Lack of reforms in labour laws and unionism in Public Sector Undertakings

This article was written on 2010.

A major reason why the public sector is not able to reach the commanding heights it deserves is lack of government’s will to reform labour laws of the country.  The world has moved.  Times have changed, yet labour laws in the country are rooted in the age of 1960’s.  So much so that these labour laws which provide job security to employees have become a stumbling block in the growth of public sector enterprises.  The employees work without any urgency while the world is overtaking the public sector units by the minute.  The employees feel they are the masters, owners, managers, the only stakeholders, all combined into one.  They pursue their own agenda through the unions rather than working for the main objectives for which public sector units were set up.  In the garb of the welfare of employees, unions keep on raising issues which do not come under their purview by any stretch of the imagination.  They create obstacles in smooth functioning of organizations, in their own petty interests and in order to establish their leadership.  Management has to undergo blackmail, work under coercion for they cannot pick a fight on daily basis with the unions.  The management at times does not exercise the option of taking very harsh measures in the interest of the organization, productivity, efficiency and larger interest of workmen.

While the above factors affect both the private sector as well as public sector, PSUs are rather severely affected vis-à-vis private sector enterprises.  This happens because while private sector enterprises have the freedom to alter the wage structure, monitor / modify the raise, management also have control over career growth and training and development of employees.  While public sector enterprises have little control over these factors, the annual increments, increase in dearness allowances, perks and benefits are neither linked to the individual performance of the employees nor to performance of PSEs.  In many public sector undertakings, time scale promotions are a reality and employees are assured of their promotions just because of passage of time.  Some recent attempts have been made by Government and concepts like performance related pay (PRP) have been introduced but given a scenario where Government fixes the prices at which outputs generated by public sector units is sold.  The concept of performance related pay is just a misnomer.  For example, in oil sector, the petroleum prices are administered by Government of India and the costs structure of oil sector PSUs is taken into consideration while computing the losses of oil companies.  The Government continues to give bonds to these PSUs to bail them out, out of tax payer’s funds.  But employees of public sector oil companies continue to draw huge performance related incentives / performance related pay.

Another example that can be quoted is of companies like Air India which are on the verge of going bankrupt but every section of employees, be it pilots, engineers, maintenance staff or other crew members right to lowest rung of employees continue to draw huge performance linked incentives which makes one wonder what is the criteria of defining performance when the survival and immediate future of the organization is uncertain.

Lots of other examples can be given whether in power sector or trading sector where cost plus pricing followed and so-called booty of profits is claimed upon as a first right by the employees.  Companies like NTC of India Ltd. are patting themselves on the back by selling land of their mills in the market which was once taken by them at extremely nominal prices, which helps them to show profits from sale of such land after closure of the mills, rather than generating profits from the business for which NTC was set up that is manufacture of quality textiles.  It is not that only management of NTC is responsible for this situation whereby private sector was allowed to overtake because the NTC mills were not modernized on time but employees are also equally to be blamed for getting the Company into such state of affairs.

Employees in public sector enterprises have over the years resorted to go on strikes and launch agitations on the slightest pretext and non issues.  A most recent example is strike by employees of Air India where all the 20,000 employees went on a strike just because management issued orders asking them to refrain from going to the press.  It is saddening to note that these pampered employees have no concern for their own organization, its credibility, its branding, its image or for stakeholders in the airline, least of all for the passenger or the customer they pretend to serve, it is a telling commentary on how the employees can hold a nation to the ransom.

The Unions even go the extent of blocking Government’s decisions.  Disinvestment decision in BSNL has been taken long back but could not be implemented because of opposition of employees.  The disinvestment in Coal India Ltd. has been allowed to proceed only after the Government bowed down to the demands of employees and agreed to lot of give and take.

Political will is required to stem the rot.  This farce has been going on for long enough and it is high time that employees of public sector undertaking (who, no doubt, are a large numbers) are treated as vote banks by leaders of different political parties.

If labor laws are reformed whereby managements have the power of hire and fire, give / block incentives, this will go a long way in improving the overall performance of public sector enterprises.  Even the wages and promotions need to be linked to performance and not seniority per se.

Another important reform that can be done is making the employee’s shareholders/stakeholders in public sector enterprises.  A small beginning has been made in some of the PSUs but this needs to be implemented across all public sector undertakings.  Making employees part owners, in the public sector undertakings will give them a sense of belongingness and will motivate them to perform and deliver.  Not only this when they see their fellow workers not performing because of any reason, there might be an effort on the part of others to motivate and set up a culture where performance delivery becomes a given rather than the other way round.

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