Role of State in Industrial Relations

It is the responsibility of the State to achieve and preserve industrial peace in the
country for economic growth and development. According to Kirkaldy, industrial
relations in a country are intimately connected with the form of its political government.
He has divided the objectives of industrial relations into four categories : (i) improvement
in the economic conditions of workers in the existing state of industrial management and
political government ; (ii) control exercised by the State over industrial undertakings with
a view to regulating production and promoting hormonious industrial relations ; (iii)
socialisation or rationalisation of industries by making the State itself a major employer ;
and (iv) vesting of a proprietary interest of the workers in the industries in which they are
employed.
The National Commission on Labour (1969) observed, "The concern of the State in
labour matters emanates as much from its obligations to safeguard the interests of
workers and employers as to ensure to the community the availability of their joint
product/service at a reasonable price. The extent of its involvement in the process is
determined by the level of social and economic advancement, while the mode of
intervention gets patterned in conformity with the political system prevailing in the
country and the social and cultural traditions of its people." In India, the public policies
on industrial relations are influenced by (a) the Constitution of India; (b) the instruments
of the International Labour Organisation; (c) the policies announced and pursued by the
Central Government on Labour from time to time. The reports and recommendations of
major commissions of inquiry such as the Royal Commission on Labour , National
Commission on Labour, Rural Labour Commission and tripartite institutions such as the
Indian Labour Conference and the Standing Labour Committee, Industrial Committees,
etc., also provide useful inputs in shaping the government policies on industrial relations.
In a democratic set up, industrial relations policies are shaped by basic philosophy
for governance of the people based on human values for freedom and human rights.
They are also influenced by the stage of development of the economy and the strategies
of development. Social policies concerning job and earnings security, etc., are influenced
by the economic health, employmentunemployment situation, etc. Such influence could
be reciprocal too. In a sound economy with full employment situation it would be
possible to offer better jobs and earnings security. When economic conditions change
significantly, the industrial relations institutions and policies too will change.
RATIONALE OF STATE ROLE
In India, the State (Union Government) endeavours to correct, through effective
industrial relations, an imbalanced, disordered and maladjusted social and economic
order with a vie v to reshaping the complex socio-economic relationships following
technological and economic progress. It also intends control and discipline the parties
concerned by reconciling their conflicting interests. In this process, it protects some and
restrains others, depending upon the situation. In India, Government intervention
became necessary in view of alarming industrial unrest, poor conditions of work and
workers, and lack of a strong trade union movement. The rationale of government's role

in industrial relations could be explained by the following factors

(i) concern for planned development and rapid economic growth, envisaged in the
successive five year plans;
(ii) fulfill requirements of a welfare state envisaged in the Indian Constitution,
particularly the Directive Principles of State Policy and more importantly Articles 43 and
43A;
(iii) the socio-economic imbalances in the society, depressed conditions of the working
class as observed by the Royal Commission on Labour and the Labour Investigation
Committee;
(iv) the imbalances in and between unions and employers and weaknesses of both the
social partners, leading to preference for adjudication despite avowed recognition and
appreciation of the merits of free and fair collective bargaining;
(v) the anxiety of the State concerning the adverse impact of industrial disputes and work
stoppages, including strikes and lock-outs, led the government to prefer adjudication
despite lip sympathy to the apparent merits of free and fair collective bargaining.
(vi) the role of the State as a major employer with public sector being projected to
achieve the commanding heights of the economy as per the Industrial Policy Resolution,
1956.
LABOUR POLICY
The term `labour policy' connotes guiding principles laid down by the labour fore,
State in the sphere of labour such as wage payments, regulation of health and bound, to
safety, welfare and social security, union-management relations, etc. Actions for the
implementation of such guidelines could be through a number of instruments. Taken in
this sense, "labour policy" would encompass not only the statutes, but also
administration-cum judicial action for improving the economic and social well-being of
the working class.
Labour policy aspires and aims at several goals like industrial peace and harmony,
reducing inequalities, increasing standard of living of workers like increasing
productivity, providing social security, providing a fair wage etc. To achieve these, labour
policy will include wage policy, industrial relations policy, welfare policy, social security
policy, etc. Thus, "the universe of labour policy is so wide that no camera can take a full
picture."
Labour Policy is a very vast area of study as is reflected by (i) the Constitution of
India; (ii) Five Year Plans, and (iii) Industrial Relations System.
(i) Constitution. Intervention of the State in the sphere of labour has its to birth in the
ideals of welfare state as embodied in the Directive Principles of State Policy as
enunciated in the constitution of the Republic of India. Again g a concern for rapid
economic growth helped by smooth and continuing in production and increased
productivity also urged the government to actively d intervene. This led the government
to enact a number of labour lagislations to put its labour policy into effect.
(ii) Five Year Plans. Successive five year plans have attempted to as improve the
lot of both agricultural and industrial labour. Many principles of labour policy,
particularly in respect of the Code of Discipline, the Inter-Union an Code of Conduct, the
Resolution on Industrial Truce, and the Workers' Participation in Management, can be
traced to the government's perception of industrial discipline required to be achieved

through a regime of economic planning.

(iii) Industrial Relations. Yet another approach to labour policy is to view industrial
relations as a natural order which is prone to break down the occasionally but which also
has a built-in tendency to overcome and eventually for
transcend its limitations by
developing institutions and a system of government to regulate their behaviour.
Accordingly, the test of labour policy is the extent to which it enables the industrial
relations system to achieve its natural goal. In this perspective, the purpose of labour
policy is to strengthen trade unions and managements and to motivate them to develop
bilateral relationships that may ultimately lead to mutually binding collective bargaining
agreements for maintaining peace in industry.
Dimensions of Labour Policy
Labour policy covers a wide spectrum of issues as discussed below :
(i) Technology. The first dimension of labour policy is technology which is the most
dynamic factor of change in a developing economy. The process of technological changes
goes hand in hand with changes in the structure of the labour force. As our society renews
itself technologically, severe stresses are bound, to be felt in the social mores, work
habits, supervisor-workers relationship, alienation from the work, welfare needs, housing,
education, of skill development and many others 5. The problem is to anticipate these only
changes and to develop appropriate policies and institutions to implement the the change
successfully.
(ii) Economic Development As is obvious, the process of economic and development is
concomitant with rising expectations. But mounting problems, like increasing
unemployment, unsatisfactory improvement in productivity, low rate of increase in per
capita consumption, inflation induced redistribution of income making rich richer and
poor poorer coming in the wake of economic development pose some of the most
dilemmas of labour policy. Such dilemmas can be tackled only when economy grows at a
much faster rate than has been hitherto possible.
(iii) Representative Status of Unions One of the peculiar problems India in the sphere
of trade unions is the multiplicity of unions in a sin plant and none of these could be
called a representative union. Even if there is a union whose claim as a representative
union could be accepted, problem arises of the fate of other contending unions which are
also d registered under the Trade Unions Act, 1926. It is a pity that in our count there
exists no foolproof mechanism of verification of membership of trade unions and no
universally accepted guidelines for the recognition of the m representative union in a
plant or an industry. The idea of one union one plant is good but then it goes against the
spirit of Constitution which allows t freedom of association as one of the fundamental
rights. Further segregating the trade unions from the rough and tumble of day-to-day
policies is another area of problem. Only a sound trade union policy backed by national
consensus is the appropriate answer.
(iv) Wage Determination The process of wage determination is closely tied up with the
income policy laid down by economic planning and industrial relations. Through its
income policy, the government attempts regulate the payment of minimum wages in
different industries. But payment of minimum , wages may not bring lasting peace in the
industry which prospering and earning huge profits. The workers may form strong unions
prefer to determine their wages through collective bargaining with the management. This

will require an atmosphere of mutual trust and confidential between the labour and the
management.
(v) Pay Packet The last dimension of labour policy which is connected with the problem
of wage determination is the question of interrelationship ,. between various components
of pay packet particularly the fringe benefit' `p" incentive pays and profit bonus.
Industrial disputes over the various components of pay and other related issues still
constitute more than twenty per cent of the total industrial disputes in the country. It is,
therefore essential to develop a rational system of wage determination in every industry
establishing links between wages and productivity.
CONSTITUTION AND LABOUR POLICY
The Preamble to the Constitution of India provides the framework with which the
labour policies can be formulated in India :
"We, the people of India, having solemnly resolved to constitute into, sovereign
socialist secular democratic republic and to secure to all its citizens
Justice, social, economic and political;
Liberty of thought, expression, belief, faith and worship;
Equality of status and of opportunity; and to promote among them alt
Fraternity assuring the dignity of the individual and the unity an integrity of the Nation."
The expression "socialist" was specifically introduced in the Preamble 6
the Constitution by the Constitution (Forty-second Amendment) Act, 1976 h transform
the country from " a wholly feudal exploitative slave society to a vibrant, socialist
welfare society". The economic policies announced during the early 1990s constitute a
marked shift towards market-oriented economy thus raising doubts as to the continued
relevance of socialism.
Part III of the Constitution lays down fundamental rights of the citizens which include;
Right to Equality. This right includes prohibition of discrimination on grounds of
religion, race, caste, sex or place of birth. Equality of opportunity in matters of public
employment and abolition of untouchability. For example, the principle of equal wages
for equal work is enforced by the Government through its wage policy.
Right to Freedom. This includes protection of certain rights regarding freedom of
speech, etc.; protection in respect of conviction for offences; protection of life and
personal liberty; and protection against arrest and detention in certain cases.
Right Against Exploitation. Prohibition of forced labour and prohibition of
employment of children in factories, etc. are intended to
minimise and eventually end such exploitations. Subsequently, separate legislations
have been promulgated to guard against such exploitation. Legislations like the Bonded
Labour (Abolition and Regulation) Act, and the Child Labour (Prohibition and
Regulation) Act are illustrative of legislative measures directed against prohibition and
regulation of variety of exploitations.
Part IV of the Constitution lists directive principles of state policy. The provisions
contained in this Part are not enforceable by any court, but the principles laid down
therein are nevertheless fundamental in the governance of the country and it is the duty of
the State to apply these principles in making laws.
The State is to secure a social order for the promotion of welfare of the people. Towards

this end, the State shall, in particular direct its policy towards securing :
(a) that the citizens, men and women equally, have the right to an adequate means to
livelihood;
(b) that the ownership and control of the material resources of the community are so
distributed as best to subserve the common good;
(c) that the operation of the economic system does not result in concentration of wealth
and means of production to the common detriment;
(d) that there is equal pay for equal work for both men and women;
(e) that the health and strength of workers, men and women, and the tender age of
children are not abused and that citizens are not forced by economic necessity to enter
vocations unsuited to their age or strength;
(f) that children are given opportunities and facilities to develop in a healthy manner and
in conditions of freedom and dignity and that childhood and youth are protected against
exploitation and against moral and material abandonment.
The Directive Principles of State Policy which influence the labour policies of the
State include the following :
The State shall secure :
(i) Equal justice and free legal aid. (Article 39A)
(ii) Right to work (within the limits of its economic capacity and development) and
to public assistance in certain cases. (Article 41)
(iii) Just and humane conditions of work and maternity (Article 42)
(iv) Living wage and conditions of work ensuring a decent standard life and full
enjoyment of leisure and social and cult opportunities, etc. (Article 43)
(v) Participation of workers in management of industries. (Article 4 The relevant
articles are reproduced below :
Article 39. The State shall, in particular, direct its policy securing
(a) that there is equal pay for equal work for both men and women,
(b) that the health and strength of workers, men and women, and tender age of
children are not abused and that citizens are forced by economic necessity to
enter avocations, unsuited to age or strength;
Article 41. The State shall, within the limits of its economic capacity development,
make effective provision to securing the right to work, education and to public assistance
in case of employment, old age, sickness and disablement, etc.
Article 43. The State shall make provision for securing just and humane conditions
of work and for maternity relief.
Article 43. The State shall endeavour to secure, by suitable legislation economic
organisation or in any other way, to the workers, agricultural industrial or otherwise,
work, a living wage, conditions of work ensuring decent standard of life and full
enjoyment of leisure and social and cultural opportunities and, in particular, the State
shall endeavour to promote cotta industries on an individual co-operative basis in rural
areas.
Article 43A. The State shall take steps, by suitable legislation or in other way, to
secure participation of workers in the development undertakings, establishments or other
organisations engaged in any industry
The federal nature of the Indian Constitution made it imperative for t State to

intervene in labour matters. Seventh schedule of the Constitution deals with the division
of legal authority between the Centre and the States Three divisions have been created,
namely, the Union List, the Concurrent L' and the State List. Subjects entered in the
Union List are under the exclusive legislative authority of Parliament of India and
executive authority of Central Government. Both central and state legislatives can make
enactments in respect of subjects mentioned in the Concurrent List, but the administrative
powers in respect of the subjects are vested in the State Governments. State List is the
exclusive responsibility of the State Governments. division of subjects concerned with
Labour into three lists is as below :
Union List. Participation in international conferences, associations an other bodies
and implementation of the decisions thereof. Regulation of labour and safety in mines ;
oil fields ; major ports ; railways ; ports ; telegraph an telephone ; industrial disputes
concerning union employees and inter-state migration.
Concurrent List. Trade unions; industrial and labour disputes; labour welfare;
provident fund; workmen's compensation; employers' liability; invalidity and old age
pension; social security; vocational and technical guidance, training; economic and
social planning; and factories, enquiries and statistics.
State List. Relief of disabled and unemployable persons.
With this demarcation as base, both central and state governments have enacted
labour laws and intervened in the conduct of industry and imposed statutory obligations
for the most part on the employers and, to a subsidiary degree, on the workmen. These
labour enactments reflect the social, economic and political ideas current at a given time.
With regard to the administration of labour laws, Articles 256 and 257 of the
Constitution authorise the central government to give necessary directions to the state
governments in order to ensure compliance with the laws enacted 'by the Parliament.
Article 258 authorizes the Central Government to confer powers and to impose duties
upon the state governments or their officers in respect of laws made by the Parliament.
The latter may also, wholly or partially, assign its legislative powers in respect of
concurrent list to the state governments.
Thus, the Directive Principles of the Indian Constitution require the Government to
intervene in industry to safeguard the interest of the working class and to increase
productivity. The Central Government has enacted certain laws which are applicable to
certain sections of labour throughout the country. These include the Plantations Labour
Act, 1952 ; the Minimum Wages Act, 1948 ; the Industrial Disputes Act, 1947 ; the
Payment of Bonus Act, 1965 ; the Contract Labour (Regulation and Abolition) Act,
1970 ; the Payment of Gratuity Act, 1972 ; the Bonded Labour System (Abolition) Act,
1975 ; and the Equal Remuneration Act, 1976. The state governments of different states
have also enacted legislation and framed rules under various central and state laws to
protect the economic and social interests of the working class.
LABOUR POLICY DURING FIVE-YEAR PLANS
The Government decided to launch economic planning for the speedy economic
development of the country; and to lay down the goals and strategies of economic
planning, the institution of Planning Commission was created in 1950. The Planning
Commission decided to launch five year plans with effect from April 1951. For the

Planning Commission's approach to labour, the first consideration is related to the wellbeing of the working class and, secondly, the plan's contribution to the economic stability
and progress of the country,
The First Five Year Plan (1951-1956)
The First Five-Year Plan emphasized the need for industrial peace in industry, the
ultimate oneness of interests and the virtue of harmonious relations between capital and
labour. The plan encouraged mutual settlement, collective bargaining and voluntary
arbitration. It observed: "It is incumbent on the State to arm itself with legal powers to
refer disputes for settlement by arbitration or adjudication, on failure of efforts to reach
an agreement by other means."
The plan emphasized two other principles :
(i) Workers' right of association, organisation and collective bargaining should be
accepted without reservation as the fundamental basis of mutual relationship;
and
(ii) Employer-employee relationship should be accepted as "a partnership in
constructive endeavour to promote the satisfaction of the economic needs of
the community in the best possible manner."
The First plan concentrated on five aspects of labour policy: (i) industrial relations;
(ii).wages; (iii) working conditions; (iv) employment and training; and (v) productivity.
These are discussed below :
(i) Industrial Relations. The Planning Commission in consultation with the
Ministries of Labour and Commerce and Industry worked out certain proposals, to
govern industrial relations. According to these proposals, the industrial development
committee composed of representatives of employers and workers agreed upon certain
conclusions in respect of the industrial relations policy. The main features of this
agreement are that the workers have a right to strike, to resort to direct action for the
protection of their rights. At the same time, the disruptive effects of a strike have to be
considered and therefore curtailed as far as possible. Since India was moving in the
direction of planned production and distribution, realisation of social justice and welfare
of the workers was of utmost importance. The plan thus recommended that the Central
and State Governments should arm themselves with legal powers to, refer industrial
dispute to arbitration or adjudication if other peaceful methods failed.
The stress was on avoidance of disputes and as far as possible on internal settlement
of disputes. For this, the plan recommended that terms and conditions of employment and
responsibilities of the employer and workers should be clearly defined and a grievance
procedure should be developed and standing orders laid down.
'
For harmonious labour-management relations there must be close collaboration
between. employers and workers through consultative committees. Works committees
were to be set up for on the spot settlement of differences between the workers and
management and the evolution of team spirit and a sense of belonging to the enterprise.
The process of collective bargaining was to be encouraged for which there would be a
single bargaining agent over as large an area of industry as possible. In other words,
industry wide agreements were to be encouraged.
(ii) Wages. The recommendations in this regard were that there should be some

control on wage increases. The Planning Commission felt that "advances to a living wage
can be achieved through a fall in prices, an increase in the productivity of labour, or an
improvement in the capacity of industries to pay, brought about by nationalisation of
industry or modernisation of the plant etc."
The tripartite machinery for wages was to develop norms as to guide wage boards in
settling questions relating to wages. A suitable and proper basis had to be worked out by
this machinery for awarding periodic bonus by the industrial tribunals and courts. Wage
boards have to be established in each State and the Centre in order to deal with the
questions relating to wages. A statutory Provident Fund for industrial workers was to be
instituted to provide for old age.
(iii) Working Conditions. The Plan emphasised that administrative measures need to
be taken for the implementation of such pieces of legislation as the Factories Act, 1948,
the Mines Act, etc. which regulate conditions of work. The Factory Inspectorate was to
be strengthened for achieving standards of enforcement of these laws. In cases where
lower standards prevailed those areas were to be given greater attention. An inspection
code for each industry regarding its working conditions was to be prepared and the
provisions of this code were to be followed strictly ; the employers were also to be
concerned with workers' education, health and other social needs. Finally to promote the
effective implementation of the provisions of the Factories Act, a national industrial
health museum was suggested to create an awareness in the minds of the public at large.
.
(iv) Employment and Training. The Plan emphasized that the recruiting
arrangement of the individual concerns be improved so that the exploitation of the
workers was avoided. An enquiry was recommended to examine the working of the
employment exchanges. There should be coordination in the facilities for technical and
industrial training between the ministry of labour and apprenticeship training schemes in
industrial undertakings. It was suggested that an assessment be made of the
requirements, short-term as well as long-term, of the different types of skilled
manpower.
(v) Productivity. Productivity studies were suggested to find out the productivity of
workers in different industries. Methods were to be evolved to conduct these studies with
a view to understanding the factory responsible for low levels of productivity in different
industries. The First Plan was drawn up with awareness of the importance of industrial
labour in the national economy. It was suggested to strengthen labour welfare and social
security measures. A Central Labour Institute was planned to study the problems of
production in relation to the health and safety of workers.
The Second Five-Year Plan (1956-1961)
The Second Five Year Plan was intended to give practical shape to Industrial Policy
Resolution,. 1956. The objectives of the labour policy were better discipline in industry,
increased production and improved productivity. In pursuance of these objectives, a Code
of Discipline in industry was agreed upon by the representatives of labour, management
and government in 1958.
For better industrial relations, the Plan stressed mutual negotiations, conciliation and
voluntary arbitration. Where the cases were intractable, there was to be recourse to
government intervention to remedy the situation. Since inadequate implementation of

awards and agreements led to friction between the labour and management, an
appropriate tribunal was to be constituted to enforce compliance with the directions of
the awards. Penalties for violation, it was suggested, should be deterrent in nature. This
Plan recommended the setting up of a standing joint consultative machinery at the
centre, in the states and in individual units for bringing about cooperation between
labour and management and setting up of joint management council in every enterprise
to recommend steps for harmonious relations.
The Second Plan suggested that statutory provision should be made for the
recognition of unions, and keeping in mind the need for having one union in an industry.
It also suggested that there should be restrictions on the number of outsiders who serve
as office-bearers of unions and that the workers who became office-bearers should- have
additional protection against victimisation, and that the finances of trade unions should
be strengthened.
The Third Five-Year Plan(1961-1966)
This Plan aimed at consolidating, stabilising and expanding the measures taken
during the Second Plan. In the matter of industrial relations, the Third Plan emphasized
the implementation of the Code of Discipline. The Plan maintained that the principle of
voluntary arbitration was to be followed for settlement of disputes in preference to
adjudication. In this connection, it was suggested that the government should take the
initiative in drawing up panels of arbitrators on a regional and industry-wise basis.
The Plan suggested that workers' participation in management should be accepted as
a fundamental principle and an urgent need. In view of its importance, the plan
undertook as a major programme the progressive extension of the scheme of Joint
Management Councils to new industries and units during the plan period so that, in the
course of a few years, it may become a normal feature of the industrial system. In course
of time, management cadres should arise out of the working class itself."" The Plan also
laid emphasis on an intensive programme of the workers' education in all establishments
where such Councils are set up. It was hoped that "trade union leadership would grow
progressively out of the ranks of the workers and this process would be greatly
accelerated as the programme of workers' education gathered momentum."
The Fourth Five-Year Plan (1969-1974)
The Fourth Five Year Plan continued with the labour policy formulated
under the Third Plan. In particular, it laid emphasis on the following :
(i) In the field of industrial relations, priority should be accorded to the growth of
healthy trade union movement so that it could secure better labourmanagement relations;
(ii) More emphasis should be laid on collective bargaining, and productivity should
be increased through labour-management co-operation; and (iii) Industrial disputes should be settled by voluntary arbitration.
The Fourth Plan laid greater emphasis on generation of employment. The strategy
developed by the Fourth Plan was unique in the sense that it emphasized labour intensive
programmes through the development of
agriculture and the rural infrastructure like electrification, water management and so on.
This Plan laid stress on schemes such as roads, minor irrigation, housing and urban

development. Thus, many of the programmes launched during the Fourth Plan Period
were with the goal of increasing employment opportunities and providing unemployment
relief in the rural areas.
The Fifth Five-Year Plan (1974-1979)
The Fifth Plan laid emphasis on generation of employment and labour welfare. The
need for greater mobility of labour was also stressed, especially from labour surplus to
labour starved areas. It was felt that geographic barriers would result in artificial
shortages and excesses. The Plan observed as follows :
"Stress will be laid on strengthening industrial relations and conciliation machinery,
better enforcement of labour legislation, research in labour relations and labour laws,
imparting training to labour officers, improvement of labour statistics and undertaking
studies in the field of wages and productivity. Special attention will be devoted to bring
about improvement in productivity in all spheres of economy."
The Sixth Five-Year Plan (1980-1985)
The Sixth Plan had a separate chapter on labour and labour welfare. After a brief
overview of the labour situation in the country, which highlighted the wage and bonus
issue, in terms of wage differentials, national minimum wage and the need for
productivity linked bonus, the document highlighted a few thematic concerns. The Plan
document observed as follows :
"Industrial harmony is indispensable for a country if it is to make economic progress
healthy industrial relations, on which industrial harmony is founded, cannot be regarded
as a matter of interest only to employers and workers, but are of vital concern to the
community as a whole. In the ultimate analysis, the problem of industrial relations is
essentially one of attitudes and approaches of the parties concerned. A spirit of cooperation postulates that employers and workers recognise that while they are fully
justified in safeguarding their respective rights and interests, they must also bear in mind
the larger interests of the community. This is the true significance of the doctrine of
industrial harmony in its three-dimensional aspect While efforts must continue to
minimise the areas of disagreement among the parties concerned and acceptable
improvements in law and machinery effected, some of the changes in the existing laws
and trade unions, industrial disputes and standing orders, which are generally considered
essential for promoting industrial relations, need not be held over and should be carried
out."
The Seventh Five Year Plan (1985-1990)
The Seventh Plan took stock of the implementation of labour policy measures so far
and felt that there is considerable scope for improvement in industrial relations which
would obviate the need for strikes and the justification for lockouts. In the proper
management of industrial relations, the responsibility of unions and employees has to be
identified and inter-union rivalry and intra-union divisions should be avoided. In
particular, the Plan stressed upon reducing inter-union rivalry and strengthening industrial
relations machinery.
The Eighth Five-Year Plan (1992-1997)

The Eighth Plan echoed concerns raised in the earlier plans with particular reference
to workers' participation in management, skill, training, productivity, equitable wage
policy, informal sector, etc. It also, for the first time, expressed concern about the need to
rationalise the regulatory framework with a view to "providing reasonable flexibility for
workforce adjustment for effecting technological upgradation and improvement in
efficiency. At the same time, the plan document emphasized the need to "ensure that the
quality of employment in the unorganised sector units improves in terms of earnings,
conditions of work and social security."
IMPACT OF INDUSTRIAL POLICY
Industrial Policy Resolution, 1956. This document has been described as the
"economic constitution" of the country. It demarcated the areas reserved exclusively for
State enterprises, the areas where both public sector and private sector enterprise can
operate and an area which should be left almost entirely to private sector. It stressed
several other objectives like encouragement of cottage and small scale industries;
development of backward areas, training for managerial and technical skills, etc.
Regarding to industrial relations, the Resolution laid down that :
"It is necessary that proper amenities and incentives should be provided for all those
engaged in industry. The living and working conditions of workers should be improved
and their standard of efficiency raised. The maintenance of industrial peace is one of the
prime requisites of industrial progress. In a socialist democracy, labour is a partner in the
common task of development and should participate in it with enthusiasm. Some laws
governing industrial relations have been enacted and a broad common approach has
developed with the growing recognition of the obligations of both management and
labour. There should be joint consultatation between the workers and the management;
the workers should, wherever possible, be associated progressively in management.
Enterprises in the public sector have to set an example in this respect."
Industrial Policy Resolution, 1991. In order to induct an element of dynamism in
the Indian economy, a new industrial policy was announced by -the government in 1991.
This policy brought about a drastic change in the organisation and working of industrial
system of the country, that in turn considerably influenced its labour policy. With a view
to safeguard the interest of labour, the industrial policy stated as under :
"The Government will fully protect the interests of labour; enhance their welfare
and equip them in all respects to deal with the inevitability of technological change.
Government believes that no small section of society can corner the gains of growth,
leaving workers to bear its pains. Labour will be made an equal partner in progress and
prosperity. Workers' participation in management will be promoted. Workers'
cooperatives will be encouraged to participate in packages designed to turn around sick
companies. Intensive training, skill development and ungradation programmes will be
launched."
NATIONAL COMMISSION ON LABOUR
The National Commission on Labour (NCL) was set up in 1966 to study the
industrial relations situation in the country and to make recommendations for
improvement. The recommendations 18 of the National Commission on Labour which had
far reaching implications on labour policy in different areas have been briefly discussed

below :
1. Strikes/Lockouts and Gheraos. The NCL categorised industries as `essential' and
'non-essential' for the purpose of strikes and lockouts, and made the following
recommendations :
(i) In essential industries/ services, where a cessation of work may cause harm to the
community, the economy or the security of the nation itself, the right to strike may be
banned, but with the simultaneous provision of an effective alternative like arbitration or
adjudication to settle disputes.
(ii) In non-essential industries, a maximum period of one month has to be fixed for
the continuance of a strike or lockout. After the lapse of this period, the dispute has
automatically to go before the Industrial Relations Commission (IRC) for arbitration. In
essential industries, the right to strike or lockout should be made redundant by requiring
the IRC to adjudicate when mutual negotiations fail and parties do not agree to
arbitration.
(iii) Every strike/lockout should be preceded by a notice. A strike notice to be given
by a recognised union should be preceded by a strike ballot open to all the members of
the union, and the strike decision must be supported by two-thirds of the members
present and voting.
(iv) `Gherao' cannot be treated as a form of labour unrest since it involves physical
coercion rather than economic pressure. It is harmful to the working class, and in the
long-run may affect national interest.
(v) The penalties, which have been provided for unjustified strikes/lock-outs, would
ultimately discharge these and would, in due course persuade, the parties to sit round the
table earnestly and settle their disputes by negotiation.
(vi) To restrain the outbreak of unnecessary strikes/lockouts, compensation and
forfeiture of wages for a strike/lockout should be provided for.
2. Industrial Relations Commission. The NCL recommended the constitution of
Industrial Relations Commission, on a permanent basis, both at the state level and the
Centre.
"The State IRC will deal with disputes in respect of industries for which the state
government is the appropriate authority, while National IRC will deal with disputes
involving questions of national importance or those likely to affect or interest
establishments situated in more than one state. One of the principal reasons for
suggesting these commissions is the desire to eliminate the possibility of political
influence disturbing or distorting industrial peace in the country.
"The Commission will have both judicial and non judicial members. The judicial
members as well as the president of the national/state IRC, are to be appointed from
among persons eligible for appointment as judges of high courts. Non-judicial members
need not have qualifications to hold judicial posts, but should be otherwise eminent in the
field of industry, labour or management.
"The IRCs will be high-powered bodies independent of the executive. The main
functions of these IRCs will be (a) adjudication in industrial disputes, (b) conciliation,
and (c) certification of unions as representative unions.
The conciliation wing will consist of a Conciliation Officer with the prescribed
qualifications and status. The functions relating to certification of unions will rest with a
separate wing of the national/state IRC. The Commission may provide arbitrators from

among its members/officers, in case parties agree to avail of such services."

"An award made by the IRC in respect of a dispute raised by recognised union
should be binding on all the workers in the establishment(s) and the
employer(s)."
3. Resolution of Industrial Disputes. The National Commission on labour felt that
the best way of settling industrial disputes is through negotiation between the parties.
However, industrial disputes, many a time, take a legalistic turn, mainly because of the
emphasis on adjudication through industrial tribunals and courts. In such a situation, the
Commission laid down the following procedure for-the settlement of disputes.
After negotiations have failed and before the notice of a strike/lockout is served, if the
parties agree to voluntary arbitration, the IRC (Industrial Relations Commission) will
help the parties in choosing a mutually acceptable arbitrator or may provide an arbitrator
from among its members/officers if the parties agree to avail of such services.
In essential services/industries, when collective bargaining fails and parties do not
agree to arbitration, either party may notify the IRC of the failure negotiations,
whereupon the IRC shall adjudicate on the dispute.
In the case of non-essential services/industries, the failure of negotiations and refusal
to avail of voluntary arbitration, the IRC, after receipt of notice of direct action, may offer
the parties its good offices for settlement.
After the expiry of the notice period, if no settlement is reached, the
parties will be free to resort to direct action. If direct action continues for 30 days, it will
be incumbent on the IRC to intervene and arrange for the settlement of the dispute. When
a strike/lockout commences, the appropriate government may move the Commission to
call for its termination on the ground that its continuance may affect the security of the
state, national economy and public order; and if, after hearing the parties and the
government, the Commission is so satisfied, it may, for reasons to be recorded, call on the
parties to terminate the strike/lockout and file statements before it. Thereupon the
Commission will have to adjudicate on the dispute.
4. Recognition of Trade Union. The National Commission on Labour felt that statutory
recognition should be granted to a representative union as a sole bargaining agent. For
this, the following guidelines need to be observed :
(a) Recognition of a representative union should be made compulsory under a Central
Law in all undertakings employing 100 or more workers or where the capital invested is
above a stipulated size. A trade union seeking recognition as a bargaining agent from an
individual employer should have a
membership of at least 30 per cent of the workers in the establishment. The minimum
membership should be 25 per cent if the recognition is sought for an industry in a local
area.
(b) The Industrial Relations Commission is to certify the union as a representative
union on the basis of either verification of membership of the contending unions or by a
secret ballot open to all workers in the establishment. The Commission will deal with
various aspects of union recognition such as :(i) determining the level of recognitionwhether plant, industry, centre-cum- industry, to determine which is the majority union;
(ii) certifying the majority union as a recognised union for collective bargaining; and
(iii) generally, dealing with other related matters.
(c) The recognised union should be statutorily given certain exclusive rights and

facilities, such as the right of sole representation; the right to enter into collective
agreements on terms of employment and conditions of service; the right to collect
membership subscriptions within the premises of the undertaking; the right of check-off,
holding discussions with departmental representatives within the factory premises,
inspecting, by prior agreement, the place of work of any of its members; and nominating
its representatives on works/grievance committees and other bipartite committees.
(d) The minority unions should be allowed only the right to represent cases of
dismissal and discharge of their members before the Labour Court.
5. Strengthening of Trade Unions. The trade unions should be made strong,
organisationally and financially. Multiplicity of unions and intra-union rivalries should
be discouraged by:
(a) providing compulsory registration of unions;
(b) raising the minimum number required for forming a union;
(c) raising the minimum membership fee;
(d) reduction in the number of outsiders; and
(e) taking steps to build internal leadership.
6. Collective Bargaining. The Commission found that collective bargaining did not
make any progress in the country because of absence of arrangements for statutory
recognition of trade unions, except in some states, and greater reliance on adjudication.
The Commission recommended strengthening of collective bargaining through the
following measures :
(a) In order to enable employees to effectively participate in the process of
collective bargaining, they should be well organised and trade unions must become
strong and stable.
(b) To facilitate collective bargaining, there should be compulsory recognition of a
union as sole representative for the purpose of bargaining with the management.
7. Grievance Procedure. The NCL recommended that statutory backing should be
provided for the formulation of an effective grievance procedure, which should be
simple, flexible, less cumbersome and more or less
on the lines of the Model Grievance Procedure. It should be time-bound and have a
limited number of steps, say, approach to the supervisor, then to the departmental head,
and thereafter a reference to the grievance committee consisting of management and
union representatives. The other suggestions of the NCL are :
(i) Grievance procedure should be simple and have a provision for at least one
appeal. The procedure should ensure that it gives a sense of (a) satisfaction to the
individual workers, (b) reasonable exercise of authority to the manager, and (c)
participation to unions. A formal grievance procedure should be introduced in each unit
employing 100 or more workers.
(ii) A grievance procedure should normally provide three steps : (a) submission of a
grievance by the aggrieved worker to his immediate superior, (b) appeal to the
departmental head/manager, (c) appeal to a bipartite grievance committee representing
the management and the recognised union. However, where unanimity eludes the
committee, the matter may be referred to an arbitrator.
SECOND NATIONAL COMMISSION ON LABOUR

The first National Commission on Labour had submitted its report in .1969 after
which a lot of changes have taken place in technology, socialeconomic, politio-legal and
in international environment of industry. The initiation of several economic reforms
during the 1990s further necessitated a review of industrial relations scenario, labour laws
and other related matters and bring the desired changes to deal with the challenges of
future. With this background, the Central Government set up the second National
Commission on Labour in 1999 under the Chairmanship of Sh. Ravindra Varma. The
Commission was entrusted to suggest, among other things, rationalisation of the existing
labour laws in the organised sector so as to make them more relevant in the changing
economic conditions under the impact of globalization.
It is a well acknowledged fact that both foreign investment and export growth are
being constrained by the existing labour laws which do not allow any room for a direct
linkage between increase in wages and productivity growth. The existing labour laws are
so inflexible that employers are reluctant to hire labour because they would not be able to
fire surplus labour in the future. Unless the labour laws are changed, higher
manufacturing growth will riot automatically result in greater employment (as is the case
in developed economies) because employers will be tempted to replace labour with
capital. They will also be constrained to undertake downsizing or restructuring for fear of
trouble from the trade unions. Thus a thorough review of the provisions of the Industrial
Disputes Act and other labour legislations is called for in order to impart greater
flexibility to the labour market and thereby encourage more employment, and attract
larger amounts of foreign investment.
The Second National Commission on Labour was expected to formulate an umbrella
law to ensure protection to workers in the unorganised sector which, in the absence of
growth in job opportunities in the organised sector, is expanding at a rapid pace,
absorbing school dropouts, women and children. It submitted its report to the
Government in June 2002.