Introduction
Special Economic Zones (SEZs) have come to be an important tool for encouraging the development and growth of the economy in India. SEZs are geographically defined territories that function as self-contained economies with distinct tax and regulatory rules. SEZs make India an appealing destination for international companies looking to set up business. It also goes through the legal structure and regulations that regulate SEZs in India, as well as their link to labour laws. This article examines the evolution of labour laws in India’s special economic zones, including the establishment of a SEZ labour commissioner, health insurance plans, the revision of the trade union act, the restriction of strike and lockout, and the effects of the SEZ minimum wage act.
Page Contents
The legal framework that governs SEZs in India
The Special Economic Zones Act of 2005 and the SEZ Rules of 2006 regulate SEZs in India. The Act establishes, develops, and manages SEZs in India, namely the formation of a SEZ authority and SEZ units. The SEZ Rules, 2006, outline the method for establishing SEZs, the SEZ eligibility criteria, and the rewards and advantages offered to SEZ divisions. Customs duty, excise duty, and service tax are among the several national and state taxes that SEZs are exempt from. Revenue tax exemption on export revenue for the initial five years, 50% deduction for the following five years, and 50% discount on ploughed-back export earnings for the following five years are also available to SEZ units. In addition, for the initial ten years of functioning, SEZ units are free from the minimum alternate tax (MAT).
The relationship between SEZs and labour legislation
SEZs in India are governed by the labour regulations of the state where they are situated. The SEZ Act, on the other hand, allows for the relaxation of some labour rules in SEZs under specific circumstances. Labour rules in SEZs are being relaxed to make it simpler for businesses to do business and encourage international investment. The SEZ Act relaxes labour rules such as the Industrial Disputes Act of 1947, the Contract Labour (Regulation and Abolition) Act of 1970, and the Factories Act of 1948, according to the following circumstances:
- The SEZ units must offer their employees better working conditions and facilities than those stipulated by the applicable labour regulations.
- The SEZ units must offer their employees an effective grievance redressal procedure.
- The liberalisation of labour laws in SEZs must not be damaging to the employees’ interests.
Impact of SEZs on workers’ rights and working conditions
The easing of labour rules in SEZs has been a source of contention, with some claiming that it has resulted in worker exploitation and violations of human rights. The SEZ units are exempt from the minimum wage restrictions of the Minimum Wages Act of 1948. In addition, SEZ units are not obligated to give permanent employment to their workers and can instead use contract labour, which is frequently paid less than the minimum wage. Labour legislation deregulation in SEZs has also resulted in violations of occupational health and safety standards. SEZ units frequently fail to offer proper safety equipment and training to their employees, resulting in accidents and injuries. Some contend, however, that SEZs have resulted in the development of new employment and improved working conditions for workers. SEZ units frequently provide greater working conditions and facilities than those mandated.
Development of labour laws in the context of SEZs
The Special Economic Zones Act of 2005 and the SEZ Rules of 2006 govern SEZs. The Act establishes, develops, and manages SEZs in India, involving the formation of a SEZ authority and SEZ units. The SEZ Rules, 2006, outline the method for establishing SEZs, the SEZ eligibility requirements, and the rewards and advantages offered to SEZ units.
1. Provision of a SEZ labour commissioner
The SEZ Act requires the appointment of a SEZ labour commissioner, whose job it is to guarantee that labour rules are followed in SEZs. The SEZ labour commissioner is in charge of ensuring that SEZ units follow the terms of the Industrial Disputes Act of 1947, the Contract Labour (Regulation and Abolition) Act of 1970, and the Factories Act of 1948. The SEZ labour commissioner is also in charge of examining complaints about labour law violations in SEZs. The labour laws relevant to SEZs are those implemented by the government of India. This covers compliance with labour laws issued by and particular to state and local governments. This implies that the developmental commissioner is in charge of guaranteeing the health of all employees in the zone.
2. Health insurance plans
Every SEZ unit is required by the SEZ Act to offer health insurance to its employees. The employee’s family members must be covered by the health insurance plan. SEZ units additionally have to offer medical services for their employees. In practise, the SEZ Act has encouraged the privatisation of labour rights monitoring, as the labour and civil courts lack authority to consider disputes occurring in SEZs. Units in SEZs are authorised to get reports from organisations recognised by the state legislature for examinations required in units beyond SEZs under the Factories Act, 1948, for the safety and health of employees, the Workmen’s Compensation Act, and the Employees’ State Insurance Act, 1948 (ESI Act). The ESI Act requires employers to register employees earning a particular amount of compensation under the ESI plan. Employees insured under the ESI Act have access to illness, maternity, and disability compensation through ESI hospitals. By establishing an authorised organisation under the SEZ Act, the employers and the ESI Corporation are relieved of their whole obligation, as authorised agencies have no legal binding under the Factories Act and the ESI Act.
3. Amendment of the Trade Union Act
Exporting zones have a history of flagrant abuses of worker rights all throughout the world, and cases of worker exploitation in India are no exception. It is also worth noting that, prior to the SEZ Act 2005, all manufacturing and labour legislation was potentially relevant to the Export Processing Zones (EPZs). Despite the fact that the EPZs were governed by statute, trade union activities were almost nonexistent, and non-worker admittance was banned. Participating in any union activities resulted in severe penalties, involving violent abuse and loss of employment.
The Trade Union Act of 1926 was revised in 2010 to allow trade unions to be registered in SEZs. The amendment permits trade unions to operate in SEZs and represent workers in SEZ units. Trade unions in SEZs are regulated by the same rules as unions in the rest of the nation.
4. Prohibition of strikes and lockouts
Strikes and lockouts are prohibited in SEZ units for a period of three years from the start of activities, according to the SEZ Act. The restriction is designed to offer a stable and welcoming environment for firms operating in SEZs.
The SEZ Act significantly relaxes employment regulations in SEZ enclaves by designating them as “public utility services.” Employees in the publicly traded sector are prohibited from demonstrating under Section 22 of the Industrial Disputes Act of 1947, as earlier indicated. They are unable to prolong their strike until they give six weeks’ notice. They are not entitled to strike during the conciliation procedure or within 14 days of getting the strike notice. Section 22 of the Industrial Disputes Act of 1947 provides that no employee employed by a public service provider shall go on strike in violation of contract:
a) without providing the employer with a written notice of strike, as required by law, within 6 weeks before noticeable;
b) without providing the company with a written announcement of strike, as required by law, within 6 weeks prior to actually striking; or
c) prior to the expiry of the strike date specified in any such announcement.
5. Impacts of the SEZ minimum wage act
The SEZ minimum wage legislation, enacted in 2017, compels SEZ sectors to provide their employees a minimum wage that is not less than the state government’s minimum wage. Employee perks such as insurance and healthcare are also needed in SEZ units. Some have criticised the SEZ minimum wage act for being insufficient and failing to tackle the problem of low pay in SEZs.
According to research, women make up a considerable share of the labour force in SEZs. Women are mistreated as normal, with mandatory night shifts, no transportation, no benefits for maternity leave, restricted toileting, sexual assault, restrictions on the right to unionise, limited opportunity for trade unions, and low pay. Because SEZs are not controlled by laws, men and women in SEZs have been paid lower minimum wages compared to those paid outside of the zones.
The implementation of the Minimum Wage Act within the boundaries of SEZs is not mentioned in the SEZ Act. It neither specifies nor gives instructions for calculating and quantifying the minimum wage. The competent government authority is responsible for establishing minimum pay rates for the jobs mentioned in the Act’s schedule. It also requires the present government to review and adjust the minimum wage rates on a regular schedule, but no more than once every five years.
Conclusion
The evolution of labour regulations in SEZs has been a source of contention, with some claiming that the relaxation of labour rules in SEZs has resulted in worker exploitation and violations of human rights. To address these issues, legislation such as the formation of a SEZ labour commissioner, health insurance plans, amendments to the Trade Union Act, the prohibition of strike and lockout, and the SEZ minimum wage act have been enacted. The implementation and enforcement of these laws will be critical in guaranteeing the safety and rights of employees in SEZs.
References
- Special Economic Zones Act, 2005
- SEZ Rules, 2006
- Industrial Disputes Act, 1947
- Minimum Wages Act, 1948
- Ministry of Commerce and Industry, Government of India. (2021). Special Economic Zones. Retrieved from https://www.sezindia.gov.in.
- Ministry of Labour and Employment, Government of India. (2021). Labour Laws & Reform Initiatives. Retrieved from https://labour.gov.in.
- Nair, N. (2018). Labour and Employment Laws in SEZs in India. Retrieved from https://www.mondaq.com.
- Mathur, M. (2019). The Evolution of Labour Laws in India’s Special Economic Zones. Retrieved from https://www.lexology.com.
- Rath, S. (2018). Special Economic Zones and Labour Laws in India: A Critical Analysis. Retrieved from https://www.academia.edu.
- Raval, V. (2019). The Effects of Special Economic Zones on Labour and Employment in India. Retrieved from https://www.econstor.eu.
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