To contain the spread of COVID-19 in India, the central government imposed a nation-wide lockdown on March 24, 2020. Under the lockdown most economic activities, other than those classified as essential activities, were suspended. States have noted that this loss of economic activity has resulted in a loss of income for many individuals and businesses. To allow some economic activities to start, some states have provided relaxations to establishments from their existing labour laws. This blog explains the manner in which labour is regulated in India, and the various relaxations in labour laws that are being announced by various states.
How is labour regulated in India?
Labour falls under the Concurrent List of the Constitution. Therefore, both Parliament and State Legislatures can make laws regulating labour. Currently, there are over 100 state laws and 40 central laws regulating various aspects of labour such as resolution of industrial disputes, working conditions, social security, and wages. To improve ease of compliance and ensure uniformity in central level labour laws, the central government is in the process of codifying various labour laws under four Codes on (i) industrial relations, (ii) occupational safety, health and working conditions, (iii) wages, and (iv) social security. These Codes subsume laws such as the Industrial Disputes Act, 1947, the Factories Act, 1948, and the Payment of Wages Act, 1936.
How do state governments regulate labour?
A state may regulate labour by: (i) passing its own labour laws, or (ii) amending the central level labour laws, as applicable to the state. In cases where central and state laws are incompatible, central laws will prevail and the state laws will be void. However, a state law that is incompatible with central laws may prevail in that state if it has received the assent of the President. For example: In 2014, Rajasthan amended the Industrial Disputes Act, 1947. Under the Act, certain special provisions with regard to retrenchment, lay-off and closure of establishments applied to establishments with 100 or more workers. For example, an employer in an establishment with 100 or more workers required permission from the central or state government prior to retrenchment of workers. Rajasthan amended the Act to increase the threshold for the application of these special provisions to establishments with 300 workers. This amendment to the central law prevailed in Rajasthan as it received the assent of the President.
Which states have passed relaxations to labour laws?
The Uttar Pradesh Cabinet has approved an ordinance, and Madhya Pradesh has promulgated an ordinance, to relax certain aspects of existing labour laws. Further, Gujarat, Rajasthan, Haryana, Uttarakhand, Himachal Pradesh, Assam, Goa, Uttar Pradesh, and Madhya Pradesh have notified relaxations to labour laws through rules.
Madhya Pradesh: On May 6, 2020, the Madhya Pradesh government promulgated the Madhya Pradesh Labour Laws (Amendment) Ordinance, 2020. The Ordinance amends two state laws: the Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961, and the Madhya Pradesh Shram Kalyan Nidhi Adhiniyam, 1982. The 1961 Act regulates the conditions of employment of workers and applies to all establishments with 50 or more workers. The Ordinance increases this threshold to 100 or more workers. Therefore, the Act will no longer apply to establishments with between 50 and 100 workers that were previously regulated. The 1982 Act provides for the constitution of a Fund that will finance activities related to welfare of labour. The Ordinance amends the Act to allow the state government to exempt any establishment or class of establishments from the provisions of the Act through a notification. These provisions include payment of contributions into the Fund by employers at the rate of three rupees every six months.
Further, the Madhya Pradesh government has exempted all new factories from certain provisions of the Industrial Disputes Act, 1947. Provisions related to lay-off and retrenchment of workers, and closure of establishments will continue to apply. However, the other provisions of the Act such as those related to industrial dispute resolution, strikes and lockouts, and trade unions, will not apply. This exemption will remain in place for the next 1,000 days (33 months). Note that the Industrial Disputes Act, 1947 allows the state government to exempt certain establishments from the provisions of the Act as long as it is satisfied that a mechanism is in place for the settlement and investigation of industrial disputes.
Uttar Pradesh
The Uttar Pradesh Cabinet has approved the Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020. According to news reports, the Ordinance seeks to exempt all factories and establishments engaged in manufacturing processes from all labour laws for a period of three years, subject to the fulfilment of certain conditions. These conditions include:
Wages: The Ordinance specifies that workers cannot be paid below minimum wage. Further, workers must be paid within the time limit prescribed in the Payment of Wages Act, 1936. The Act specifies that: (i) establishments with less than 1,000 workers must pay wages before the seventh day after the last day of the wage period and (ii) all other establishments must pay wages before the tenth day after the last day of the wage period. Wages must be paid into the bank accounts of workers.
Health and safety: The Ordinance states that provisions of health and safety specified in the Building and Other Construction Workers Act, 1996 and Factories Act, 1948 will continue to apply. These provisions regulate the usage of dangerous machinery, inspections, and maintenance of factories, amongst others.
Work Hours: Workers cannot be required to work more than eleven hours a day and the spread of work may not be more than 12 hours a day.
Compensation: In the case of accidents leading to death or disability, workers will be compensated as per the Employees Compensation Act, 1923.
Bonded Labour: The Bonded Labour System (Abolition) Act, 1976 will continue to remain in force. It provides for the abolition of the bonded labour system. Bonded labour refers to the system of forced labour where a debtor enters into an agreement with the creditor under certain conditions such as to repay his or a family members debt, due to his caste or community, or due to a social obligation.
Women and children: Provisions of labour laws relating to the employment of women and children will continue to apply.
It is unclear if labour laws providing for social security, industrial dispute resolution, trade unions, strikes, amongst others, will continue to apply to businesses in Uttar Pradesh for the period of three years specified in the Ordinance. Since the Ordinance is restricting the application of central level labour laws, it requires the assent of the President to come into effect.
Changes in work hours
The Factories Act, 1948 allows state governments to exempt factories from provisions related to work hours for a period of three months if factories are dealing with an exceptional amount of work. Further, state governments may exempt factories from all provisions of the Act in the case of public emergencies. The Gujarat, Himachal Pradesh, Rajasthan, Haryana, Uttar Pradesh, Goa, Assam and Uttarakhand governments passed notifications to increase maximum weekly work hours from 48 hours to 72 hours and daily work hours from 9 hours to 12 hours for certain factories using this provision. Further, Madhya Pradesh has exempted all factories from the provisions of the Factories Act, 1948 that regulate work hours. These state governments have noted that an increase in work hours would help address the shortage of workers caused by the lockdown and longer shifts would ensure fewer number of workers in factories allowing for social distancing to be maintained. Table 1 shows the state-wise increase in maximum work hours.
Table 1: State-wise changes to work hours
|
State |
Establishments |
Maximum weekly work hours |
Maximum daily work hours |
Overtime Pay (2x ordinary wages) |
Time period |
|
All factories |
Increased from 48 hours to 72 hours |
Increased from 9 hours to 12 hours |
Not required |
Three months |
|
|
All factories |
Increased from 48 hours to 72 hours |
Increased from 9 hours to 12 hours |
Required |
Three months |
|
|
All factories distributing essential goods and manufacturing essential goods and food |
Increased from 48 hours to 72 hours |
Increased from 9 hours to 12 hours |
Required |
Three months |
|
|
All factories |
Not specified |
Increased from 9 hours to 12 hours |
Required |
Two months |
|
|
All factories |
Increased from 48 hours to 72 hours |
Increased from 9 hours to 12 hours |
Not required |
Three months* |
|
|
All factories and continuous process industries that are allowed to function by government |
Maximum 6 days of work a week |
Two shifts of 12 hours each. |
Required |
Three months |
|
|
All factories |
Not specified |
Increased from 9 hours to 12 hours |
Required |
Three months |
|
|
Goa |
All factories |
Not specified |
Increased from 9 hours to 12 hours |
Required |
Approximately three months |
|
All factories |
Not specified |
Not specified |
Not specified |
Three months |
Note: *The Uttar Pradesh notification was withdrawn
The Union Cabinet recently approved the launch of the National Health Protection Mission which was announced during Budget 2018-19. The Mission aims to provide a cover of five lakh rupees per family per year to about 10.7 crore families belonging to poor and vulnerable population. The insurance coverage is targeted for hospitalisation at the secondary and tertiary health care levels. This post explains the healthcare financing scenario in India, which is distributed across the centre, states, and individuals.
How much does India spend on health care financing vis-à-vis other countries?
The public health expenditure in India (total of centre and state governments) has remained constant at approximately 1.3% of the GDP between 2008 and 2015, and increased marginally to 1.4% in 2016-17. This is less than the world average of 6%. Note that the National Health Policy, 2017 proposes to increase this to 2.5% of GDP by 2025.
Including the private sector, the total health expenditure as a percentage of GDP is estimated at 3.9%. Out of the total expenditure, effectively about one-third (30%) is contributed by the public sector. This contribution is low as compared to other developing and developed countries. Examples include Brazil (46%), China (56%), Indonesia (39%), USA (48%), and UK (83%) (see Figure 1).
Who pays for healthcare in India? Mostly, it is the consumer out of his own pocket.
Given the public-private split of health care expenditure, it is quite clear that it is the private expenditure which dominates i.e. the individual consumer who bears the cost of her own healthcare. Let’s look at a further disaggregation of public spending and private spending to understand this.
In 2018-19, the Ministry of Health and Family Welfare received an allocation of Rs 54,600 crore(an increase of 2% over 2017-18). The National Health Mission (NHM) received the highest allocation at Rs 30,130 crore and constitutes 55% of the total Ministry allocation (see Table 1). Despite a higher allocation, NHM has seen a decline in the allocation vis-à-vis 2017-18.
Interestingly, in 2017-18, expenditure on NHM is expected to be Rs 4,000 crore more than what had been estimated earlier. This may indicate a greater capacity to spend than what was earlier allocated. A similar trend is exhibited at the overall Ministry level where the utilisation of the allocated funds has been over 100% in the last three years.
State level spending
A NITI Aayog report (2017) noted that low income states with low revenue capacity spend significant lower on social services like health. Further, differences in the cost of delivering health services have contributed to health disparities among and within states.
Following the 14th Finance Commission recommendations, there has been an increase in the states’ share in central pool of taxes and they were given greater autonomy and flexibility to spend according to their priorities. Despite the enhanced share of states in central taxes, the increase in health budgets by some states has been marginal (see Figure 2).
Consumer level spending
If cumulatively 30% of the total health expenditure is incurred by the public sector, the rest of the health expenditure, i.e. approximately 70% is borne by consumers. Household health expenditures include out of pocket expenditures (95%) and insurance (5%). Out of pocket expenditure dominate and these are the payments made directly by individuals at the point of services which are not covered under any financial protection scheme. The highest percentage of out of pocket health expenditure (52%) is made towards medicines (see Figure 3).
This is followed by private hospitals (22%), medical and diagnostic labs (10%), and patient transportation, and emergency rescue (6%). Out of pocket expenditure is typically financed by household revenues (71%) (see Figure 4).
Note that 86% of rural population and 82% of urban population are not covered under any scheme of health expenditure support. Due to high out of pocket healthcare expenditure, about 7% population is pushed below the poverty threshold every year.
Out of the total number of persons covered under health insurance in India, three-fourths are covered under government sponsored health schemes and the balance one-fourth are covered by private insurers. With respect to the government sponsored health insurance, more claims have been made in comparison to the premiums collected, i.e., the returns to the government have been negative.
It is in this context that the newly proposed National Health Protection Mission will be implemented. First, the scheme seeks to provide coverage for hospitalisation at the secondary and tertiary levels of healthcare. The High Level Expert Group set up by the Planning Commission (2011) recommended that the focus of healthcare provision in the country should be towards providing primary health care. It observed that focus on prevention and early management of health problems can reduce the need for complicated specialist care provided at the tertiary level. Note that depending on the level of care required, health institutions in India are broadly classified into three types: primary care (provided at primary health centres), secondary care (provided at district hospitals), and tertiary care institutions (provided at specialised hospitals like AIIMS).
Second, the focus of the Mission seems to be on hospitalisation (including pre and post hospitalisation charges). However, most of the out of the pocket expenditure made by consumers is actually on buying medicines (52%) as seen in Figure 3. Further, these purchases are mostly made for patients who do not need hospitalisation.
