Jaitley slams ‘unsustainable’ taxes

New Delhi, November 22, 2014

 

‘If the government is not investor-friendly, people will start looking elsewhere’

 

Comments come in the wake of I-T department losing its battle against  Shell

Finance Minister Arun Jaitley on Friday said that an unsustainable tax demand would only earn the country a bad name as an investment destination. Mr. Jaitley’s comments come in the wake of the Income Tax department losing its battle against Shell in the Mumbai High Court.

“Unsustainable demand won’t get you taxes. Unsustainable demands in the books can show you in good glory, but eventually those taxes will be blocked in some judicial court proceedings... they would have only earned us a bad name as an investment destination,” Mr. Jaitley said at the HT Leadership Summit. He, however, maintained that those who are supposed to pay taxes must pay.

The Mumbai High Court order earlier this week went against the Income Tax department in its Rs.18,000 crore transfer pricing cases against oil major Shell India. The government is also engaged in a Rs. 20,000 crore tax dispute with British telecom major Vodafone.

Referring to retrospective amendments to the tax laws by the UPA government, Mr. Jaitley said, if the government was not investor-friendly, people would start looking elsewhere.

He further said making the taxation regime investor-friendly and streamlining the procedure for land acquisition were the big challenges facing the government.

The Minister, however, took comfort from the fact that taxation laws were the domain of the Lok Sabha in which the NDA has majority.

He said though the government had managed to get the mess concerning allocation of coal blocks cleared with ease, resolving other issues remained a challenge.

Asked which three specific reforms he would like to get passed in the coming winter session of Parliament, Mr. Jaitley said he would like the insurance Bill, coal laws and Goods and Services tax to be cleared. He said there were political risks to reforms..

“Reforms by themselves are not enough, if they have to survive politically, the blending [with politics] has to be adequately done by those involved,” Mr. Jaitley said. — PTI

 

http://www.thehindu.com/todays-paper/jaitley-slams-unsustainable-taxes/article6623652.ece

Far from sunny optimism

 

November 11, 2014

Updated: November 11, 2014 01:34 IST

Women still play only a disproportionately minor role in the economy. Picture shows women labourers on their way to work in Kochi. Photo: K. K. Mustafah

Some of India’s labour market regulations are a legacy of Fabian Socialism and colonial rule; others are a product of postcolonial bureaucracy, disincentivising economic growth

By 2050, India’s economy could be the third largest in the world, surpassed only by China and the U.S., according to a study undertaken by Goldman Sachs. In a 2003 analysis, Goldman Sachs economists Dominic Wilson and Roopa Purushothaman painted a dramatic picture of the future international economy. By 2050, they argued, the combined Gross Domestic Product of Brazil, Russia, India and China (which economist Jim O’Neill had grouped into the acronym BRIC in 2001) could surpass the combined GDP of the current richest economies. Central to the rise of the BRIC, the two economists agreed, would be the rise of India.

Indeed, at the time, India’s trajectory seemed stratospheric. Even when buffeted by the winds of financial crisis in 2007-2008, it managed to sustain growth and helped avert global economic depression. India, many analysts noted, possessed key components of what it would take to become a global economic power: a strong civil society, favourable demographics (including a relatively young workforce), an increasingly educated populace, and vast natural resources. Noting these and other factors, on his first trip to India in 2010, U.S. President Barack Obama declared, “The United States does not just believe, as some people say, that India is a rising power; we believe that India has already risen.”

Impediments to growth

Within four years, however, the situation has changed dramatically. The pace of reform had screeched to a standstill; rather than moving the country forward, the Congress became entangled in mismanagement and a series of corruption scandals, and resorted to economic populism to sustain its rule. Economic growth slowed to below five per cent.

In turn, many of those who had envisioned India’s future as a great economic power saw their projections fail. Far from the sunny optimism of the early 2000s, the country’s turn to failed statism naturally led to large-scale corruption and sclerotic growth.

Today, an opportunity exists for India to reclaim its future. In order to achieve the economic growth its people deserve, it must seize the moment by modernising its labour market.

Some of the current labour market regulations are a legacy of Fabian Socialism and colonial rule; others are a product of postcolonial bureaucracy. Either way, they are a clear disincentive to employment and growth.

Also Read: Reforming labour laws, creating livelihoods

Despite a large population, labour participation in the formal economy remains low. Women still play only a disproportionately minor role in the economy, large segments of the population remain cut off from the global market, and government mandates stifle labour sector growth.

In short, the regulatory burden is incompatible with building a modern society. For example, the Industrial Employment Act requires employers to submit information such as work hours and wages to the government ahead of time for approval. Moreover, the Act’s regulations constrain employers by providing little flexibility in updating employees’ work hours, training, or pay. Similarly, the Industrial Disputes Act (IDA) requires businesses to obtain government approval before firing large numbers of employees. In many instances, the process of doing so is lengthy and features copious red tape.

Foreign companies are also discouraged from investing in Indian enterprises by laws like the IDA. As a result, they prefer to take their businesses to other labour hubs that offer greater employment flexibility and fewer regulations.

Reform under way
Yet India’s potential should not be underestimated. As Prime Minister Narendra Modi has emphasised, further reform may be on the way. Moreover, some reform has already begun at the state level, with Rajasthan leading the charge as a regional leader in labour reform. Under the leadership of Chief Minister Vasundhara Raje, the State has passed a number of measures aimed at decreasing corporate regulations that inhibit efficient business practices. This liberalising impulse will make hiring, training, and firing easier for employers.

Whereas in the past the IDA required that government be notified if more than one hundred workers were being terminated, if the Rajasthan reforms are enacted, companies in the future will be able to terminate up to 300 employees without government approval. Moreover, representative trade unions will be held to stricter standards, with worker membership requirements doubling from 15 per cent to 30 per cent. The effect should be a more productive and dynamic workforce.

Rajasthan is also pushing regulatory streamlining through reform of the Contract Labour Act, which aims to put contract labourers on a similar footing as employees; and the Factories Act, which closely regulates operations of factory businesses. In Rajasthan, smaller and mid-sized businesses will be exempt from these regulations, allowing them to compete more effectively in the marketplace.

On a national scale, Bharatiya Janata Party (BJP) leaders hope that Mr. Modi will succeed in strengthening federalism, providing individual States more opportunities for reform. Progressive States like Rajasthan, or Mr. Modi’s own Gujarat, which put in place significant changes under his leadership, will not only be free to move forward with pro-employment measures but hopefully can act as a catalyst for the rest of the country too.

The BJP’s election manifesto promised to focus on national economic reform and development, with an emphasis on manufacturing. In his 2014 Independence Day speech, Mr. Modi invited global economy players to “‘Come, make in India,’ ‘Come, manufacture in India.’ Sell in any country of the world but manufacture here.” In an attempt to capitalise on India’s vast human resources, Mr. Modi also appealed to India’s large youth population.

In order to unleash the potential of the labour force, Mr. Modi has already pushed for a number of reforms, including the doubling of the hourly overtime limit. Also, in order to keep pace with global technological advances, the government has sponsored initiatives to increase Internet access across the nation, thereby augmenting business connectivity and improving technological literacy.

Though India has not lived up to some of its more optimistic development scenarios, its economic potential remains vast. With the right kinds of reforms mobilising its relatively young workforce, it can enjoy a prosperous future.

Also read: A new economic agenda

(Kenneth R. Weinstein is President and CEO of the Hudson Institute, a Washington DC-based think tank.)

http://www.thehindu.com/opinion/op-ed/commet-on-indias-labour-market-and-economic-growth/article6584155.ece

Reforming labour laws, creating livelihoods

October 30, 2014

Updated: November 4, 2014 01:23 IST

Mukul G. Asher

INCENTIVISING MANUFACTURING: Encouraging the manufacturing sector through initiatives like 'Make in India' is essential to generate productive employment. File photo from October 2011 shows workers fixing accessories at the Maruti plant in Manesar. Photo: Shanker Chakravarty

A consensus on the outcome-based approach adopted by the Modi government to labour reforms is emerging. As the benefits become apparent, more reforms would become feasible

Prime Minister Narendra Modi’s government has exhibited competence in formulating economic reform measures that are small but likely to have substantial positive impact on reviving growth, generating productive livelihoods, and addressing price rise. The government has tended not to view reforms in a particular scheme or a programme narrowly but has tried linking them with other schemes and programs which could positively impact the desired outcomes and create an environment of trust among the various stakeholders.

These welcome initiatives are also evident in the government’s moves to make labour markets more flexible to address employability gaps effectively. The government is explicitly linking labour reforms to improvement in ease of doing business — setting up the business, operating it as a going concern, and exit norms — so that the available human and material assets can be put to more productive use.

This is evident in the phrase used by the Rajasthan Chief Minister Vasundhara Raje to explain the government’s labour reform proposals — creating “a fertile habitat for jobs creation”.

The labour reforms are also, rightly, linked to improving worker benefits — like providing for a minimum pension under Employees’ Pension Scheme; making Provident and Pension Funds portable; and increasing the maximum work hours. There is also stress on easing the compliance burden for small and medium businesses, like by permitting self-certification in some areas; restricting the powers given to labour inspectors, and by modernising labour laws. Also, various initiatives to increase the skilled manpower include the amendment to the Apprenticeship Act, 1961 which was passed by the Lok Sabha in August this year but is pending before the Rajya Sabha and steps to modernise the governance of the Industrial Training Institutes (ITIs).

“Reforming labour laws to bring about moves such as permitting women to work in night shifts would improve gender equality”

Rethinking MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) to provide skills and create productive assets and perhaps linking it to apprenticeship programs in industry, plantations, and agriculture is also consistent with labour reforms, which encourages labour mobility.

The above approach builds support for the reform process, enhances trust in the government; and develops capacities and consensus for far deeper and wider reforms. It is also consistent with modern growth theory and evidence, and with sound public management principles.

The approach also enables the Union government to experiment with the concept of cooperative federalism where outcomes rather than narrow partisan political considerations govern Union-State relations. The decision to let the States retain revenue from proposed e-auctioning of coal blocks is consistent with this.

Demographically favourable
India is in a demographically favourable phase. This implies that the ratio of working age population to total population ratio is on the increase, leading to a need to provide productive livelihoods to the increasing number of young entering the workforce and also to those who are unemployed or under-employed.

India’s total labour force in 2011-12 is estimated to be about 480 million, only about 40 per cent of the total population. In particular, the participation of women is quite low at about one-third of the working age population — that in the 15-59 years category — while for men it is around four-fifth. Thus, reforming labour laws to bring about moves such as permitting women to work in night shifts, as has been proposed, would improve gender equality and, potentially, the economic growth.

Shifting labour from agriculture to non- agricultural occupations is essential and so is encouraging manufacturing — through initiatives such as ‘Make in India’. India’s employment elasticity was negative for the years 2009-10 and in 2011-12. This cannot be allowed to continue if the country’s economic progress is to be sustained and a certain social cohesion maintained.

Under the current constitutional provisions, labour is a subject in the Concurrent List. Individual States can amend labour laws. The Union government’s role is to forward them to the President. If the President assents, the States are free to implement the amended laws. This is the avenue States such as Rajasthan and Madhya Pradesh are likely to pursue to implement labour reforms. Uttar Pradesh, Himachal Pradesh, and Haryana, are reportedly considering labour reforms to attract investments. Also, with a BJP government having been elected in Maharashtra — an important State in terms of the economy as Mumbai is the financial and commercial Centre of the country — labour reforms are also likely to be initiated there.

This avenue of State initiation-Central consent-presidential acceptance permits initiation of context-specific labour reforms and allows experimentation and flexibility, making the costs of policy reversal less severe. It also encourages much needed accountability on the part of State governments in terms of livelihood outcomes.

As the BJP gets entrusted with the responsibility of governing more States, potential for constructive competition among States to produce the economic, social, and political environments necessary to generate productive livelihood increases. This will also help facilitate the passage of Union government’s labour reform legislation in the Rajya Sabha.

Constitutional amendment
An alternative avenue is to amend the Constitution so that labour primarily becomes a State subject. This merits further research and debate.

A consensus on the outcome-oriented approach adopted by the Modi-led government to labour reforms is emerging. As the benefits, particularly to workers and to businesses, become apparent, greater reforms are likely to become feasible. Here it is essential not to let ‘the best’ be the enemy of ‘the good’, and to keep focus on the 500 million workers in the labour force — not on just the workers who are members of trade unions — and on ease of doing business, particularly for small and medium businesses.

(Mukul G. Asher is Councillor at the Takshashila Institution and a Professorial Fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore.)

http://www.thehindu.com/opinion/op-ed/comment-reforming-labour-laws-creating-livelihoods/article6545494.ece

Putin blames politics for falling energy prices

 

Thu Nov 6, 2014 8:01pm GMT

* Falling energy prices hit Russia's economy

* Putin says politics prevailing on oil price

* Criticises Pacific trade pact that excludes China, Russia

By Vladimir Soldatkin and Timothy Heritage

MOSCOW, Nov 6 (Reuters) - President Vladimir Putin has suggested that the fall in global oil prices that is hurting Russia's economy was caused in part by political manipulation.

In an interview with Chinese media published on Thursday, Putin did not blame any particular country for the price drop, but some Russian political commentators have depicted it as a Saudi-U.S. plot against Moscow.

"Of course, the obvious reason for the decline in global oil prices is the slowdown in the rate of (global) economic growth which means energy consumption being reduced in a whole range of countries," Putin said, according to a text released by the Kremlin.

"In addition, a political component is always present in oil prices. Furthermore, at some moments of crisis it starts to feel like it is the politics that prevails in the pricing of energy resources."

The price of Russia's flagship Urals URL-E crude oil blend has fallen by about a quarter since the end of June, following the trend in global oil prices.

Trading at over $80 per barrel, it is well below the $114 required to balance the Russian budget. That will further weaken an economy already hurting from Western sanctions over the crisis in Ukraine.

Putin made his comments before going to an Asia-Pacific Economic Cooperation (APEC) summit in Beijing next week and a meeting of the Group of 20 major economies in Brisbane.

Underlining Russia's growing interest in building ties with Asia to ensure it is not isolated by the Western sanctions, Putin said the Asia-Pacific region was seen by Moscow as an increasingly important energy market.

"The steps taken by us ... envisage further diversification of the structure and growth sources of the Russian economy as well as the decrease of over-dependence on the European hydrocarbon market, among other things due to the growth in oil and gas exports to the countries of the Asia-Pacific region."

MAJOR REGIONAL PLAYERS

Russia supplies Europe with a third of its gas needs. It has already started pumping more oil to China, and aims to double the volumes this decade.

Russia's top gas producer, Gazprom, has also agreed to start shipping gas via a pipeline to China from 2019 and to eventually ship up to 38 billion cubic metres a year -- more than any single European country is buying from Russia.

Putin said Russia's relations with China had reached "the highest level of comprehensive equitable trust-based partnership and strategic interaction in their entire history."

By contrast, relations with the United States are at their lowest ebb since the Cold War, because of the crisis in Ukraine.

Both countries are members of APEC and the G20 but Washington says no formal face-to-face talks are scheduled between Putin and U.S. President Barack Obama though they could have an informal conversation on the sidelines.

In a new barb aimed at Obama, Putin criticised the proposed Trans-Pacific Partnership (TPP) free-trade trade pact that the U.S. administration is negotiating with a group of Pacific countries that includes Japan, but not China or Russia.

"Obviously, the Trans-Pacific Partnership is just another U.S. attempt to build an architecture of regional economic cooperation that the USA would benefit from," Putin said.

"At the same time, I believe that the absence of two major regional players such as Russia and China in its composition will not promote the establishment of effective trade and economic cooperation." (Editing by Robin Pomeroy)

 

http://af.reuters.com/article/energyOilNews/idAFL6N0SW7FD20141106?pageNumber=3&virtualBrandChannel=0&sp=true

Modi's Two Self-Goals In One Week

October 21, 2014 23:17 IST

Mani Shankar Aiyar

(Mani Shankar Aiyar is a Congress MP in the Rajya Sabha.)

When Narendra Modi steals other people's schemes and re-launches them as his own initiatives, this purloining of the heritage of others is but a reflection of the absence of anything in his heritage to proclaim as his own. But such larceny is as nothing compared to the havoc he wreaks when he begins to think for himself. Two examples of Modi's self- goals have struck this benighted nation in the week of 11-18 October.

The first was his Saansad Adarsh Gram Yojana (MPs' Model Village Programme). Pray, what business is it of MPs to establish model villages? Is that not the domain of the Panchayats? Launched on 11 October, the birth anniversary of Loknayak Jayaprakash Narayan, it mocks everything that JP stood for in wishing to insulate Panchayats from higher echelons of government, including interfering MPs and MLAs. I know Modi has little knowledge of what went before him but, had he cared to ask, someone might have handed him JP's "Swaraj for the People", priced at one rupee and published in 1961 by the Akhil Bharat Sarva Seva Sangh, Rajghat, Varanasi.

He would have read JP's passionate plea for empowering Panchayats far more effectively than had been achieved by Jawaharlal Nehru on the basis of the 1957 Balvantray Mehta Study Group recommendations. Clarifying that he was "indebted" to many but "most of all to Gandhiji", JP stressed his view, the same as the Mahatma's, "that as you proceed from the bottom level of government to the top, each higher level should have less and less functions and powers." Instead, he bemoaned, we had created an "inverted pyramid" from which it was necessary that the "broad upper levels" be "sawed off (and) brought down to earth so that the pyramid of democracy becomes a real pyramid - narrow at the top and broad at the bottom". In such a system, he said, "the people at each level would have the full opportunity to manage all those affairs that might pertain to that level."

So, what is an MP doing setting up "model villages" at the Panchayat level? At the level of the village panchayat, who more needs the "full opportunity to manage all those affairs that pertain to that level" than the Panchayats themselves? Had Modi been a JP follower, he would have started a Panchayat Adarsh Gram Yojana, ensuring that at least 50 lakhs a year is made available to every village in every panchayat every year so that within 10, perhaps even five years, every one of our 7,00,000 villages is made an "adarsh gram". Launching such a scheme on JP's birthday would have then been highly appropriate.

But to go against the grain of JP's thinking in asking legislators to do the executive's job of facilitating model villages, and that too by leaving it to MPs to decide which three of the 600 plus village panchayats in each constituency he is going to choose, is such a gross violation of everything that JP stood for that it adds insult to injury - that too on his birthday of all days - and amounts to transgressing the most dearly cherished principles that JP stood for. This is what happens when lesser human beings try to steal the clothes of the truly greater ones.

I also pity the MPs. At three villages every year over a five-year period, they would be left explaining to 585 of their 600 panchayats why they were not chosen, and the privilege extended only to 15 others. And how will the MP choose the 15 "adarsh grams"? In all probability, as a reward for votes cast for the MP. This will ensure the MP's defeat at the next election in all the other infuriated panchayats. If, on the other hand, he chooses to please three villages that did not vote for him, the fury of those who supported him last time but, in turn, were not supported by him, will lead to a stern reckoning at the next elections. Thus, both from the Panchayats' point-of-view, and from the MPs', this is truly a lose-lose scheme.

As JP said, "Swaraj from Below" means not a "procedural reform" but bringing "swaraj to the people" by ensuring "a real devolution of power and not a make-belief. It is possible," he warned, "to construct the outward structures of Panchayati Raj and to give it no substance. That would be like a body without a soul, dead from the start, a still-born child". Modi has made a "still-born child" of Panchayati Raj, "dead from the start", by devolving powers and funds to MPs and not Panchayats for the building of model villages.

Worse, to this farcical inauguration in Vigyan Bhawan, he had invited thousands of panchayat representatives, but instead of listening to what they had to say (as Dr. Manmohan Singh and Soniaji had done on a previous occasion when we celebrated the 15th anniversary of Panchayati Raj under my chairmanship in 2008), Modi rudely left the meeting immediately after making his speech and Minister Nitin Gadkari promptly dissolved the proceedings, abandoning the panchayat participants who came to me to complain bitterly about the treatment they had received at the hands of the Modi dispensation.

Next, we have the draft labour legislation tabled in the last session and procedural reforms announced on 16 October. The intended labour reforms signal Modi's pay-back time to the giant corporates who funded his hugely expensive election campaign. They have so infuriated organized labor that even the BJP-affiliated Bharat Mazdoor Sangh has joined its comrades in the Trades Union movement to issue a joint statement on 15 September 2014 decrying the failure of the Central Government to "push through" amendments to the relevant laws "without any consultations with them".

The joint statement explains painstakingly how "liberalizing the provisions of the Factories Act will imperil safety at the workplace (and) push the majority of factories out of its coverage". Further, the amendments proposed will result in "the principal employer and the contractor  becoming unaccountable for service conditions of the workers in a large number of enterprises." Moreover, the amendments proposed for the Apprentices Act "will pave the way for the replacement of contract/casual/temporary workers, and even regular workers, by comparatively low-paid apprentices" And the end-game will be the empowerment of employers to "retrench/lay off workers at will (and) resort to mass-scale contractorisation".

Is this how Modi proposes to promote industrialisation - as growth without jobs and decent employment? To secure an answer to these and other connected questions, the country's entire Trades Union movement is calling National Protest Day on 5 December. Modi has stirred the hornets' nest - and the country will have to pay the price in widespread industrial unrest.
With regard to Modi's "Shrameva Jayate Karyakram", trade unionist Gurudas Dasgupta has accused the Government of catering to the corporates so that "they can play hell." The moves are "anti-worker and pro-corporates". The CPM, for its part, has both pointed out that the Universal Account Number for EPF, which Modi is touting as his achievement, is no more than the finalisation of a programme that has long been in the works, but added that the new norms for implementation of labour laws "will only worsen the situation and encourage further violations by employers."

Prof KR Shyam Sundar of the Xavier Labour Research Institute, Jamshedpur, adds that the new procedures violate ILO's Labour Inspection Convention no. 81 by "centralizing inspections" and "controlling inspection visits from above" and regulating "inspection timings". We are likely to be hauled up in an international forum for Modi's rush to embrace his arch supporters. 

 

http://www.ndtv.com/article/opinion/mani-talk-modi-s-two-self-goals-in-one-week-610281

The limits of self-certification

November 6, 2014

Jesim Pais

Any discussion of industrial safety must reckon that the risk of accidents arising out of faulty maintenance is borne disproportionately by the workers

Sinned against:India has a dubious record when it comes to industrial safety. Picture shows family members of survivors of the Bhopal gas tragedy, one of the world’s worst industrial disasters, paying tribute to victims.— PHOTO: A.M. Faruqui

Prime Minister Narendra Modi, in his recent speech at the Shramev Jayate programme in Delhi, outlined his government’s approach to labour reforms. He began by appearing to take a pro-worker stand, urging those who mattered that workers be treated with respect and dignity. He then rightly made a strong plea for recognising that vocational and technical training has a pivotal contribution to make to industrial development, if not national development itself. While he was careful to recognise the contribution of workers to nation-building, the focus of his speech was on the various ills of the much-maligned inspector raj and the initiatives that his government plans to take to eliminate it.

Among others, he proposed the introduction and implementation of a self-certification scheme in a full-fledged manner. Self-certification has been around for a while in several States, though offered or implemented in different forms. To understand it in its proposed form, it may be useful to go back to Mr. Modi’s speech, where he gave an analogy of maintenance of a personal car versus that of a factory boiler.

He asked, “When we purchase a new car, do we require a government inspector to check if the brakes, the accelerator and the gears function as they should? No, we don’t. We very well know that to maintain our car, its brakes and gear box is in our own interest — it is a question of our own life and death.”

Mr. Modi then went on to suggest the same applied to the maintenance of a boiler in a factory. A factory owner knows it is a matter of life and death. Hence, we need to have confidence in him and trust that he is capable and will act responsibly. Therefore, he went on to say, the factory owner should be allowed to self-certify that his boiler functions properly and that the factory is compliant with respect to all standards.

Flaws in the argument

To begin with, there is a basic flaw in this argument. A personal car is not comparable to a factory and definitely not to a boiler in a factory. In the case of a personal car, there is clearly an inherent incentive for the owner to maintain it, while the same is not true for a boiler. Let me explain.

A personal car is used — and often driven — by its owner. Therefore, the risk of accidents or mishaps due to mechanical failures arising out of its poor maintenance is borne directly by the owner and his/her family.

In the case of a factory and, specifically, a boiler, it is the concerned workers who operate it. Therefore, any risk, life-threatening or otherwise, arising out of poor maintenance of the boiler is borne by workers. Only in very exceptional and rare cases, where the owner himself operates the boiler or positions his office near it, he shares this risk with the workers.

Even when it comes to benefits, it can be argued that in the case of a car it goes entirely to its owner. However, in the case of a factory boiler, while the main benefits go to the factory owner, the operator’s benefits are limited to his wages — a fraction of the total. On the other hand, the risk of accidents arising out of faulty maintenance is borne, disproportionately, by the worker. By equating a personal car with a factory boiler, the Prime Minister seems to have missed these rather elementary points of difference.

It is important to highlight another, more subtle, difference. It has to do with the safety standards. What could be considered safe for domestic operations need not be safe at the level of an industry. While, on average, a personal car is used only for a few hours a day, an average factory boiler is expected to work all 24 hours a day, 365 days a year. In that sense, a personal car and a factory boiler are not comparable. While it is possible that Mr. Modi did not have this difference in mind while making the analogy, it is important and needs to be pointed out.

The context in which a case is being made for self-certification system also needs to be understood. India has a dubious record when it comes to road safety and industrial safety. While in the case of many road accidents, the victims are the owners themselves, in the case of industrial accidents, it is mainly the workers. Further, at times, the victims also include unrelated third parties — like in the case of the Bhopal gas tragedy where most of them were neither owners nor workers but poor slum dwellers living in the vicinity of the factory. Thus, situations relating to industrial safety standards typically suffer from what economists call the problem of ‘moral hazard’.

At present, self-certification schemes — with similar features — are in operation in at least 10 States, including Andhra Pradesh, Gujarat, Maharashtra, Punjab, Rajasthan and Uttar Pradesh. They are voluntary — establishments who do not opt for them continue to operate under the existing labour regulatory standards. As a result, self-certification schemes have few takers.

Under-reporting of accidents

Mr. Modi’s announcement perhaps suggests taking self-certification to the next level in two distinct ways. First, the proposed scheme will be offered nationwide — across States and across industries. Second, it will water down the existing compliance requirements — norms that have made the existing self-certification schemes less attractive to factory owners.

These proposals are being made at a time when there is clear evidence to show that inspection standards relating to labour and industrial regulations have declined drastically in the last two decades.

Data on industrial safety and accidents suffer from serious under reporting. Non-fatal industrial accidents go unrecorded and unreported and only those involving deaths in registered enterprises and those that cannot be concealed at all are reported.

Despite this, data from National Crime Records Bureau show that in 2013, boiler explosion-related accidents alone led to 359 deaths in the country. Another 955 persons died in factory/machine-related accidents. Data also show an upward trend in both industrial mishaps and fatal accidents involving workers. Therefore, what a self-certification scheme is expected to achieve on this count is not clear.

It is understandable that an owner of a factory asks for less stringent regulations or even a lax system of self-certification. However, for a government looking for ways to take the country’s industrial growth and production standards to a higher level, the proposal to introduce a system of self-certification clearly displays lack of imagination. How the introduction of a self-certification scheme will succeed in increasing industrial production, productivity and occupational safety is questionable. If widely applied with less stringent compliance norms, it will only exacerbate the already precarious industrial safety situation in the country.

( Jesim Pais is Assistant Professor at the Institute for Studies in Industrial Development, New Delhi. )

For a government looking for ways to increase industrial growth, the self-certification proposal clearly displays lack of imagination