

forms the proclaimed basis of this legislation is however, not an indigenously

developed one but is one which constitutes the globally dominant discourse on

development, its pre-requisites, means and ends. Therefore, to fully appreciate the

implications of such an approach, embodied in the legislation, with respect to labour,

an insight into the discourse is certainly in order.

5 Boaventura de Sousa Santos, Toward a New Legal Common Sense 96 (Butterworths Lexis Nexis,

London, 2002). 6 An Act to provide for the establishment, development and management of the Special Economic Zones

for the promotion of exports and for matters connected therewith or incidental thereto. 7 The Special Economic Zones Act, 2005, Statement of Objects and Reasons. 8 Ibid. 9 J. Cling, G. Letilley, “Export Processing Zones: A Threatened Instrument for Global Economy

Insertion?” in William Milberg, Mathew Amengual, “Economic Development and Working Conditions in Export Processing Zones: A Survey of Trends,” Working Paper ILO 26 (2008).

10 Kamal Nath, Minister of Commerce and Industry, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22.



export oriented path to development like the one projected11 to have been pursued by

the newly industrializing countries (NICs) of East Asia like South Korea, Taiwan,

Hong kong, Singapore, Mexico.12 The World Bank and IMF became the “missionary

institutions”13 to promote “market oriented structural adjustment” of the developing

countries to enable them to imitate the NICs path by making the loans tendered for

overcoming the balance of payment crisis contingent upon the country’s commitment

towards pursuance of the policy prescription that focused on trade related economic

sectors designed to enhance efficiency and export orientation.14 This was possible

because these institutions are led by the “collective will of G7.”15 United States is the

only country enjoying effective veto in IMF.16 Therefore the two factors i.e.

domination of these institutions by the developed countries, and reliance of

developing countries on these institutions for financial assistance ensured that the

ideology of development based on free market which came to be preached in USA

and UK under the auspices of Ronald Reagan and Margaret Thatcher were also

“pushed on the reluctant poor countries.”17 Thus by the 1990s this neo-liberal

prescription of free trade, free investment, deregulation and privatization became the

dogma of development establishment.18

The rationale behind the strategy imbibed in the SEZs Act itself raises a number of

concerns with respect to labour. An interdisciplinary deconstruction of the rationale

amply demonstrates the centrality of labour oppression to the strategy on which the

legislation is based. This in turn indicates that such a law is inevitably devoid of any

4.2.3 Implications of the Rationale for Labour Rights

11 This was done despite evidence of active role of the states in those countries in creating, shaping and

guiding markets as well as import substitution being practiced by them as well. See Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match 14 (Paradigm Publishers, USA, 2009); Joseph Stiglitz, Globalisation and its Discontents 10 (Penguin Books, USA, 2002).

12 Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match 13-15(Paradigm Publishers, USA, 2009).

13 Joseph Stiglitz, Globalisation and its Discontents 13 (Penguin Books, USA, 2002). 14 John Williamson, “Lending Policies of the International Monetary Fund” 1 Policy Analysis in

International Economics Series, 22 Institute for International Economics, Washington (1982), in Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match, 16 (Paradigm Publishers, USA, 2009); also see Joseph Stiglitz, Globalisation and Its Discontents, 13 (Penguin Books, USA, 2002).

15 Joseph Stiglitz, Globalisation and its Discontents 14-15 (penguin Books, USA, 2002) .G7 include United States, Japan, Germany, Canada, Italy, France and UK.

16 Id., at p. 12. 17 Id., at p. 13. 18 Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match 14 (Paradigm

Publishers, USA, 2009).



potential to respect and protect enjoyment of labour rights. Therefore despite the

purported commitment (of whatever degree) reflected in the words of the legislation

with respect to labour rights, it remains still born. A journey through different

disciplines is thus undertaken to establish the same.

The developmental dogma promoted through the World Bank and IMF as a panacea

for the ills affecting the developing countries was far from being completely altruistic

and benign. Free trade, free investment, deregulation and privatization meant

withdrawal of the state from its role in regulating the market and incurring wasteful

expenditure in doing same. Withdrawal of the state also embodied prescription of

exercise of fiscal prudence by the state marked by reduction in deficits.19 Reduction in

govt. expenditure in order to reduce budget deficit, has a “contractionary or

deflationary impact”20 resulting in an “overall, magnified fall in the purchasing

power” which in turn means “ a shrinking market at home for selling goods, typically

leading to loss of income and employment all around.”21 The situation is exacerbated

by diversion of resources by the states from domestically oriented output to export and

investment promotion policies22 in tune with the necessities arising out of

operationalisation of prescriptions for development. On account of the fall in

purchasing power consumption of goods produced in internal market gets compressed

which “implies a corresponding reduction in labour cost.”23 The situation of labour is

further exacerbated by the belief that “labour market interventions misallocate labour;

they waste resources through rent seeking; they impair adjustments to economic

shocks; and they deter investment, thereby reducing rates of growth.”24 This situation

promoted through the imposition of the dominant ideology of neo-liberalism, supports

the “relocation of economic activity from the rich countries to the poor countries,”25

19 Atul Kohli, Democracy and Development in India: From Socialism to Pro-Business 170 (Oxford

University Press, 2009). 20 Utsa Panaik, “Why Hunger is on Increase?” in Michael Higgins et al (eds.), Food Security and Judicial

Activism in India 102 (Human Rights Law Network, 2007). 21 Amit Bhaduri, Deepak Nayyar, The Intelligent Person’s Guide to Liberalisation 59 (Penguin books,

New Delhi, 1996). 22 Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match 17 (Paradigm

Publishers, USA, 2009). 23 Michel Chossudovsky, The Globalisation of Poverty: Impact of IMF and World Bank Reforms 77 (Zed

Books, London, 1997). 24 Asian Development Bank, Labour Markets in Asia: Promoting full, Productive and Decent

Employment, 27 (2005). 25 Michel Chossudovsky, The Globalisation of Poverty: Impact of IMF and World Bank Reforms 76 (Zed

Books, London, 1997).

in

the contemporary world economy which is marked by “the relocation of a substantial



share of the industrial base of the advanced countries to cheap labour locations in

developing countries.”26 Michel Chossudovsky27

Secondly, similar structural adjustment policy prescription stipulating export oriented

growth to all the developing countries by the World Bank and IMF had an inherent

weakness. The weakness referred to as “fallacy of composition” problem emerged on

account of the “simultaneous pursuit of net export growth by many countries around

the world.”

thus holds

The globalization of poverty endorses the development of a worldwide

cheap-labour export economy; the possibilities of production are immense

given the mass of cheap impoverished workers throughout the world

Global poverty is an input from supply side, the global economic system

feeds on cheap labour.

28 Since on a global scale “imports are by definition equal to exports not all

the countries can at once achieve positive net exports.”29 United States large trade

deficit over the past ten years allowed many countries to have positive net exports and

balancing act on the part of the former is likely to put the latter in peril.30

Thirdly, simultaneous promotion of export led growth in the developing countries

results in competition between developing countries, all of which “want to export to

the same European and North American markets.”

31 Two categories of battles get

unleashed by this. First to offer “cheaper more docile labour forces” along with

“attractive financial incentives to lure global corporations’ assembly lines away from

the other countries and second to “win scarce export markets.”32 One advertisement

from Sri Lanka’s which captures the sentiment is as follows33

Sri Lanka challenges you to match the advantages of its Free Trade Zone,

against those being offered elsewhere. . . Sri Lanka has the lowest labour

rates in Asia.

26 Id., at p. 75. 27 Id., at pp. 75, 76. 28 William Milberg, Mathew Amengual, “Economic Development and Working Conditions in Export

Processing Zones: A Survey of Trends” Working Paper ILO, 27 (2008). 29 Ibid. 30 Ibid. 31 Michel Chossudovsky, The Globalisation of Poverty: Impact of IMF and World Bank Reforms 77 (Zed

Books, London, 1997). 32 Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match 17 (Paradigm

Publishers, USA, 2009).



The number of unemployed people across the globe together with the ease with which

capital can move from one location to another strongly condition the level of labour

cost.34

Not only this even the struggle of the labour for fair conditions of work and fair wages

is sought to be suppressed on account of the ability of capital to move to other

location which as Chossudovsky puts offer “reserve armies of labour.”

As succinctly put by Chossudovsky:

World unemployment becomes “a lever” of global capital accumulation

which “regulates” the cost of labour in each of the national economies. Mass

poverty regulates the international cost of labour.

35 This is also

reflected in the following remark by a global-corporate executive36

The global context thus puts labour in a situation where it is compelled to bear

injustice without even the possibility of protesting against it for the fear of moving

from the frying pan into fire i.e. from a condition of indecent employment to

unemployment. This is also on account of the fact that in the absence of floor of

labour standards adhered to by states in SEZs the firms rather than adopting “high

road to growth i.e. increasing productivity with innovations in technology, product

design, organisation etc” are enticed to follow “low road to growth i.e. reducing their

unit costs by lowering wages and labour standards.”

We tell the [Philippine] government: you’ve got to clamp down [on labour] .

. . Or we threaten to move elsewhere. And we’ll do just that. There’s Sri

Lanka [and] now China too.

37 This leads states into vicious

cycle of low wage and low productivity inevitably leading to “race to the bottom.”38

33 “Far Eastern Economic Review, 16 Oct’ 1981, in Robin Broad, John Cavanagh, Development

Redefined: How the Market Met its Match, 17 (Paradigm Publishers, USA, 2009). 34 Michel Chossudovsky, The Globalisation of Poverty: Impact of IMF and World Bank Reforms 80 (Zed

Books, London, 1997). 35 Ibid. 36 Remark made in an interview with Manila-based global-corporate executive in 1981 cited in Robin

Broad, John Cavanagh, Development Redefined: How the Market Met its Match, 17 (Paradigm Publishers, USA, 2009).

37 F. Wilkinson, “Why Britain Needs a National Minimum Wage?” 1992, NBER, London, Sengenberger, in W. and Campbell, D. “Creating Opportunities: Role of Labour Standards in Industrial Restructuring,” IILS (1994), in Praveen Jha, Sakti Golder, “Labour Market Regulation and Economic Performance: A Critical Review of Arguments and Some Plausible Lessons for India” 1 Economic and labour Market Papers, ILO 4 (2008).

38 Blanchflower D. and Andrew J. Oswald, The Wage Curve (MIT Press, Cambridge, 1994), in Praveen Jha, Sakti Golder, “Labour Market Regulation and Economic Performance: A Critical Review of



Competition between countries with respect to limited markets “obliges the third

world producers to cut their prices.”39 It is on account of the same that despite a

substantial increase in the volume of exports from the developing countries the value

of export revenues has deteriorated.40 Value of exports also deteriorated on account of

technological innovation since late 1970s. This led to global fragmentation of

production which in turn resulted in the developing countries getting marginal

segments of scattered assembly line processes rather than complete industrial

processes received by the NICs earlier.41 This implied wide disparity between gross

value of industrial export earnings and actual value added to the product in developing

country.42 Thus segmentation of production process and reliance of a developing

country on imports in the form of machinery, component parts, packaging material

etc. for the purposes of production resulted in lowering the domestic value addition.

For instance, “for every dollar of non-traditional export earnings, only 25% stayed in

the Philippines; the rest was siphoned off by import payments.”43 Further export led

growth also had to withstand the challenge of import substitution policies followed by

the corporates, “new protectionism” adopted by the developed countries in the form of

Multi-Fiber arrangement as well as labour saving use of application of

microprocessors.44

1. Inclusionary Regime – It encompasses those systems where the national labour

laws are fully applicable to SEZs as well

4.3 Labour Laws in SEZs/EPZs: Inter Country Comparison

Three categories of SEZ/EPZ labour law regimes can be discerned from inter country

comparison of the special legislations with respect to these zones or the general

interface between labour law and SEZ/EPZ law in a particular country. These are as

follows:

Arguments and Some Plausible Lessons for India” 1 Economic and labour Market Papers, ILO 4 (2008).

39 Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match, 17 (Paradigm Publishers, USA, 2009).

40 Id., at p. 78. 41 Id., at p. 19. 42 Ibid. 43 World Bank Report on Philippines: Staff Appraisal Report on the Industrial Finance Project, 4 (April 7,

1981), in Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match19 (Paradigm Publishers, USA, 2009).

44 Robin Broad, John Cavanagh (2009) Development Redefined: How the Market Met its Match, 20-23 (Paradigm Publishers, USA, 2009).



2. Exclusionary Regime – It encompasses those systems where the application of

national labour laws or particular provisions is completely and expressly

excluded with respect to SEZs

3. Special/Altered Regime – It refers to those systems where a separate labour law

regime is established for governing labour relations in SEZs or changes are

introduced in the existing national regimes and that altered regime governs

labour relations in SEZs. It may also be a combination of inclusionary and

exclusionary regimes where certain legislations are applicable whereas

applicability of certain others is excluded from the zones or it may be a regime

which secures altered conditions of work for labour in SEZs not by altering the

law but by taking advantage of the spaces available in the national regimes

within the substance or the procedure established for realization of rights.

4. Chart 4.1 – Classification of SEZ/EPZ Labour Rights Regimes



The following table classifies labour law regimes prevalent in EPZs across 26

countries of the world

Table 4.1 - Labour Laws in SEZ/EPZs: Inter Country Comparison45

S.

No.

Country Application of

Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

1 Bahamas Same law

applicable

2 Belize Same law

applicable

Officially, trade unions

are not banned in the

banana plantations or

the EPZs, however

workers have

traditionally had

problems organising

themselves in these

sectors.46

3 Costa Rica Same law

applicable47

Law no. 7360

prohibits anti

trade union

practices,

protects persons

forming or

leading trade

union or

representing

workers

48

The few unionised

workers in EPZs face

harassment and unfair

dismissal. The number

of labour inspectors

remains far too low to

deal with the amount

of unfair dismissals

among this large

segment of the

workforce. Organising

is virtually non-

existent in the zones.

49

45 Unless otherwise indicated the table is based on the information collated from http://survey07.ituc-

csi.org/getcountry.php?IDCountry=NIC&IDLang=EN and http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=BLZ&Lang=EN.

46 http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=BLZ&Lang=EN. 47 ILO, Labour and Social Issues relating to Export Processing Zones 24 (1998). 48 Ibid. 49 http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=CRI&Lang=EN.

http://survey07.ituc-csi.org/getcountry.php?IDCountry=NIC&IDLang=EN�

http://survey07.ituc-csi.org/getcountry.php?IDCountry=NIC&IDLang=EN�



S.

No.


Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

4 Dominican

Republic

Same law

applicable

Of the 57 companies

that operate in the

EPZs and employ

about 155,000

workers, only eight

have a trade union

(14%). The unions

report harassment and

persecution which

means that workers

have to deal with union

matters outside the

workplace, for fear of

dismissal. Blacklists of

trade unionists are

circulated, preventing

them from getting new

jobs.50

5 Jamaica Same law

applicable

It is common practice

in companies in EPZs

to threaten workers

and create pro-

employer "workers'

councils", which

interfere in the

handling of complaints

but are not allowed to

engage in collective

bargaining on working

conditions or minimum

50 http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=DOM&Lang=EN.



S.

No.


Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

wages. As a result, so

far there are no unions

at all in these zones.51

6 Honduras Modified law

applicable

The law allows

export processing

zones to set

additional

limitations on the

right to strike52

In the export

processing zones

(EPZs) workers trying

to form unions are

sacked and blacklisted.

They are subjected to

harassment, separation

from their colleagues,

and psychological and

even physical abuse.

7 Nicaragua Modified law

applicable

the Foreign

Investment Law

regulating the

EPZs opens a

loophole for

avoiding their

jurisdiction by

providing for

discrepancies,

controversies and

claims to be

settled by an

arbitration court

8 Panama Modified law

applicable

In the

maquiladoras, all

labour disputes

are subject to

51 http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=JAM&Lang=EN. 52 http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=HND&Lang=EN.



S.

No.


Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

compulsory

arbitration. A

strike is only

considered legal

after 36 working

days of

conciliation are

exhausted. If this

requirement is

not met, striking

workers may be

fined or

dismissed.

9 Peru Modified law

applicable

Governed by

special

regulations,

which allow for

greater flexibility

in labour

contracts, the

widespread use

of temporary

labour and the

setting of wages

on the basis of

supply and

demand

10 Trinidad

and Tobago

Same law

applicable

11 Bangladesh Special

legislation

EPZ Workers

Association and



S.

No.


Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

Industrial

Relations Act,

200453

12 Indonesia Same law

applicable

“We are now exploring

the possibility of

relaxing the

implementation of the

labour legislation in

the SEZs”54

13 Republic of

Korea

Special

legislation

law on Special

Economic Zones

(SEZs) of July

2003 exempts

foreign

companies

investing in the

SEZs from many

national

regulations on the

protection of the

environment and

labour standards

14 Sri Lanka Same law

applicable

Malaysia Same law

applicable

Labour law itself

imposes five year

moratorium on

collective bargaining

in “Pioneer industries”

53 http://www.businesslaws.boi.gov.bd/components/com_eregistry/attach/268-Law-2004.pdf. 54 Muhammad Lufti, the Chairman of the government’s Investment Coordinating Board (BKPM),

Indonesia, available at http://survey07.ituc-csi.org/getcountry.php?IDCountry=IDN&IDLang=EN.



S.

No.


Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

15 Pakistan Modified

application

allowed and

facilitated

The Export

Processing Zones

Act of 1980 also

provides for

notifications to

exempt the zones

from coverage

under the major

labour laws

The ESMA

prohibits workers

in EPZs - who

could otherwise

have come under

the IRO - from

forming or

joining unions,

bargaining

collectively or

striking

16 Philipine Same law

applicable55

Violations persist

because of the “trade

union free” policy

adopted by a number

of private zones56

17 Botswana Same law

applicable

18 Cameroon Modified law

applicable

Firms operating

in the EPZs are

exempt from

employers enjoy

"flexibility in

hiring/firing workers".

55 The Special Economic Zones Act, 1995, section 37. 56 ILO, Labour and Social Issues relating to Export Processing Zones 24 (1998).



S.

No.


Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

certain aspects of

the Labour Code,

but must comply

with

internationally

recognised labour

standards

19 Kenya Same law

applicable

20 Madagascar Same law

applicable

21 Mauritius Modified law

applicable

Specific labour

laws that

condone longer

working hours

(45 hours a week,

plus ten hours

compulsory

overtime in the

EPZs, where

required).

Weak enforcement57

22 Malawi Labour law

applicable

Union activity resisted

23 Namibia Modified

application

s. 8 of Export

Processing Zones

Act 1995 which

excluded

application of

Strikes and lock outs

prohibited for five

years. It also provides

for compulsory

arbitration of labour

57 Sarah Perman, Laurent Duvillier, Natacha David, John Eden et Samuel Grumiau, “Behind the Brand

Names: Working Conditions and Labour Rights in Export Processing Zones” ICFTU 9 (2004).



S.

No.


Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

Labour Act, 1990

amended58

disputes

59

24 Nigeria Modified

application

Article 18 (5) of

Nigeria Export

Processing

Zones, 199260

Article 21

authorises the

Nigeria Export

Processing Zones

Authority to

make regulations

regarding

conditions of

service of

employees in

EPZs.

61

Article 13 (1)

restricts access to

zones

62

There shall be no

strikes or lockouts for

a period of 10 years

following the

commencement of

operations within a

Zone and any trade

dispute arising within a

Zone shall be resolved

by the Authority.

25 Zimbabwe Modified law

applicable

Zimbabwe

Export

Processing Zones

Act 1994,

Section 56 which

exempted

investors

operating and

The attached Schedule

defines the powers of

the Authority, which

include the power to

regulate benefits and

working conditions in

the zones

58 ILO, Labour and Social Issues relating to Export Processing Zones 26 (1998). 59 Ibid. 60 http://www.nepza.gov.ng/downloads/act.pdf. 61 Ibid. 62 Ibid.



S.

No.


Labour Laws

in EPZs

Nuances in the

Applicable Law

Reality Check

employees

employed in the

zones from the

Labour Relations

Act, 1985 (No.

16) was repealed

in 2005.63

26 United Arab

Emirates

Compliance

with labour

laws required64

Implemented not

through ministry

of labour but

separate

departments

governing the

zones

65

A survey of available data with respect to labour laws applicable currently in EPZs

across the globe indicates that most of the countries fall within first and the third

categories. However, this was not the case a decade ago when a number of countries

expressly excluded application of entire labour codes or particular enactments to

EPZs.66 This change was not a smooth one but was an outcome of incessant struggles

of labour like in Philippines, Dominican Republic67 though in case of Bangladesh a

“threat of losing trade preferences for its exports to U.S. Canadian markets”68

63 https://www.ilo.org/dyn/natlex/natlex_browse.details?p_lang=en&p_isn=72878. 64 http://survey09.ituc-csi.org/survey.php?IDContinent=5&IDCountry=ARE&Lang=EN. 65 Ibid. 66 Dominican Republic, Costa Rica, Philippines, Bangladesh, Zimbabwe, Namibia have over the last

decade moved from exclusionary to modified or inclusionary regimes on account of labour struggles and/or international pressure.

67 ILO, Labour and Social Issues relating to Export Processing Zones 23-24 (1998). 68 Sarah Perman, Laurent Duvillier, Natacha David, John Eden et Samuel Grumiau, “Behind the Brand

Names: Working Conditions and Labour Rights in Export Processing Zones” ICFTU 8 (2004).

was to a

large extent instrumental in enactment of EPZ Workers Association and Industrial

Relations Act, 2004. Thus the past decade witnessed certain advancement with respect

to protection of rights of labour in EPZs. However advancement at the normative level

or for that matter even reference to inclusionary regimes in the first category does not



automatically imply a strong regime of labour rights in EPZs. In fact de facto

enjoyment of rights even in completely inclusionary regimes depends on two factors

Firstly, the kind of rights and the degree to which rights are normatively recognized in

the national regime itself i.e. the extent to which the national labour law regime is in

accordance with the international standards. Secondly, enforcement of the labour laws

in EPZs i.e. whether the enforcement of labour laws in EPZs is rigorous enough to

translate the de jure recognition into de facto realization of rights or it is weak.

“Neglect of labour regulations through the phenomenon of under enforcement of

labour laws” is a typically prevalent “low-visibility” practice encouraged by the

World Bank to reduce the effectiveness of labour laws “without immediately arousing

the ire of trade unions.”69 Even special/altered labour law regimes offer wide space for

such kind of low visibility strategy whereby labour protection is compromised either

by using spaces within the national regimes to alter the rights of labour working in

SEZs or through indirect changes in certain legislations. For instance a particular

strategic advice of World Bank includes re-regulation of apprenticeship contract to

introduce lower wages rather than reducing the minimum wage.70 It is also the

immense political significance that it holds for states that renders credence to such a

strategy. This is succinctly put by Adelle Blackett who noted that “it remains true that

governments pay a significant premium should they decide to reduce labour

protections.”71 All this explains why many countries have special labour regulations

or altered laws applicable in SEZs which render at best weak protection to labour in

SEZs. This limited protection turns out to be weaker in practice since the actual

realization of rights in SEZs is subject to pressures emanating not only on account of

the interface of state legislation with production law72 but systemic law73

69 “Employing Workers”, available at

as well.

Finally exclusionary regimes are at worst marked by either non-existence of labour

http://www.doingbusiness.org, in Adelle Blackett “Trade Liberalisation, Labour Law and Development,” in Tzehainesh Tekle (ed.), Labour Law and Worker Protection in Developing Countries 107 (Hart Publishing, Oxford, 2010).

70 Ibid. 71 Adelle Blackett, “Trade Liberalisation, Labour Law and Development,” in Tzehainesh Tekle (ed.),

Labour Law and Worker Protection in Developing Countries 106 (Hart Publishing, Oxford, 2010). 72 Production law is a set of regulations and normative standards that rule the everyday life of wage labour

relations etc. Production law is marked by the power prerogatives inherent to the ownership of means of production and is a form of law not based on universal rights but on production interests. See Boaventura de Sousa Santos, Toward a New Legal Common Sense (Butterworths Lexis Nexis, London 2002).

73 Systemic law is the sum total of rules and normative standards that organize the core/periphery hierarchy and the relations among the nation states in the interstate system. It exists on the reverse of the official legality that governs the relations among states sometimes complimenting it, sometimes conflicting with or undermining it. See Boaventura de Sousa Santos, Toward a New Legal Common Sense (Butterworths Lexis Nexis, London 2002).

http://www.doingbusiness.org/�



rights or provide a mere semblance of a regime or are at best extremely weak labour

law regimes,

4.4 Parliamentary Debates and Evolution of the SEZ Legislation in India

Parliamentary debates with respect to the SEZ legislation offer an insight into the

government’s approach to the issue of labour rights within SEZs as well as, the

concerns of the members of Parliament and their role with respect to securing labour

rights within SEZs. With a brief reflection on the overall issues and concerns raised by

members of Parliament, this section primarily focuses on the debates with respect to

applicability of labour laws in SEZs.

A number of members of Parliament welcomed the Bill on account of its potential to

further economic growth (especially through exports), employment generation,74 give

a fillip to foreign investment and promote development of infrastructure.75 Concern

was raised by some with regard to the employment generation potential76 degradation

of environment77 overlooks the role of states78 especially the relationship between the

centre and the states with respect to SEZs in the context of the federal structure of

India,79 quality of employment generated in SEZs,80 notion, range, structure and

effectiveness/misuse of incentives,81 constitution of the board,82

absence of time limit

74 Madhusudan Mistry, M. Ramadass, Lok Sabha Debates, 10th May’ 2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564. Vijay Darda, C. Ramachandraiah, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22.

75 Shri Vijay Darda, Shri C. Ramachandraiah, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22.

76 Shri Manoj Bhattacharya, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22. Madhusudan Mistry, Lok Sabha Debates, 10th May’ 2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564.

77 Ibid. 78 Ibid, M.Ramadass, Lok Sabha Debates, 10th May’ 2005, available at

http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564. 79 Rupchandpal, M.Ramadass, Lok Sabha Debates, 10th May’ 2005, available at

http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564. 80 Shri Nilotpal Basu, E.M.Sudarsana Natchiappan, Rajya Sabha Debate, 11th May’ 2005, available at

http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22.

81 Shri Manoj Bhattacharya, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22.Rupchandpal, Gurudas Dasgupta. M.Ramadass

82 K.S.Rao, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22.

http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564�

http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22�












for approval of SEZs,83 absence of punishment for erring officer,84 absence of

guidelines for developers85 or mechanism to monitor them,86 equitable growth

throughout India,87 operation of foreign banks in SEZs,88 protection of labour rights89

within SEZs though some suggested restricting the scope of labour rights in these

zones “to an extent where it should not affect the growth.”90 Reference was also made

to Chinese experience during the debates.91

Nilotpal Basu emphasized the critical role of the legislation in ushering investment for

export, growth and employment generation, the need to secure cooperative federalism

in ensuring investment and specifically raising the concern for labour moved an

amendment to clause 49 (Section 49 of the Act) of the Bill. Referring to the power of

the central govt. to suspend application of laws to special economic zones embodied

in clause 49 the member proposed insertion of clause “save and accept (sic) labour

laws.”

92

83 Ibid. 84 Ibid. 85 Ibid.

Shri Gurudas Dasgupta mentioned during debate in Lok Sabha “Mr. Kamal

Nath and the Government he represents agreed to delete the paragraph in page 21

from 14 to 23 lines.” Thus the pressure from the left of the political spectrum which

made clear to the government “that if the labour laws of the country are not allowed to

be operated in Special Economic Zones, we shall not support” resulted in deletion of

the said lines from clause 50 of the Bill. Specific reference to the problematic

provision proposed in clause 50 of the Bill was also made by Shri Rupchandpal during

debate in the Lok Sabha. It is clear from the discussion above that the debates with

86 Gurudas Dasgupta, Lok Sabha Debates, 10th May’ 2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564.

87 C. Ramachandraiah, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22, Madhusudan Mistry, M.Ramadass, Rupchandpal, Lok Sabha Debates, 10th May’ 2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564.

88 K.S.Rao, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22, M.Ramadass,

89 Shri Vijay Darda, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22, Gurudas Dasgupta Madhusudan Mistry, Lok Sabha Debates, 10th May’ 2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564.

90 K.S.Rao, Lok Sabha Debates, 10th May’ 2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564

91 M.Ramadass, Rupchandpal, Lok Sabha Debates, 10th May’ 2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564.

92 Nilotpal Basu, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22, Rupchandpal, Lok Sabha Debates, 10th May’ 2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564

















respect to application of labour laws in SEZs related specifically to two clauses in the

Bill i.e. clause 49 and 50. While responding to the concern for labour rights in SEZs

Bill raised by the abovementioned members the minister of Commerce and Industry

said, “Special Economic Zones Bill does not and will not allow violation of any such

right. We consider workers' rights to be supreme. They will be maintained.” This

statement of the Minister is difficult to reconcile with the action of the government in

introducing this Bill (approved by the Council of ministers) in the form which allowed

for complete exclusion or modification of labour laws in SEZs.

The following table compares the provisions of the Bill and the Act

Table 4.2 – Comparison of the SEZs Bill and SEZs Act, 2005

Cl.

No.

Bill Act

49 49. (1) The Central Government may, by

notification, direct that any of the

provisions of this Act (other than sections

54 and 56) or any other Central Act or any

rules or regulations made thereunder or any

notification or order issued or direction

given thereunder (other than the provisions

relating to making of the rules or

regulations) specified in the notification--

(a) shall not apply to a Special Economic

Zone or a class of Special Economic Zones

or all Special Economic Zones; or

(b) shall apply to a Special Economic Zone

or a class of Special Economic Zones or all

Special Economic Zones only with such

exceptions, modifications and adaptation, as

may be specified in the notification.

A copy of every notification proposed to be

issued under sub-section (1), shall be laid in

draft before each House of Parliament,

49. Power to modify provisions of

this Act or other enactments in

relation to Special Economic Zones.

- (1) The Central Government may,

by notification, direct that any of the

provisions of this Act (other than

sections 54 and 56) or any other

Central Act or any rules or

regulations made thereunder or any

notification or order issued or

direction given thereunder (other

than the provisions relating to

making of the rules or regulations)

specified in the notification--

(a) shall not apply to a Special

Economic Zone or a class of Special

Economic Zones or all Special

Economic Zones; or

(b) shall apply to a Special

Economic Zone or a class of Special

Economic Zones or all Special



Cl.

No.

Bill Act

while it is in session, for a total period of

thirty days which may be comprised in one

session or in two or more successive

sessions, and if, before the expiry of the

session immediately following the session

or the successive sessions aforesaid, both

Houses agree in disapproving the issue of

the notification or both Houses agree in

making any modification in the notification,

the notification shall not be issued or, as the

case may be, shall be issued only in such

modified form as may be agreed upon by

both the Houses.

Economic Zones only with such

exceptions, modifications and

adaptation, as may be specified in

the notification.

Provided that nothing contained in

this section shall apply to any

modifications of any Central Act or

any rules or regulations made

thereunder or any notification or

order issued or direction given or

scheme made thereunder so far as

such modification, rule, regulation,

notification, order or direction or

scheme relates to the matters

relating to trade unions, industrial

and labour disputes, welfare of

labour including conditions of work,

provident funds, employers’ liability,

workmen’s (sic) compensation,

invalidity and old age pensions and

maternity benefits applicable in any

Special Economic Zones.

A copy of every notification

proposed to be issued under sub-

section (1), shall be laid in draft

before each House of Parliament,

while it is in session, for a total

period of thirty days which may be

comprised in one session or in two

or more successive sessions, and if,



Cl.

No.

Bill Act

before the expiry of the session

immediately following the session or

the successive sessions aforesaid,

both Houses agree in disapproving

the issue of the notification or both

Houses agree in making any

modification in the notification, the

notification shall not be issued or, as

the case may be, shall be issued only

in such modified form as may be

agreed upon by both the Houses.

50 50. The State Government may, for the

purposes of giving effect to the provisions

of this Act, notify policies for Developers

and Units and take suitable steps for

enactment of any law:-

(a) granting exemption from the State taxes,

levies and duties to the Developer or the

entrepreneur;

(b) Directing that any of the provisions of

any State Act relating to trade union

industrial and labour disputes, welfare of

labour including conditions of work,

provident funds, employers’ liability,

workmen’s compensation, invalidity and

old age pensions and maternity benefits or

any other activity relating to Special

Economic Zones

(1) shall not apply to a Special Economic

50. Power of State Government to

grant exemption.- The State

Government may, for the purposes

of giving effect to the provisions of

this Act, notify policies for

Developers and Units and take

suitable steps for enactment of any

law:-

(a) granting exemption from the

State taxes, levies and duties to the

Developer or the entrepreneur;

(b) delegating the powers conferred

upon any person or authority under

any State Act to the Development

Commissioner in relation to the

Developer or the entrepreneur.



Cl.

No.

Bill Act

Zone or a class of Special Economic Zones

or all Special Economic Zones; or

(2) shall apply to a Special Economic Zone

or a class of Special Economic Zones or all

Special Economic Zones only with such

exceptions, modifications and adaptation,

as may be specified in the notification.

(c) delegating the powers conferred upon

any person or authority under any State Act

to the Development Commissioner in

relation to the Developer or the

entrepreneur.

No doubt that the legislation was passed in the Parliament after a few hours of

discussion in both the houses of the Parliament and also that a much wider

consultation with all the stake holders as well as civil society in the process of

legislation would have ensured a more effective and protective legislation however,

the credit of avoiding the worst evil in the form of complete and explicit enabling of

exclusion of SEZs from applicability of labour laws was avoided through effective

intervention of the members of the Parliament. However this fact must not deviate

one’s attention from the fact that the cabinet, the functional executive of the state did

propose a Bill which reflected its willingness to sacrifice labour rights at the altar of

export led growth. Further it is appalling to note that the formulation of the proposal

with respect to labour in SEZs Bill was analogous to the EPZ law prevalent in

Bangladesh until 2004 and which now stands repealed with the enactment of EPZ

Workers Association and Industrial Relations Act, 2004. Section 11A of Bangladesh

Export Processing Zone Authority Act provided as follows:

The Government may by notification in the official gazette, exempt a zone

from the operation of all or any of the provisions of all or any of the

following enactments, or direct that any such enactment or any provision

thereof shall, in its application to a zone, be subject to such modifications or

amendments as may be specified therein namely, the Employment of Labour



Act 1965, the Industrial Relations ordinance1969, the Boilers Act 1923, the

Factories Act 1965.

4.5 Labour Rights Regime in SEZs in India

The nature of labour rights regime that exists for SEZs in India must be discerned

through a comprehensive process encompassing the following:

1. Analysis of substantive provisions embodied in SEZs Act pertaining to

applicability of labour laws i.e. section 49 and 50 of SEZs Act along with their

interface with the provisions of various state legislations on SEZs and the SEZ

policies formulated by various states.

2. Mechanism envisaged under the SEZs Act for the implementation of labour

laws

3. The use of already existing spaces within the labour law regime prevalent at the

national level

4.5.1 Analysis of Substantive Provisions : Interpreting Section 49 and 50 OF SEZs Act

4.5.1A Section 49: Meaning and Implications

A statute being “the will of the legislature”93 the purpose of interpretation is to

ascertain the meaning of the text “according to the intent of them that made it.”94 The

meaning of the text therefore has to be ascertained in the light of the intention of the

legislature, which in turn “must be found in the words used by the legislature itself.”95

Thus the “cardinal rule of construction of statutes is to read the statutes literally, that

is by giving to the words their ordinary, natural and grammatical meaning.”96

However, only if as pointed out by Lord Simon of Glaisdale “. . . when such an

approach produces injustice, absurdity, contradiction or stultification of statutory

objective the language may be modified sufficiently to avoid such disadvantage,

though no further.”97

93 P.St. J. Langan (ed.), Maxwell on the Interpretation of Statutes, 1 (Lexis Nexis Butterworths, New

Delhi, 1969). 94 Coke, 4 Institutes 330, quoted in P.St. J. Langan (ed.), Maxwell on the Interpretation of Statutes, 1

(Lexis Nexis Butterworths, New Delhi, 1969). 95 Padma Sundara Rao v. State of Tamil Nadu (2002) 3 SCC 533, at p. 542. 96 Jugalkishore Saraf v. Raw Cotton Co. Ltd., AIR 1955 SC 376, at p. 381 (per S.R.Das J.). 97 Suthendran v. Immigration Appeal Tribunal (1976) 3 All ER 611, at p. 616, followed in Harbhajan

Singh v. Press Council of India (2002) 3 SCC 722, at p. 728.

Therefore, to begin with, it is necessary to put together the plain

meaning of the words used in section 49 to establish what the section connotes.



The marginal note to the section reads, “power to modify provisions of this Act or

other enactments in relation to Special Economic Zones.” Natural meaning of the term

power is “ability or capacity to exercise control”98 and to modify means to alter,

change, vary,99 or to “make partial changes to”100

1. Any provisions of this (SEZ) Act, except sections 54 to 56

adjust, adapt, mutate, change,

revise, mutate or amend. Thus the marginal note indicates that the provision relates to

the authority to make alterations or changes in either SEZ Act itself or any other

legislation. According to clause 1 of the section the authority is vested in the Central

government and it is to be exercised by the central government by issuing notification.

The subject matter of the notification may be any of the following:

2. Any other central Act

3. Any rules, regulations, notification, order or direction given under either SEZ Act

or any other central Act

The object of the notification may be to direct the following with respect to either one

SEZ, a class of SEZs or all SEZs:

1. Exclusion or non-application of the subject matter of the notification

2. Application of the subject matter of the notification only with such exceptions,

modification or adaptation as specified in the notification

Since the word modify only means alteration or change and not complete exclusion

and the enacting section includes not only modification, adaptation or exception but

also exclusion thus the enacting part of the section and the marginal note are not

completely co extensive. In this context the “weight of authority is in favour of the

view that marginal note appended to a section cannot be used for construing the

section.”101 Moreover Supreme Court in Nalinakhya Bysack v. Shayam Sunder

Haldar102

98 The New International Webster’s Comprehensive Dictionary of the English Language 990 (Trident

International Press, 2003). 99 Id., at p. 818. 100 Catherine Soanes, Angus Stevenson, Concise Oxford English Dictionary 918 (Oxford Press, 2009). 101 36 Halsbury Laws of England 373 (3rd ed.), in G.P.Singh (eds.), Principles of Statutory Interpretation

166-167 (Lexis Nexis Butterworths Wadhwa Nagpur, New Delhi, 2008). 102 AIR 1953 SC 148.

held that in case of discrepancy between the marginal note and the enacting

part of a section, the section overrides the marginal note. Thus the intention of the

legislature as apparent from the reading of clause 1 was to vest central government



with a power to exclude application of certain laws completely or to notify their

application but with modifications.

Further clause 1 is followed by a proviso added through an amendment to the Bill

before the Bill was voted upon in the Parliament and passed. Generally, “the proviso

takes birth because something which was not thought of at the original stage of the

Bill, later occurred to the draftsman, or was suggested to the draftsman in subsequent

instructions.”103 Secondly, the paragraph added through the amendment in the Bill

serves the true function of a proviso i.e. to “remove special cases from the general

enactment and provide for them specially.”104

1. “Provided that nothing contained in this section shall apply to any modifications

of any Central Act or any rules. . . “ Thus whereas the section extends to

modification, exception, adaptation as well as complete exclusion

From the subject matter of clause 1 i.e.

SEZs Act and any other central legislation and pursuant subordinate legislations the

subject matter of the proviso removes legislations and subordinate legislations

pertaining to labour i.e. “trade unions, industrial and labour disputes, welfare of labour

including conditions of work, provident funds, employers’ liability, workmen’s (sic)

compensation, invalidity and old age pensions and maternity benefits applicable in

any Special Economic Zones.” However, the following introduce ambiguity into the

proviso:

105

2. Use of expression “applicable in any Special Economic Zone” after listing the

legislations which are sought to be excluded from the subject matter of this

section again relates to the ambiguity mentioned above i.e. whether the intention

of the legislature expressed through the proviso was to limit the power of the

central government only with respect to modified application of the labour laws

and retain its power to completely exclude application of labour laws in

accordance with clause 1 (a) of section 49 and thus on account of the same the

subject matter of proviso i.e. labour laws is qualified by expression “applicable

in any SEZ.”

the proviso

only refers to modification.

103 Georgia Railroad and Banking Co. v. James M. Smith, 128 US 174; Kershi Pirozsha Bhagvagar v.

State of Gujarat, 2007 Cri LJ 3958, at 3970. 104 G.P.Singh, Principles of Statutory Interpretation, 203 (Lexis Nexis Butterworths Wadhwa Nagpur,

New Delhi, 2008). 105 Though the terms modification, exception and adaptation still fall within the broad genus of

modification/ alteration exclusion is not something that falls within the same.



3. This is the only provision dealing with applicability of labour laws to SEZs and

reference to labour laws in this provision is limited to Central legislations and

subordinate legislation with respect to labour. Labour being a matter in the

Concurrent list of the Constitution of India, not only Union but the states also

have power to make laws with respect to labour. However, the words used in the

proviso offer protection (of whatever degree) only to labour legislations of the

Centre and the proviso is silent on the labour legislations enacted by the states.

4. The main clause only refers to rules, regulations, notification, order or direction,

the proviso in addition to the aforesaid refers to “schemes” and therefore in that

sense it no longer only excepts something from the purview of the main clause

but seeks to expand the scope of the restriction with respect to labour laws to

include something which is not even part of the enabling main clause. In the

light of the aforementioned ambiguities It remains uncertain whether the

legislature added the term “schemes” as an abundant caution in order to

comprehensively and completely seal the matters pertaining to labour in SEZs

from the purview of the power of modification conferred on the central

government.

Thus the plain meaning of the proviso as discussed above is highly ambiguous and on

account of lack of reference to the scope and limits of the power conferred on the

central government with respect to modifications in SEZ and other legislations and

subordinate legislations it is desirable to move to external aids for interpretation of the

proviso. In this context it is pertinent to refer to the debates in the Parliament. As

discussed in the previous section, the issue of applicability of labour laws in SEZs was

focus of the debate and amendments introduced in the Bill. The support of the left to

the Bill was contingent upon the promise they elicited from the Minister of Commerce

and Industry that labour laws will be applicable in the Zones. Moreover the minister

made a statement in the Parliament that an amendment to the Bill will be introduced to

the same effect and this proviso was added through the said amendment. However, the

proviso introduced through the amendment is highly ambiguous and but for the

reference to Parliamentary debates the intention as apparent from the words of the Act

is limited only to curbing the power of the central government to modify the labour

laws applicable to SEZs while retaining its power of excluding the applicability of the

same to SEZs. The plain meaning as well as the principles of interpretation of a

proviso that a proviso is subservient to the main provision and that it should receive



strict interpretation also support this construction. Thus it is desirable to amend the

said proviso in the light of the true intention of the legislature by removing

ambiguities that it is infested with and to provide formidable protection to labour

rights in SEZs else the provision will remain incapable of effectively “subjecting

human conduct to governance of rules,”106 which is the basic purpose of law. A rule

that is unclear, ambiguous or un-understandable lacks one of the eight characteristics

enumerated by Fuller which law should possess to be worthy of being referred to as

law.107

Another issue that may be raised with respect section 49 of the Act relates to

delegation of power to the executive to exclude or modify SEZs Act itself or other

central legislations with respect to an SEZ, a class of SEZs or all SEZs. Though this

aspect does not directly affect the labour legislations on account of their special

treatment through the proviso, yet it is of significance generally with regard to an

overall impact of SEZs on people’s rights generally. The questions that arise in this

context are whether section 49 of the Act suffers from excessive delegation and

secondly the nature of legislative control over delegated legislation. Since the issues

do not affect the labour laws within SEZs a brief comment on the two will suffice.

Firstly, the basic principle established through case law with regard to delegated

legislation is that though the legislature cannot delegate its “essential legislative

function which consist in declaring the legislative policy and laying down the standard

which is to be enacted into a rule of law” but can delegate the task of making

“subordinate legislation which by its very nature is ancillary to the statute.”

108 As far

as legislative policy is concerned the court has relied upon not only the delegating

provision but also other provision in the statute,109 the preamble to the Act,110

legislative history in terms of rules adopted from previous legislation111 to discern the

policy. It has been suggested that the Supreme Court leans towards upholding the

validity of the delegating provision.112

106 Lon L. Fuller, The Morality of Law 96 (Universal Law Publishing Co, Delhi, 2004). 107 Id., at pp. 35-40 and 63-65. 108 In Re Delhi Laws Act, 1951 SCR 747 (per Mukherjea) reaffirmed in Gwalior Rayon Co. v. Asst.

Commr of Sales Tax, AIR 1974 SC 1660; K.S.E. Board v. Indian Aluminum AIR 1976 SC 1031; Registrar, Co-Operative Societies v. K. Kunjabmu AIR 1980 SC 350; State of Maharashtra v. Indina Medical Association (2002) 1 SCC 589.

109 D. S. Garewal v. The State of Punjab and others AIR 1959 SC 512. 110 Hari Shankar Bagla v. State of Madhya Pradesh AIR 1954 SC 465. 111 Bhatnagars and Co. ltd. v. Union of India AIR 1957 SC 478. 112 M.P.Jain, S.N.Jain, Principles of Administrative Law 70 (Lexis Nexis Butterworths Wadhwa Nagpur,

Gurgaon, 2007).

In the light of the established law it is



necessary to note that though section 49 itself does not explicitly provide guidance

with regard to exercise of delegated power by the central government but the long title

of the Act indicates that the purpose of the Act is to “provide for the establishment,

development and management of the Special Economic Zones for the promotion of

exports.” Therefore the scope of the power delegated to the central government is

determined by its role in “promotion of exports” thus only those exclusions or

modifications in the central legislations in force fall within the purview of the

delegated power which have the potential of promoting exports. In that sense going by

the trend of the courts in upholding the validity of delegating provision the aforesaid

policy embodied in the Act is likely to be relied upon by the court for the same

purpose.

Further in the context of legislative control over subordinate legislation (power of

notification in this case) the route embodied in the SEZs Act for the said purpose is

not a strong one. Clause (2) of section 49 provides for legislative control over the

notifications issued by the central government by enshrining the laying procedure.

Laying procedure refers to the process of laying the notification in the Parliament so

as to enable the Parliament to oversee and check objectionable or unwarranted use of

delegation by the administration. Laying procedures are of three types viz.113

1. Simple Laying – this process only involves laying the subordinate legislation

before the Parliament

2. Laying with annulment – this process involves laying the rules in draft before

the Houses and the rules can be annulled by a resolution of a House

3. Laying subject to Affirmation – this process also involves laying of rules in

draft before the Houses and they come into operation only when the Houses

pass a resolution affirming them. It is also known as negative laying

procedure.114

The primary distinction between the second and the third categories of laying

procedures is that in the second procedure “the legitimacy of delegated legislation

precedes, not follows, the negative laying procedure.”

115 In the latter “the initiative to

move a resolution to annul or modify the rules has to be taken by the members of the

House. The government is under no obligation to take any initiative.”116

113 Id., pp. 176-177. 114 Id., at p. 176. 115 Ibid. 116 Id., at p. 178.

Unfortunately



out of the three procedures the one embodied in the SEZs Act is not ‘laying subject to

affirmation’ which is the most effective but the negative laying procedure.

4.5.1B Section 50: Meaning and Implications

Section 50 of the Act relates to the “power of the state government to grant

exemptions.”117

This change raises a significant issue regarding protection of labour rights in SEZs in

the light of the Constitutional framework. The subject matter of laws enumerated in

section 49 of the Act and clause 50 of the Bill find mention in List III i.e. Concurrent

list of the 7th Schedule to the Constitution of India. With respect to the Concurrent list

both the centre and the states have the power to legislate

The meaning and implications of this provision assume significance

on account of the fact that it was this provision in the Bill (clause 50) which included

enabling clauses for either excluding application of state laws relating to labour to the

Special Economic Zones or for introducing exceptions, modifications and adaptation

to those laws, including subordinate legislation. After discussion in the Parliament it

was deleted and as discussed earlier a proviso was instead added to clause 49. The

provision is geared towards enabling the states to give effect to the provisions of SEZs

Act and it is appalling to note that exclusion and alterations in labour laws was

envisaged as playing such a role. However, the will of the legislature did not support

this proposal of the cabinet enshrined in the Bill and therefore it was deleted from the

same. In that sense now the Act is silent on the power of the states to exclude or alter

application of labour laws enacted by the states to SEZs though as discussed above the

power of the central government with respect to the central labour legislations stands

ambivalently excluded to a large extent.

118 however, in case of

inconsistency, the law made by the Parliament prevails119 unless the state law is made

in accordance with clause 2 of Article 254 i.e. provided it has received assent of the

President. SEZ Act enacted under entry 33 of list III120

117 Special Economic Zones Act, 2005, section 50, marginal note. 118 The Constitution of India, 1950, Article 246 (2). 119 Id., Article 254 (1).

as notified restricts the

modification of central labour legislations (including subordinate legislations) with

respect to their application to SEZs. However as discussed above the amendment in

120 E.M.Sudarsana Natchiappan, Rajya Sabha Debate, 11th May’ 2005, available at http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search=%22sez%20bill%22.





the Bill entailed deletion of the enabling provision from clause 50 and addition of

restrictive proviso in section 49 leaves the arena of state legislations with respect to

labour un-occupied by the central SEZ legislation. The proviso added through the

amendment in the Bill pertains only to Central legislations on labour and not the state

legislations. Therefore it remains open to the states to exclude or modify the

application of state labour legislations with respect to SEZs. In the absence of any

debate on the words of the proposed amendment with respect to clause 49 and 50 of

the Bill121 and its acceptance by the majority it remains uncertain whether the

reiteration in the Parliament by the minister about the intention to bring SEZs within

the purview of labour laws and the collective will of the Parliament was only limited

to protection as far as central legislations are concerned. Though it may not seem to

have been the intention but the words of the legislation are extremely restrictive. Since

the intention as reflected in proviso to section 49 is limited to central labour

legislations it cannot be said that the legislature through this proviso intended to cover

entire field of labour law i.e. central as well as state legislations and silence of section

50 with respect to the same brought about through an amendment in the Bill also

points towards such intention. In the absence of intention to occupy the entire field of

labour law with respect to SEZs, exclusion of state labour legislations or their

modification with respect to their application in SEZs cannot be said to be void on

account of being repugnant to the central legislation in the same field. In other words

apart from direct conflict repugnancy can only arise when the two enactments operate

in the same field and one is inconsistent with the other.122

This implication arising out of the intention of the legislature to only occupy the field

with respect to central labour laws as reflected in section 49 and not to extend the

operation of the limitation to state labour legislations may not at the first instance

appear to be of much significance on account of the fact that central labour

legislations encompass within their purview most of the matters pertaining to labour

and state legislations on labour are rather few. However, one of the areas that still

remains unoccupied by central labour legislations pertains to recognition of trade

unions. In the absence of any provision in The Trade Unions Act, 1926 (an

121 The demand to amend the Bill was accepted in principle by the minister however, the proposed

amendment was introduced after the deliberations on the Bill in general by the members were over and the Lok Sabha proceeded to clause by clause consideration of the Bill which was a process that wound up in less than 30 minutes in Lok Sabha.

122 National Engineering Industries Ltd. v. Shri Kishan Bhageria A.I.R. 1988 SC 329.



amendment to this effect was incorporated but remains unenforced) with respect to

recognition of trade unions, certain states like Maharashtra, Madhya Pradesh,

Rajasthan, Bihar have legislated with regard to union recognition.123

Further as labour is a matter embodied in the concurrent list the states have

Constitutional power to introduce amendments to central legislations after following

procedure provided in the Constitution. However, the proviso only refers to the power

of the central government to modify central legislations without referring to the power

of the state governments to introduce amendments to the central legislations. Even

though the words of the proviso refer only to the power of the central government but

since the intention is to retain the applicability of the central labour legislations in

SEZs (through an ambiguously worded proviso as discussed above), any attempt by

states to do the same would be repugnant to the central legislation. However, one must

not lose sight of the fact that since labour is a matter embodied in the concurrent list

the effect of ambiguous formulation of the proviso to section 49 does not only

introduce vagueness to the power of the central government but also introduces

vagueness to the power of the state governments with regard to exclusion or

modification of central labour legislations. Only when one goes by the interpretation

emerging in the light of the Parliamentary debates that state law excluding or

modifying central labour legislation with respect to SEZs would stand repugnant to

the central law. In this context the repugnancy would arise on account of the fact that

the field occupied by the state legislation embodying amendment of central labour

legislation applicable to SEZ in that particular state is the same as that covered by the

proviso to section 50 of SEZs Act. Exclusion or modification of Central labour

legislations by the states here amounts to undoing the protection sought to be

guaranteed to central labour legislations in section 49 of SEZs Act. Thus on the basis

of the doctrine of “occupied field” whereby the proviso to section 49 occupied the

field pertaining to central labour legislations and intended through the proviso to

secure applicability of labour laws to SEZs, a state legislation on SEZs which seeks to

Given the

significance of the issue of recognition of union in general in securing and upholding

labour rights and especially their need in SEZs given the context of their emergence

and internationally and nationally (given the competition between states to attract

investment) competitive environment in which they exist (as discussed in the first

section of this chapter) the implications of this repugnancy with regard to labour

(especially trade union) rights are likely to be severe.



exclude or modify application of central labour legislations to SEZs in that particular

state would be inconsistent with the intention expressed in the central legislation. The

conflict in such cases between the central and state legislations is not a direct conflict

since the prohibition with respect to exclusion and modification in central labour

legislations imposed under proviso to section 49 of the SEZs Act is limited to central

government. However, where the state government on account of its concurrent power

does what the central government under the Act is

prohibited from doing and thus distorts the operation of the central legislation, it

amounts to repugnancy. This has been very succinctly put by Dixon, J. in Victoria v.

Commonwealth124

The Supreme Court has also followed this doctrine in cases like Zaveribhai v. State of

Bombay,

Substantially it amounts to this. When a State law, if valid, would alter,

impair or detract from the operation of a law of Commonwealth Parliament,

then to that extent it is invalid. Moreover, if it appears from the terms, nature

or the subject-matter of a federal enactment that it was intended as a

complete statement of the law governing a particular matter or set of rights or

duties, then for State law to regulate or apply the same manner or relation is

regarded as a detraction from the full operation of the Commonwealth law

and so is inconsistent.

125 Deep Chand v. State of U.P.,126 State of Assam v. Horizon Union.127

Generally implementation of labour laws in enterprises is secured through labour

inspection which is a vital part of labour administration. Standards pertaining to

On

the basis of aforementioned reasons it is appropriate to hold that the euphemistically

referred “simplification in labour laws” envisaged in section 18 of Gujarat SEZ Act,

2004 and specifically provided in schedule II of the Act embodying exclusion or

amendment to various central labour legislations would be repugnant to the SEZs Act,

2005. It is also pertinent to point out here that no such modification or simplification

as envisaged in section 18 read with schedule II has been done till now.

4.6 Implementation Mechanism of Labour Laws under SEZs Act

123 Government of India, Report: National Commission on Labour 329 (1969). 124 (1937) 58 CLR 618, at 620. 125 A.I.R. 1954 SC 752. 126 A.I.R. 1952 SC 648. 127 A.I.R. 1967 SC 442.



labour inspection are embodied in the Labour Inspection in Industry and Commerce

Convention (No. 81) adopted by ILO in 1947. There are three associated

Recommendations Nos. 81, 82, 85. The Convention provides that the labour

inspection should be organized as a system128 and it should be placed under the

supervision and control of a central authority.129 The labour inspectors must be

recruited with sole regard to their qualifications and they should be adequately trained

for the performance of their duties,130 be properly equipped131 and their number

should be sufficient.132 Most importantly it provides that workplaces must be

inspected as often and as thoroughly as is necessary to ensure effective application of

relevant legal provision.133 Moreover it recognizes that adequate penalties should be

imposed for violations of legal provisions enforceable by labour inspection.134

As noticed in the context of variable overall labour regimes prevalent in different

countries even with respect to implementation mechanism there is absence of

uniformity in state practice. In some countries like Costa Rica, Honduras, Indonesia,

Kenya, Mauritius and Sri Lanka the Ministry of labour which has jurisdiction over all

workplaces in the country is also responsible for implementation of labour laws in

EPZs.

135 Some of these countries have “smaller and specialized units with sectoral or

technical specialists that deal with specific issues.”136 However, in Bangladesh EPZ

authority, BEPZA (Bangladesh Export Processing Zones Authority) is the absolute

authority for any legal process in EPZ and the Ministry of Labour and Employment is

not responsible for implementation of labour laws in the Zones.137 It has also been

remarked that the main role of EPZ authority being “to protect the investors’ interest

so there is a gap of confidence of workers on their role.”138

128 Article 1. 129 Article 4 (1). 130 Article 7. 131 Article 11. 132 Article, 10. 133 Article 16. 134 Article 18. 135 Helena Perez Vasquez, “Good Labour Practice Compilation of Labour Inspection Practices and

Guidelines for Effective Labour Inspections in EPZs” ILO 13 (2010). 136 Id., p. 14. 137 Id. p. 13. 138 Ibid.

Even though BEPZA has

an industrial relations department in every EPZ bearing the responsibility for

enforcing labour conditions but the workers have expressed discontent over the



remedial action of the counsellors in BEPZA and claim that the dispute resolution

mechanism is not fully transparent.139

Mechanism envisaged in the SEZs Act of India with respect to implementation of

labour laws typically reflects adoption of “low visibility”

140 strategy to reduce

effectiveness of labour laws and is akin to the mechanism prevalent in Bangladesh. As

noted earlier the substantively the labour laws applicable in SEZs are the same as

prevalent in rest of the country but the implementation mechanism established for the

same is different. This is primarily done by ascribing a plethora of functions to the

Development Commissioner and implementation of labour laws just being one of

them. Development Commissioner is an officer of the rank of Deputy Secretary to the

Government of India who may be designated as the former by the Central

Government.141 He is ex officio member of the Board of approval142 and approval

committee.143 The main function of the board of approval is to grant/reject/modify

proposals for establishment of the SEZs.144 The function of the approval committee is

to approve/modify or reject proposals for setting up units in SEZs, facilitate their

functioning and monitor and supervise compliance of conditions subject to which

approval is granted to the entrepreneurs.145 The general and primary function of the

Development Commissioner is to “ensure speedy development of the Special

Economic Zone and promotion of exports therefrom.”146 However he is also required

to guide entrepreneurs for setting up units in SEZ, ensure effective promotion of

exports from SEZ, coordinate between state and central government departments for

the purposes of aforesaid functions, monitor performance of developer, discharge

functions delegated by the board,147central or state government.148 The SEZs Act

recognises the overriding power of the central government to “prescribe a single form

for furnishing returns or information by a developer or an entrepreneur under one or

more central Acts”149

139 Id., at p. 15. 140 Expression used by Adelle Blackett to reflect the current methodological advise by the World Bank to

states seeking labour market flexibility. See supra note 71 at 107. 141 The Special Economic Zones Act, 2005, section 11(1). 142 Id., section 8(1) (g). 143 Id., section 13(2) (a). 144 Id., section 9 (2) (1) (a). 145 Id., section 14 (1). 146 Id., section 12 (1). 147 Id., section 12 (2), section 9(4). 148 Id., section 12 (4).

or “specify any officer or agency to carry out surveys or

inspections for securing of compliance with the provisions of any central Act by a



developer or an entrepreneur . . .”150 Further it enables the states to make laws or

notify policies for the purposes of giving effect to the provisions of the SEZs Act

especially “delegating the powers conferred upon any person or authority under any

State Act to the Development Commissioner in relation to the developer or the

entrepreneur.”151

Various states through their SEZ legislations or policies

All this facilitates the establishment of a separate implementation

and monitoring mechanism with respect to central laws (including central labour

legislations) as well as state laws in SEZs. Thus even if the labour laws were intended

to remain applicable in SEZs their implementation was sought to be taken out of the

hands of the authority having expertise to perform this task and which is dedicated to

perform this single task of monitoring with respect to labour laws and vests it in the

hands of the Development Commissioner who is not specifically designated only for

this but may be required to perform this function along with many others and thus it

raises concerns regarding the effectiveness with which a single officer may fulfill

these obligations.

152 whether enacted or

formulated before or after the enactment of the central SEZs Act have delegated the

powers of the labour Commissioner,153 Chief inspectorate of factories154 as well as of

all officers under labour legislations155 to the Development Commissioner in SEZs.

However, SEZs policies of the states like Jharkahand,156 Karnataka,157 West Bengal158

and Uttar Pradesh159

149 Id., section 19 ( c). 150 Id., section 20. 151 Id., section 50 (b). 152 For comparison of labour law regimes prevalent in SEZs in different states see appendix 4.1. 153 Gujarat SEZ Act, 2004, section 17 (1); The Punjab Special Economic Zones Act, 2009, section 12 (2)

(a); The Haryana Special Economic Zone Act, 2005, section 12 (2) (a); Jharkhand SEZ Policy, 2003 para 5.1; Karnataka State Policy for Special Economic Zones, 2009, para 4; West Bengal Special Economic Zone Policy, para 6.1; Chandigarh 2005, para 5; Government of Uttar Pradesh, Notification No. 987/36-1-03-40(S.T.)/ 99, dated 28th July, 2003.

154 The Haryana Special Economic Zone Act, 2005, section 12 (2) (a); The Punjab Special Economic Zones Act, 2009, section 12 (2) (a), West Bengal SEZ Policy, para 6.3.

155 Gujarat SEZ Act, 2004, section 17 (1). 156 Para 5.2. 157 Para 4. 158 Para 6.1. 159 Para 3(1).

provide for placement of an officer from the labour department

under the supervision of the Development Commissioner for the performance of the

abovementioned functions. The powers and functions of the Labour Commissioner

under the labour law regime in India are enormous. They relate to monitoring and



ensuring implementation of a number of labour legislations.160 Vesting of functions in

one authority under all these legislations pertaining to labour ensures specialized

monitoring and promotes efficiency in securing compliance. Development

Commissioner however, already has a number of functions to perform under the Act,

adding monitoring of so many labour laws makes his task onerous. Further as pointed

out by Jaivir Singh unlike the labour Commissioner, Development Commissioner’s

“job is not primarily to look into labour matters but to ensure that SEZ is able to

attract sufficient investment and generate earnings. This clearly generates a conflict of

interests in the office and there is no built in guarantee that labour interests will be

privileged efficiently in relation to those of employers.”161 Concerns about the ability

of the Development Commissioner “to learn about the implementation of the plethora

of laws” have also been raised162 along with the idea of equating ‘good governance’

with speedy decisions and generation of quick outcomes.163 The overzealous attitude

towards quick decision making (single window clearance for almost everything in

SEZs) somewhere compromises establishment of adequate checks and balances with

regard to “other normative concerns”164 primarily that of labour. The high probability

that “premium on speed acts primarily to reinforce the concentration of power in the

office of the Development Commissioner, initiating the institution of an important

centre of rent seeking activity” has also been indicated.165

Apart from delegation of powers of Labour Commissioner to the Development

Commissioner, the other mechanisms of implementation of labour laws that are

witnessed in SEZs are not specific to SEZs alone but their expression is seen generally

in the labour market outside SEZs in India. However, in SEZs the same mechanisms

Thus a different

mechanism for implementation of nationally prevalent labour laws is facilitated

through the SEZs Act. The centre and the states have used these provisions to

operationalise a different implementation mechanism for labour law in SEZs. The

same is bound to be less effective given the variety of other functions assigned to the

Development Commissioner as well as on account of the likelihood of incongruence

between other functions and the function of implementation of labour laws.

160 For details of the legislations falling within the purview of Labour Commissioners of Haryana and

Uttar Pradesh see appendix 4.2. 161 Jaivir Singh, “Labour Law and Special Economic Zones in India,” 11 CSLG/WP/09/01. 162 Ibid. 163 Id., at p. 12. 164 Ibid. 165 Ibid.



appear not alone but in combination with the changes discussed above and other

realities of implementation of labour laws in SEZs, resulting in the differential impact

of the same on labour in SEZs. Thus it is desirable to view the changes common to

both SEZs and non-SEZ areas in the broader context prevalent nationally.

In general the contemporary life of labour law in India is being shaped by the

unequivocal acceptance of the neo-liberal model of development not only as a means

to promote economic growth but also to enhance the employment net and thus secure

well being of labour. In this context the response to the challenge of strong political

resistance to changes in labour laws has been through withdrawal of the state from

rigorous enforcement of labour laws. State governments in India are engaged in

“frenzied competition to attract capital to their regions.”166 The state of Uttar Pradesh

for instance ordered 5% inspection of industrial units and establishments on a random

basis in 1994, in 1998, “restrictions on inspections were removed, but industries were

protected from unnecessary interference by introducing a system of prior written

permission of inspections from the concerned District Magistrate/Divisional

Commissioner,” subsequently in 2006 it “introduced a system of “self certification”

whereby the establishments are required to submit report on their activities, followed

by inspection of 20% of establishments by enforcement authorities, where those found

in violation of legal provisions are to be motivated to follow them rather than

imposition of punishment which is viewed as the last resort.167 “The states of

Rajasthan and Andhra Pradesh have also reduced the scope of labour inspection, and

have exempted several establishments from the purview of labour inspection.”168

Similar changes have been introduced with respect to implementation of labour laws

in SEZs primarily on basis of the need to provide single window mechanisms. The

Government of Punjab SEZ policy,169 Chandigarh SEZ Policy170 provides for

establishment of single window committee for clearances, approvals and permissions

inter alia with respect to labour. SEZ policies of Maharashtra171

166 Alakh N. Sharma, V. Kalpana, “Labour Regulation and Industrial Development in Uttar Pradesh: Some

Recent Trends” 7 ISID 70. Fiscal incentives are also being offered to industries in terms of tax exemptions to attract capital investment.

167 Id., at pp. 55-56. 168 A.N.Sharma “Flexibility, Employment and Labour Market Reforms in India” in S. Mahendra Dev, N.

Chandrasekhara Rao (eds.), India: Perspectives on Equitable Development 211 (Academic Foundation, New Delhi 2009).

169 Para 14. 170 Para 5. 171 Para 8.

and Madhya



Pradesh172 also provide for single point or single window services with respect to

clearances and registration under labour laws. Karnataka and Jharkhand SEZ Policies

allow filing of a consolidated annual report to the Development Commissioner instead

of periodical returns under most of the labour laws.173 Uttar Pradesh174 and Madhya

Pradesh SEZ Policies175 provide that the government would permit the units in SEZs

to get inspections relating to workers’ health and safety done through “accredited

agencies” that may be notified by the government/Development Commissioner.176

SEZ Policies of Punjab177 and Uttar Pradesh require prior permission of Development

Commissioner before any authority can conduct inspection in units in SEZs. SEZs

policies of Chandigarh178 and Maharashtra179 also provide for the same but explicitly

allow for inspection without permission in urgent circumstances and West Bengal

SEZs Policy provides for inspections in consultation with Development

Commissioner.180

The labour rights regime in SEZs is not only determined by the recognition of

application of labour laws or a separate mechanism envisaged for its implementation,

All these processes diluting supervision over the obligations of entrepreneurs vis-à-vis

labour along with fiscal and other incentives are geared towards providing congenial

atmosphere to developers and entrepreneurs to grow and in turn contribute to the

economic growth of the state. However the approach by being highly biased in favour

of the entrepreneurs in certain ways compromises the protections to which labour is

entitled. The incentives and concessions to the entrepreneurs are not justly balanced

by putting in place effective mechanisms to ensure their accountability in terms of

their treatment of labour. The zones are thus progressively and supportively special

for the former while special in ushering adversity for the latter.

4.7 Use of Existing Spaces under National Labour Rights Regime in SEZs

172 Para3. 173 Karnataka SEZ Policy, 2002, para 4, Jharkhand SEZ Policy, 2003, para 5.3. 174 Uttar Pradesh SEZ (Amended) Policy, 2007, para 3(3). 175 Madhya Pradesh SEZ Policy, 2000, p. 3. 176 Uttar Pradesh SEZ (Amended) Policy, 2007, para 3(3), Jharkhand SEZ Policy 2003, para 5.5,

Jharkhand policy provides for inspections by agencies accredited by Development Commissioner. 177 Para 10. 178 Para 5. 179 Para 8.



it is also shaped by the use of already existing spaces within labour law. When these

spaces are used in order to encompass within their fold all the establishments in SEZs,

which may otherwise be varied in terms of nature of processes carried on in them and

in turn their impact on public good, then the usage appears to be a mere euphemism

for the subjection of SEZs to different labour rights standards. In India, this is done by

designating all the establishments in SEZs as “public utility.” SEZ Policies of

Karnataka, 2002,181 Chandigarh,182 West Bengal,183 Punjab,184 Maharashtra185 and

Uttar Pradesh186

• A notice of strike is given to the employer within six weeks before

striking, or

have designated all the units in SEZs as ‘public utility’ under the

Industrial Disputes Act, 1947. The recognition of status of a unit as public utility

implies certain restrictions on the right of the labour to strike work. According to

section 22 read with section 23 of the Industrial Disputes Act, 1947, a strike by

employees in a public utility service is illegal unless

• Strike commences within fourteen days of giving such notice, or

• Strike commences before the expiry of date of strike specified in such

notice, or

• Strike is during the pendency of conciliation proceedings, or

• Strike takes place seven days after the conclusion of conciliation

proceedings

Since upon service of notice conciliation is deemed to begin,187 “the cumulative

effect of these provisions is, in practice, to prohibit strikes in these public utility

services which is contrary to the principles of freedom of association.”188 The

rationale behind such a prohibition of strikes in public utility services is that they are

considered to be against public good.189

180 West Bengal SEZs Policy, para 8.1. 181 Para 4 182 Para 5 183 Para 6.4. 184 Para 9( c). 185 Para 9. 186 Para 3(4). 187 Kamala Sankaran, Freedom of Association in India and International Labour Standards 191

(LexisNexis Butterworths Wadhwa Nagpur, Haryana, 2009). 188 Ibid. 189 Satyavir Singh v. Union of India A.I.R. 1986 SC 555.

Article 4 of the Voluntary Conciliation and

Arbitration Recommendation 1951 provides that parties to the dispute should be



“encouraged to abstain from Strikes and Lockouts while conciliation is in progress.”

At the same time the recommendation also provides that “no provision of this

Recommendation may be interpreted as limiting, in any way whatsoever, the right to

strike.”190 Moreover, the Committee on Freedom of Association of the Governing

Body of the ILO in its second meeting in 1952 held that “the right to strike is one of

the essential and legitimate means through which workers and their organisations may

further and defend their social and economic interests.”191 These interests may be

related to occupation, labour problems or broader economic and social policy

questions.192 Further workers and employers organisations have a right “to organize

their administration and activities and to formulate their programmes”193 Strike is

considered to be an activity of workers within Article 3 of Convention No. 87194 and

in several cases relating to India the Committee on Freedom of Association has stated

that right to strike is a “legitimate means by workers of defending their economic and

social interests.”195 The Committee of Experts on the application of Conventions and

Recommendations (hereinafter referred to as CEACR) is also of the view that “the

right to strike is an intrinsic corollary of Convention No. 87, though it can be subject

to restrictions.”196

190 Article 7.

191 Case No. 5, 4th Report, para 27, in Kamala Sankaran, Freedom of Association in India and International Labour Standards 169 (LexisNexis Butterworths Wadhwa Nagpur, Haryana, 2009).

192 General Survey, 1983, para 200, in Kamala Sankaran, Freedom of Association in India and International Labour Standards 169 (LexisNexis Butterworths Wadhwa Nagpur, Haryana, 2009).

193 Convention concerning Freedom of Association and Protection of the Right to Organise, 1948, Convention No. 87, Article 3(1).

194 Kamala Sankaran, Freedom of Association in India and International Labour Standards 169 (Lexis Nexis Butterworths Wadhwa Nagpur, Haryana, 2009).

195 Case No. 5, 4th Report, para 27; Case Nos. 589 and 594, 118th Report, para 59; Case No. 793, 149th Report, para 133; Case No. 756, 147th Report, para 167; Case No. 942, 199th Report, para 42; Case No. 1024, 211the Report, para 537; Case No. 1091, 217th Report, para 443; Case No. 1113, 233rd report, para 149, in Kamala Sankaran, Freedom of Association in India and International Labour Standards 170 (Lexis Nexis Butterworths Wadhwa Nagpur, Haryana, 2009).

196 General Survey, 1994, para 151, in Kamala Sankaran, Freedom of Association in India and International Labour Standards 170 (Lexis Nexis Butterworths Wadhwa Nagpur, Haryana, 2009).

Even Article 8 (1) (d) of the Covenant on Economic, Social and

Cultural Rights, 1966 (ICESCR) recognises the right to strike, provided that it is

exercised in conformity with the laws of the particular country. India, a party to

ICESCR has put a declaration on Article 8 indicating that the said article will be

applied in conformity with Article 19 of the Constitution of India. As far as

restrictions on strike in case of industrial establishments declared as public utility are

concerned, the approach of ILO has been to narrowly interpret essential services

which constitute a ground for imposing prohibition on strike. CEACR has limited the

scope of essential services to only those where there is a clear and imminent threat to



the life, personal safety and health of the whole or the part of the population.197

However, en masse declaration of all the units in SEZs as public utility and practically

prohibiting the right to strike in those units is thus not in tune with the approach of

ILO. Further unlike the central Industrial Disputes legislation, Uttar Pradesh Industrial

Disputes Act, 1947 with the aim to prevent strikes and lock outs confers power upon

the state government for “requiring any public utility service, or any subsidiary

undertaking not to close or remain closed and to work or continue to work on such

conditions as may be specified in the order.”198 The said order can be made under the

condition that the state government thinks it necessary or expedient to do so for

securing the public safety or convenience or the maintenance of public order or

supplies and services essential to the life of the community, or for maintaining

employment.199

The en masse declaration of every unit in SEZs as public utility thus adversely affects

the right to strike and in turn the bargaining power of the labour. It amounts to

depriving workers of “their greatest source of power, the power concertedly to

interrupt work.”

Inclusion of grounds like convenience, public order in the Act gives a

wide leeway to the state government to prohibit strike in many industrial

establishments than would fall under the narrow approach to the grounds recognized

by ILO in this regard.

200 Uninterrupted production through industrial peace is viewed as an

absolute collective interest in modern society which must be protected all the time.

However, this protection which reaps benefits to the entrepreneurs is secured at the

cost of disempowerment of labour. In this sense unions are placed in “the

uncomfortable position of serving as fiduciaries of an imagined societal interest in

industrial peace.”201 Further declaration of all the units in SEZs as public utility stands

as another expression of how the legal system is organized by the state to “guarantee

the conditions for private accumulation . . . that are necessary for it to survive in the

context of a capitalist economy.”202

197 Digest, 2006, para 581, in Kamala Sankaran, Freedom of Association in India and International

Labour Standards 191 (Lexis Nexis Butterworths Wadhwa Nagpur, Haryana, 2009). 198 Uttar Pradesh Industrial Disputes Act, 1947, section 3(e). 199 Id., section 3. 200 Karl E. Klare, “Labour Law as Ideology: Toward a New Historiography of Collective Bargaining Law”

4 IRLJ 466 (1981). 201 Republic Steel Corp. v. UMV 570 F. 2d. 467, 479, in Karl E. Klare, “Labour Law as Ideology: Toward

a New Historiography of Collective Bargaining Law” 4 IRLJ 452 (1981).



4.8 Conclusion

SEZs, perceived as a formidable vehicle for export led growth within the neo-liberal

ideology, is necessarily premised upon cheap labour as an input required in order to be

competitive in not only attracting domestic and foreign investment but also to win

scarce export markets in the contemporary context of simultaneous adoption of export

led growth strategy in most of the countries. In such a competitive world three

categories of labour law regimes have emerged in SEZs – inclusionary, exclusionary

and special/altered regime. Increasingly because of varied pressures the exclusionary

regimes are gradually disintegrating. The most prevalent labour law regimes in SEZs

are the special/altered labour law regimes. Even inclusionary regimes suffer from the

nationally prevalent lacunae in de jure recognition of labour rights as well as from the

practice of “low visibility” strategy of under enforcement of labour laws. Despite

assurance of the Minister of Commerce and Industry in the Parliament about the

subjection of SEZs to the existing labour laws in India, the formulation of the

provisions securing the same in the SEZs Act, 2005 is highly ambiguous. But for the

reference to Parliamentary debates the language of provisions relating to labour laws

in SEZs Act, 2005 imbibe prohibition only of modified application of central labour

legislations in SEZs without ruling out the possibility of completely excluding the

application of labour laws. Moreover, labour being a subject in the concurrent list, the

influence of this ambiguity also reverberates in the powers of the states. Therefore it is

desirable to remove this ambiguity by amending the provision in order to clearly

embody the will of the legislature to uphold applicability of labour laws in SEZs.

However, the extent to which such a change will secure labour rights in SEZs is

uncertain on account of the different implementation mechanism of labour law

envisaged in the Act, extension of the trend of compromised/weak enforcement

generally prevalent in some states to SEZs as well as the prompt reliance of the states

on the already existing spaces within the nationally prevalent labour law in order to

legally restrict the labour rights in SEZs. It is thus clear that despite Parliamentary

proclamation of protection of labour rights in SEZs the special labour rights regime

established in SEZs is weak.

202 Boaventura de Sousa Santos, Toward a New Legal Common Sense 73 (Butterworths Lexis Nexis, U.K.,

2002).

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