Andhra Pradesh chief minister Y S Jagan Mohan Reddy has stirred a hornet’s nest by his radical decision to reserve 75% jobs for locals in private industrial units and factories in the state.
The move is seen by experts and in industry circles as a “regressive and recklessly populist” move that will hamper the State’s industrial development.
AP Employment of Local Candidates in Industries and Factories Bill, 2019, passed a bill on Wednesday (July 23), making it mandatory for the private sector to provide 75% reservation for locals. This will be applicable to all existing and upcoming units, joint ventures and projects taken up under the public-private partnership mode. The existing units have been given three years to comply with the provisions.
Once the bill is passed by the Legislative Council, AP will become the first state in the country to have reservations in the private industry. Locals are defined as those people who are domiciled in the state of Andhra Pradesh. However, there is no elaboration on what constitutes the domicile status.
Though similar proposals for jobs quota for locals were made in states like Karnataka, Madhya Pradesh and Maharashtra in the past, they remained at the proposal stage. No state has so far come up with any legislation, making it mandatory for the private sector to reserve jobs for locals.
In Karnataka, the private companies are required to provide 50 per cent jobs in certain specified categories to locals and report the status of employment to the government. However, it is not mandated by law. The arrangement is more flexible and voluntary.
Earlier this month, Madhya Pradesh Chief Minister Kamal Nath had said that his government was contemplating 70 percent quota for locals in the private sector.
There has been virtually no reaction from the opposition Telugu Desam Party (TDP) and Congress, despite the sweeping provisions of the AP Employment of Local Candidates in the Industries/Factories Act, 2019. The TDP members had staged a walkout in the Assembly on some other issue when the important bill was taken up by the House.
‘Jobs for locals’ was one of the key campaign themes of the YSR Congress Party headed by Jagan Mohan Reddy. Given the sensitive nature of the issue, the opposition camp has so far remained muted, preferring not to be critical about the legislation for fear of sounding politically incorrect.
However, experts have warned that the move would seriously undermine the efforts to attract investments into the state which is already grappling with the bifurcation blues and severe resource crunch.
As per the provisions of the act, even if locals with requisite skills are not available, the companies are required to train people along with the state government and then hire them.
The representatives of the industry bodies and experts dubbed it as regressive and unconstitutional. The Constitution allows every citizen to live and work anywhere freely within the country.
“This is scary. Now, imagine that every state does this. Half of the employees in Maharashtra, Karnataka and Telangana will have to move out. Most states will have an influx of people. Many corporations will lose out people. Large corporations like Infosys, Wipro and TCS can never have a national talent pool nor diversity at work place. They in turn, will opt to avoid Andhra in their expansion plans,” said Peri Maheshwar, Chairman and CEO, Careers 360.
The policy analyst Mohan Guruswamy said that the move was “ultra vires and unconstitutional.” “What happens if every state raises barriers against the outsiders,” wondered Harish Bijoor, a Brand Consultant.
The experts warned that such a legislation would render the market non-competitive and result in loss of revenue and production efficiency for the industries.
“It is a laudable idea to provide more employment opportunities to the local youth. But, the government has to ramp up its skill development centres in the state to train locals to be ready to be hired in manufacturing companies,” said Galla Vijay Naidu, president and CEO of Amara Raja industrial group and chairman of CII-AP.
G Sambasiva Rao, president of the AP Chambers of Commerce and Industry Federation said, “While most of the units employ locals only, there are certain sectors where it may be difficult to find locals for the jobs and the units will be forced to search outside.”
At a time when AP is struggling to attract investments in different sectors after bifurcation, it is not desirable to lay down such conditions, said Naresh Kumar, the CEO of Symbiosis, a local IT company.
The companies listed in the first schedule of the Factories Act, which include those dealing with hazardous industries like fertilisers, coal, pharma, petroleum and cement, are exempted from the act after the government “looks into each of them and takes a call.” They will also have to provide quarterly reports about the appointments to the nodal agency.
The State Industries and Information Technology Minister M Goutham Reddy said that the incentive model for industries that successive governments had followed only benefitted the private companies but not the workforce.
“We have seen that in multiple reforms that have been taken up in the country, the incentives that have been offered to industries so far, have resulted in industries negating the state’s financial flows but have not created any value addition in terms of employment. Employment for locals has contained itself to unskilled and semi-skilled workers,” he said.
“We have been very clear in the law that if you are not able to find the required employees, you can always approach the government and we are more than willing to look at it and make exemptions. It is not a rigid law. It is a very flexible law which is the requirement of the day,” the Minister said.
One of the main complaints from people who gave up their land for the factories was that they expected their children to be employed and skilled so that they could move up in life. Unfortunately, none of the governments have been able to address this, he argued.
“We can proudly say that we are at the forefront of the third phase of industrial revolution with social responsibility. In the coming days and months, the people of the country are going to look at Andhra Pradesh as a role model,” Reddy said.