Chapter - 4 Labour Regime Within Sez Law

Development of Special Economic Zones and its Impact on Labour Rights and Livelihood in NCR
CHAPTER - 4
LABOUR REGIME WITHIN SEZ LAW
4.1 Introduction
This chapter focuses on the labour rights regime established under the Special
Economic Zones Act, 2005 (hereinafter referred to as SEZs Act). Since the Special
Economic Zones Act, 2005 lies at the core of this framework, analysis of labour rights
is undertaken with specific reference to the provisions of the Act along with its
interface with the legislations and policies of different states in India. This is done
with a view to appraise the law from the point of view of the normative commitment
to labour rights. Further, since law is not an autonomous realm, the legislations do not
exist in vacuum but are grounded in the social, economic and political context in
which they are enacted. This necessitates an insight into the context in which the law
was enacted and the rationale behind the same together with the concerns emanating
with respect to the ideological grounding of the legislation especially with regard to
labour. In pursuance of the aforementioned aims the first section of the chapter
unravels the ideological basis of the Act and delves into the implications for labour
that are integral to the same and given the ideological grounding of the Act, the labour
regime established under the Act remains impregnated with those implications.
Comparison of the approach towards labour embodied in the legislations pertaining to
SEZs/EPZs across the world is undertaken in the second section of the chapter with a
view to locate the Indian legislation within the broader international trends. Third
section of the chapter analyses the debates that took place in the Parliament of India
with respect to the SEZ Bill in order to offer an insight into the evolution of the
provisions pertaining to labour in the said legislation. Finally the approach of SEZs
law with respect to labour is sought to be ascertained through an in depth analysis of
the provisions relating to labour embodied in the central legislation, state legislations
and policies.
4.2 Legal Framework of SEZs: Context, Rationale and Implications for Labour
Rights
4.2.1 Context
Purpose of promoting export-led growth by providing “internationally competitive
environment for exports” recognized in the objects and reasons appended to the
legislation refer to the context of economic globalization. This is further buttressed by
Labour Regime within SEZ Law 204
reference to the proclaimed necessity of SEZ legislation which seeks to establish

framework “in line with international practice.” 1 These references in the objects and
reasons of the Act undeniably indicate the broader international milieu in the
background of which this legislation is enacted. What emerges from these references
is that economic globalization marked by free trade, free movement of capital,
currencies and financial transactions, transformation of labour markets and work
practices 2 necessitated the enactment of the said legislation so as to avoid India from
falling out of line with the international practice and thus losing out to others in the
internationally competitive environment. Thus in order to remain competitive in the
world which secures free movement of capital, it is the ability to attract and retain
capital investment within the territory of the state that to a large extent determines the
growth potential of an economy.
At the same time in the context of enactment of the SEZs Act one must not lose sight
of the fact that the states are differently placed in the world system which is
experiencing economic globalization and thus the process of economic globalization
is differentially related to the legal changes in different states. As it has been pointed
out by Boaventura de Sousa Santos, in an unequal world system 3 constituted by core,
semi peripheral and peripheral states, 4 the position of the state in this system “affects
its role in social regulation, as well as its relationship with market and with civil
society.” Therefore in order to fully grasp the reasons, context and implications of a
law like the SEZs Act with respect to labour one must not lose sight of the “decisive”
role of global practices in last three decades in determining “the production of law
inside each state territory” depending on the position of the state in the world system. 5
4.2.2 Rationale
A sound basis to explore the rationale behind a particular legislation is the raison
d’etre of the legislation. As reflected in the long title of the Act, “promotion of
1
The Special Economic Zones Act, 2005, Statement of Objects and Reasons.
2
Andrew Jones, Dictionary of Globalisation 70-71 (Polity Press, Cambridge, 2006).
3
World Systems Theory propounded by Immanuel Wallerstein. Generally see P.W.Preston,
Development Theory: An Introduction (Blackwell, Oxford, 1996).
4
Countries of the core are sites of global economic power and wealth and associated political influence,
countries of semi periphery reflect mix of characteristics of core and periphery i.e. industry, export
power, prosperity and poverty, primary product reliance and vulnerability to outside decision making,
periphery is the backwater of the world system which does little but provide raw materials for
industries elsewhere and have poor living conditions and bleak development prospects.
exports” is the purpose behind the Act. 6 Thus the Act which provides the legal, fiscal
and administrative framework for the establishment, development and management of
Special Economic Zones in India for the purpose of promoting exports is thus
definitely based on the belief that these zones give a fillip to exports. The assumption
is that this fillip, however, does not emerge in a vacuum but has to be facilitated
through the creation of these zones which are governed by laws, administrative and
other facilities different from the general or even export based industrialization in the
rest of the economy. The promotion of exports by providing incentives to attract
foreign and domestic investment in SEZs is with a view to promote export-led
growth. 7
In the contemporary world exports have been proclaimed as a “very major engine of
growth.” 8 Cling and Letilly point out that “the adoption of export-led growth
strategies by developing countries is directly responsible for the considerable
expansion of export processing zones in recent years.” 9 SEZs Act was thus an attempt
to attract foreign direct investment, which cannot per se be directed, alongwith
domestic investment in a global competitive situation on SEZs. 10 This rationale which
forms the proclaimed basis of this legislation is however, not an indigenously
developed one but is one which constitutes the globally dominant discourse on
development, its pre-requisites, means and ends. Therefore, to fully appreciate the
implications of such an approach, embodied in the legislation, with respect to labour,
an insight into the discourse is certainly in order.
1980s, when many developing countries were faced with a debt crisis, the cause of the
crisis was attributed to the excessive govt. regulation whereby “too much govt. spent
too much money to implement import-substitution-industrialisation” and therefore a
common policy advice came to be tendered to the developing countries i.e. to follow
5
Boaventura de Sousa Santos, Toward a New Legal Common Sense 96 (Butterworths Lexis Nexis,
London, 2002).
6
An Act to provide for the establishment, development and management of the Special Economic Zones
for the promotion of exports and for matters connected therewith or incidental thereto.
7
The Special Economic Zones Act, 2005, Statement of Objects and Reasons.
8
Ibid.
9
J. Cling, G. Letilley, “Export Processing Zones: A Threatened Instrument for Global Economy
Insertion?” in William Milberg, Mathew Amengual, “Economic Development and Working Conditions
in Export Processing Zones: A Survey of Trends,” Working Paper ILO 26 (2008).
10
Kamal Nath, Minister of Commerce and Industry, Rajya Sabha Debate, 11th May’ 2005, available at
http://rsdebate.nic.in/bitstream/123456789/47194/1/PD_204_11052005_36_p291_p319_16.pdf#search
=%22sez%20bill%22.
export oriented path to development like the one projected 11 to have been pursued by
the newly industrializing countries (NICs) of East Asia like South Korea, Taiwan,
Hong kong, Singapore, Mexico. 12 The World Bank and IMF became the “missionary
institutions” 13 to promote “market oriented structural adjustment” of the developing
countries to enable them to imitate the NICs path by making the loans tendered for
overcoming the balance of payment crisis contingent upon the country’s commitment
towards pursuance of the policy prescription that focused on trade related economic
sectors designed to enhance efficiency and export orientation. 14 This was possible
because these institutions are led by the “collective will of G7.” 15 United States is the
only country enjoying effective veto in IMF. 16 Therefore the two factors i.e.
domination of these institutions by the developed countries, and reliance of
developing countries on these institutions for financial assistance ensured that the
ideology of development based on free market which came to be preached in USA
and UK under the auspices of Ronald Reagan and Margaret Thatcher were also
“pushed on the reluctant poor countries.” 17 Thus by the 1990s this neo-liberal
prescription of free trade, free investment, deregulation and privatization became the
dogma of development establishment. 18
4.2.3 Implications of the Rationale for Labour Rights
The rationale behind the strategy imbibed in the SEZs Act itself raises a number of
concerns with respect to labour. An interdisciplinary deconstruction of the rationale
amply demonstrates the centrality of labour oppression to the strategy on which the
legislation is based. This in turn indicates that such a law is inevitably devoid of any
11
This was done despite evidence of active role of the states in those countries in creating, shaping and
guiding markets as well as import substitution being practiced by them as well. See Robin Broad, John
Cavanagh, Development Redefined: How the Market Met its Match 14 (Paradigm Publishers, USA,
2009); Joseph Stiglitz, Globalisation and its Discontents 10 (Penguin Books, USA, 2002).
12
Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match 13-15(Paradigm
Publishers, USA, 2009).
13
Joseph Stiglitz, Globalisation and its Discontents 13 (Penguin Books, USA, 2002).
14
John Williamson, “Lending Policies of the International Monetary Fund” 1 Policy Analysis in
International Economics Series, 22 Institute for International Economics, Washington (1982), in Robin
Broad, John Cavanagh, Development Redefined: How the Market Met its Match, 16 (Paradigm
Publishers, USA, 2009); also see Joseph Stiglitz, Globalisation and Its Discontents, 13 (Penguin
Books, USA, 2002).
15
Joseph Stiglitz, Globalisation and its Discontents 14-15 (penguin Books, USA, 2002) .G7 include
United States, Japan, Germany, Canada, Italy, France and UK.
16
Id., at p. 12.
17
Id., at p. 13.
18
Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match 14 (Paradigm
potential to respect and protect enjoyment of labour rights. Therefore despite the
purported commitment (of whatever degree) reflected in the words of the legislation
with respect to labour rights, it remains still born. A journey through different
disciplines is thus undertaken to establish the same.
The developmental dogma promoted through the World Bank and IMF as a panacea
for the ills affecting the developing countries was far from being completely altruistic
and benign. Free trade, free investment, deregulation and privatization meant
withdrawal of the state from its role in regulating the market and incurring wasteful
expenditure in doing same. Withdrawal of the state also embodied prescription of
exercise of fiscal prudence by the state marked by reduction in deficits. 19 Reduction in
govt. expenditure in order to reduce budget deficit, has a “contractionary or
deflationary impact” 20 resulting in an “overall, magnified fall in the purchasing
power” which in turn means “ a shrinking market at home for selling goods, typically
leading to loss of income and employment all around.” 21 The situation is exacerbated
by diversion of resources by the states from domestically oriented output to export and
investment promotion policies 22 in tune with the necessities arising out of
operationalisation of prescriptions for development. On account of the fall in
purchasing power consumption of goods produced in internal market gets compressed
which “implies a corresponding reduction in labour cost.” 23 The situation of labour is
further exacerbated by the belief that “labour market interventions misallocate labour;
they waste resources through rent seeking; they impair adjustments to economic
shocks; and they deter investment, thereby reducing rates of growth.” 24 This situation
promoted through the imposition of the dominant ideology of neo-liberalism, supports
the “relocation of economic activity from the rich countries to the poor countries,” 25 in
the contemporary world economy which is marked by “the relocation of a substantial
19
Atul Kohli, Democracy and Development in India: From Socialism to Pro-Business 170 (Oxford
University Press, 2009).
20
Utsa Panaik, “Why Hunger is on Increase?” in Michael Higgins et al (eds.), Food Security and Judicial
Activism in India 102 (Human Rights Law Network, 2007).
21
Amit Bhaduri, Deepak Nayyar, The Intelligent Person’s Guide to Liberalisation 59 (Penguin books,
New Delhi, 1996).
22
23
Michel Chossudovsky, The Globalisation of Poverty: Impact of IMF and World Bank Reforms 77 (Zed
Books, London, 1997).
24
Asian Development Bank, Labour Markets in Asia: Promoting full, Productive and Decent
Employment, 27 (2005).
25
share of the industrial base of the advanced countries to cheap labour locations in
developing countries.” 26 Michel Chossudovsky 27 thus holds
The globalization of poverty endorses the development of a worldwide

cheap-labour export economy; the possibilities of production are immense
given the mass of cheap impoverished workers throughout the world
Global poverty is an input from supply side, the global economic system
feeds on cheap labour.
Secondly, similar structural adjustment policy prescription stipulating export oriented

growth to all the developing countries by the World Bank and IMF had an inherent
weakness. The weakness referred to as “fallacy of composition” problem emerged on
account of the “simultaneous pursuit of net export growth by many countries around
the world.” 28 Since on a global scale “imports are by definition equal to exports not all
the countries can at once achieve positive net exports.” 29 United States large trade
deficit over the past ten years allowed many countries to have positive net exports and
balancing act on the part of the former is likely to put the latter in peril. 30
Thirdly, simultaneous promotion of export led growth in the developing countries

results in competition between developing countries, all of which “want to export to
the same European and North American markets.” 31 Two categories of battles get
unleashed by this. First to offer “cheaper more docile labour forces” along with
“attractive financial incentives to lure global corporations’ assembly lines away from
the other countries and second to “win scarce export markets.” 32 One advertisement
from Sri Lanka’s which captures the sentiment is as follows 33
Sri Lanka challenges you to match the advantages of its Free Trade Zone,
against those being offered elsewhere. . . Sri Lanka has the lowest labour
rates in Asia.
26
Id., at p. 75.
27
Id., at pp. 75, 76.
28
William Milberg, Mathew Amengual, “Economic Development and Working Conditions in Export
Processing Zones: A Survey of Trends” Working Paper ILO, 27 (2008).
29
Ibid.
30
Ibid.
31
32
The number of unemployed people across the globe together with the ease with which
capital can move from one location to another strongly condition the level of labour
cost. 34 As succinctly put by Chossudovsky:
World unemployment becomes “a lever” of global capital accumulation

which “regulates” the cost of labour in each of the national economies. Mass
poverty regulates the international cost of labour.
Not only this even the struggle of the labour for fair conditions of work and fair wages
is sought to be suppressed on account of the ability of capital to move to other
location which as Chossudovsky puts offer “reserve armies of labour.” 35 This is also
reflected in the following remark by a global-corporate executive 36
We tell the [Philippine] government: you’ve got to clamp down [on labour] .
. . Or we threaten to move elsewhere. And we’ll do just that. There’s Sri
Lanka [and] now China too.
The global context thus puts labour in a situation where it is compelled to bear
injustice without even the possibility of protesting against it for the fear of moving
from the frying pan into fire i.e. from a condition of indecent employment to
unemployment. This is also on account of the fact that in the absence of floor of
labour standards adhered to by states in SEZs the firms rather than adopting “high
road to growth i.e. increasing productivity with innovations in technology, product
design, organisation etc” are enticed to follow “low road to growth i.e. reducing their
unit costs by lowering wages and labour standards.” 37 This leads states into vicious
cycle of low wage and low productivity inevitably leading to “race to the bottom.” 38
33
“Far Eastern Economic Review, 16 Oct’ 1981, in Robin Broad, John Cavanagh, Development
Redefined: How the Market Met its Match, 17 (Paradigm Publishers, USA, 2009).
34
35
Ibid.
36
Remark made in an interview with Manila-based global-corporate executive in 1981 cited in Robin
Broad, John Cavanagh, Development Redefined: How the Market Met its Match, 17 (Paradigm
37
F. Wilkinson, “Why Britain Needs a National Minimum Wage?” 1992, NBER, London, Sengenberger,
in W. and Campbell, D. “Creating Opportunities: Role of Labour Standards in Industrial
Restructuring,” IILS (1994), in Praveen Jha, Sakti Golder, “Labour Market Regulation and Economic
Performance: A Critical Review of Arguments and Some Plausible Lessons for India” 1 Economic and
labour Market Papers, ILO 4 (2008).
38
Blanchflower D. and Andrew J. Oswald, The Wage Curve (MIT Press, Cambridge, 1994), in Praveen
Jha, Sakti Golder, “Labour Market Regulation and Economic Performance: A Critical Review of
Competition between countries with respect to limited markets “obliges the third
world producers to cut their prices.” 39 It is on account of the same that despite a
substantial increase in the volume of exports from the developing countries the value
of export revenues has deteriorated. 40 Value of exports also deteriorated on account of
technological innovation since late 1970s. This led to global fragmentation of
production which in turn resulted in the developing countries getting marginal
segments of scattered assembly line processes rather than complete industrial
processes received by the NICs earlier. 41 This implied wide disparity between gross
value of industrial export earnings and actual value added to the product in developing
country. 42 Thus segmentation of production process and reliance of a developing
country on imports in the form of machinery, component parts, packaging material
etc. for the purposes of production resulted in lowering the domestic value addition.
For instance, “for every dollar of non-traditional export earnings, only 25% stayed in
the Philippines; the rest was siphoned off by import payments.” 43 Further export led
growth also had to withstand the challenge of import substitution policies followed by
the corporates, “new protectionism” adopted by the developed countries in the form of
Multi-Fiber arrangement as well as labour saving use of application of
microprocessors. 44
4.3 Labour Laws in SEZs/EPZs: Inter Country Comparison
Three categories of SEZ/EPZ labour law regimes can be discerned from inter country
comparison of the special legislations with respect to these zones or the general
interface between labour law and SEZ/EPZ law in a particular country. These are as
follows:
1. Inclusionary Regime – It encompasses those systems where the national labour
laws are fully applicable to SEZs as well
Arguments and Some Plausible Lessons for India” 1 Economic and labour Market Papers, ILO 4
(2008).
39
Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match, 17 (Paradigm
40
Id., at p. 78.
41
Id., at p. 19.
42
Ibid.
43
World Bank Report on Philippines: Staff Appraisal Report on the Industrial Finance Project, 4 (April 7,
1981), in Robin Broad, John Cavanagh, Development Redefined: How the Market Met its Match19
(Paradigm Publishers, USA, 2009).
44
Robin Broad, John Cavanagh (2009) Development Redefined: How the Market Met its Match, 20-23
(Paradigm Publishers, USA, 2009).
2. Exclusionary Regime – It encompasses those systems where the application of

national labour laws or particular provisions is completely and expressly
excluded with respect to SEZs
3. Special/Altered Regime – It refers to those systems where a separate labour law
regime is established for governing labour relations in SEZs or changes are
introduced in the existing national regimes and that altered regime governs
labour relations in SEZs. It may also be a combination of inclusionary and
exclusionary regimes where certain legislations are applicable whereas
applicability of certain others is excluded from the zones or it may be a regime
which secures altered conditions of work for labour in SEZs not by altering the
law but by taking advantage of the spaces available in the national regimes
within the substance or the procedure established for realization of rights.
4. Chart 4.1 – Classification of SEZ/EPZ Labour Rights Regimes

The following table classifies labour law regimes prevalent in EPZs across 26
countries of the world
Table 4.1 - Labour Laws in SEZ/EPZs: Inter Country Comparison 45
S. Country Application of Nuances in the Reality Check
No. Labour Laws Applicable Law
in EPZs
1 Bahamas Same law
applicable
2 Belize Same law Officially, trade unions
applicable are not banned in the
banana plantations or
the EPZs, however
workers have
traditionally had
problems organising
themselves in these
sectors. 46
3 Costa Rica Same law Law no. 7360 The few unionised
applicable 47 prohibits anti workers in EPZs face
trade union harassment and unfair
practices, dismissal. The number
protects persons of labour inspectors
forming or remains far too low to
leading trade deal with the amount
union or of unfair dismissals
representing among this large
workers 48 segment of the
workforce. Organising
is virtually non-
existent in the zones. 49
45
Unless otherwise indicated the table is based on the information collated from http://survey07.ituc-
csi.org/getcountry.php?IDCountry=NIC&IDLang=EN and http://survey09.ituc-
csi.org/survey.php?IDContinent=2&IDCountry=BLZ&Lang=EN.
46
http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=BLZ&Lang=EN.
47
ILO, Labour and Social Issues relating to Export Processing Zones 24 (1998).
48
Ibid.
49
http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=CRI&Lang=EN.

in EPZs
4 Dominican Same law Of the 57 companies
Republic applicable that operate in the
EPZs and employ
about 155,000
workers, only eight
have a trade union
(14%). The unions
report harassment and
persecution which
means that workers
have to deal with union
matters outside the
workplace, for fear of
dismissal. Blacklists of
trade unionists are
circulated, preventing
them from getting new
jobs. 50
5 Jamaica Same law It is common practice
applicable in companies in EPZs
to threaten workers
and create pro-
employer "workers'
councils", which
interfere in the
handling of complaints
but are not allowed to
engage in collective
bargaining on working
conditions or minimum
50
http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=DOM&Lang=EN.

in EPZs
wages. As a result, so
far there are no unions
at all in these zones. 51
6 Honduras Modified law The law allows In the export
applicable export processing processing zones
zones to set (EPZs) workers trying
additional to form unions are
limitations on the sacked and blacklisted.
right to strike 52 They are subjected to
harassment, separation
from their colleagues,
and psychological and
even physical abuse.
7 Nicaragua Modified law the Foreign
applicable Investment Law
regulating the
EPZs opens a
loophole for
avoiding their
jurisdiction by
providing for
discrepancies,
controversies and
claims to be
settled by an
arbitration court
8 Panama Modified law In the
applicable maquiladoras, all
labour disputes
are subject to
51
http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=JAM&Lang=EN.
52
http://survey09.ituc-csi.org/survey.php?IDContinent=2&IDCountry=HND&Lang=EN.

in EPZs
compulsory
arbitration. A
strike is only
considered legal
after 36 working
days of
conciliation are
exhausted. If this
requirement is
not met, striking
workers may be
fined or
dismissed.
9 Peru Modified law Governed by
applicable special
regulations,
which allow for
greater flexibility
in labour
contracts, the
widespread use
of temporary
labour and the
setting of wages
on the basis of
supply and
demand
10 Trinidad Same law
and Tobago applicable
11 Bangladesh Special EPZ Workers
legislation Association and


in EPZs
Industrial
Relations Act,
2004 53
12 Indonesia Same law “We are now exploring
applicable the possibility of
relaxing the
implementation of the
labour legislation in
the SEZs” 54
13 Republic of Special law on Special
Korea legislation Economic Zones
(SEZs) of July
2003 exempts
foreign
companies
investing in the
SEZs from many
national
regulations on the
protection of the
environment and
labour standards
14 Sri Lanka Same law
applicable
Malaysia Same law Labour law itself
applicable imposes five year
moratorium on
collective bargaining
in “Pioneer industries”
53
http://www.businesslaws.boi.gov.bd/components/com_eregistry/attach/268-Law-2004.pdf.
54
Muhammad Lufti, the Chairman of the government’s Investment Coordinating Board (BKPM),
Indonesia, available at http://survey07.ituc-csi.org/getcountry.php?IDCountry=IDN&IDLang=EN.

in EPZs
15 Pakistan Modified The Export
application Processing Zones
allowed and Act of 1980 also
facilitated provides for
notifications to
exempt the zones
from coverage
under the major
labour laws
The ESMA
prohibits workers
in EPZs - who
could otherwise
have come under
the IRO - from
forming or
joining unions,
bargaining
collectively or
striking
16 Philipine Same law Violations persist
applicable 55 because of the “trade
union free” policy
adopted by a number
of private zones 56
17 Botswana Same law
applicable
18 Cameroon Modified law Firms operating employers enjoy
applicable in the EPZs are "flexibility in
exempt from hiring/firing workers".
55
The Special Economic Zones Act, 1995, section 37.
56

in EPZs
certain aspects of
the Labour Code,
but must comply
with
internationally
recognised labour
standards
19 Kenya Same law
applicable
20 Madagascar Same law
applicable
21 Mauritius Modified law Specific labour Weak enforcement 57
applicable laws that
condone longer
working hours
(45 hours a week,
plus ten hours
compulsory
overtime in the
EPZs, where
required).
22 Malawi Labour law Union activity resisted
applicable
23 Namibia Modified s. 8 of Export Strikes and lock outs
application Processing Zones prohibited for five
Act 1995 which years. It also provides
excluded for compulsory
application of arbitration of labour
57
Sarah Perman, Laurent Duvillier, Natacha David, John Eden et Samuel Grumiau, “Behind the Brand
Names: Working Conditions and Labour Rights in Export Processing Zones” ICFTU 9 (2004).

in EPZs
Labour Act, 1990 disputes 59
amended 58
24 Nigeria Modified Article 18 (5) of There shall be no
application Nigeria Export strikes or lockouts for
Processing a period of 10 years
60
Zones, 1992 following the
Article 21 commencement of
authorises the operations within a
Nigeria Export Zone and any trade
Processing Zones dispute arising within a
Authority to Zone shall be resolved
make regulations by the Authority.
regarding
conditions of
service of
employees in
EPZs. 61
Article 13 (1)
restricts access to
zones 62
25 Zimbabwe Modified law Zimbabwe The attached Schedule
applicable Export defines the powers of
Processing Zones the Authority, which
Act 1994, include the power to
Section 56 which regulate benefits and
exempted working conditions in
investors the zones
operating and
58
59
Ibid.
60
http://www.nepza.gov.ng/downloads/act.pdf.
61
Ibid.
62
Ibid.

in EPZs
employees
employed in the
zones from the
Labour Relations
Act, 1985 (No.
16) was repealed
in 2005. 63
26 United Arab Compliance Implemented not
Emirates with labour through ministry
64
laws required of labour but
separate
departments
governing the
zones 65
A survey of available data with respect to labour laws applicable currently in EPZs
across the globe indicates that most of the countries fall within first and the third
categories. However, this was not the case a decade ago when a number of countries
expressly excluded application of entire labour codes or particular enactments to
EPZs. 66 This change was not a smooth one but was an outcome of incessant struggles
of labour like in Philippines, Dominican Republic 67 though in case of Bangladesh a
“threat of losing trade preferences for its exports to U.S. Canadian markets” 68 was to a
large extent instrumental in enactment of EPZ Workers Association and Industrial
Relations Act, 2004. Thus the past decade witnessed certain advancement with respect
to protection of rights of labour in EPZs. However advancement at the normative level
or for that matter even reference to inclusionary regimes in the first category does not
63
https://www.ilo.org/dyn/natlex/natlex_browse.details?p_lang=en&p_isn=72878.
64
http://survey09.ituc-csi.org/survey.php?IDContinent=5&IDCountry=ARE&Lang=EN.
65
Ibid.
66
Dominican Republic, Costa Rica, Philippines, Bangladesh, Zimbabwe, Namibia have over the last
decade moved from exclusionary to modified or inclusionary regimes on account of labour struggles
and/or international pressure.
67
ILO, Labour and Social Issues relating to Export Processing Zones 23-24 (1998).
68
Sarah Perman, Laurent Duvillier, Natacha David, John Eden et Samuel Grumiau, “Behind the Brand
Names: Working Conditions and Labour Rights in Export Processing Zones” ICFTU 8 (2004).
automatically imply a strong regime of labour rights in EPZs. In fact de facto

enjoyment of rights even in completely inclusionary regimes depends on two factors
Firstly, the kind of rights and the degree to which rights are normatively recognized in
the national regime itself i.e. the extent to which the national labour law regime is in
accordance with the international standards. Secondly, enforcement of the labour laws
in EPZs i.e. whether the enforcement of labour laws in EPZs is rigorous enough to
translate the de jure recognition into de facto realization of rights or it is weak.
“Neglect of labour regulations through the phenomenon of under enforcement of
labour laws” is a typically prevalent “low-visibility” practice encouraged by the
World Bank to reduce the effectiveness of labour laws “without immediately arousing
the ire of trade unions.” 69 Even special/altered labour law regimes offer wide space for
such kind of low visibility strategy whereby labour protection is compromised either
by using spaces within the national regimes to alter the rights of labour working in
SEZs or through indirect changes in certain legislations. For instance a particular
strategic advice of World Bank includes re-regulation of apprenticeship contract to
introduce lower wages rather than reducing the minimum wage. 70 It is also the
immense political significance that it holds for states that renders credence to such a
strategy. This is succinctly put by Adelle Blackett who noted that “it remains true that
governments pay a significant premium should they decide to reduce labour
protections.” 71 All this explains why many countries have special labour regulations
or altered laws applicable in SEZs which render at best weak protection to labour in
SEZs. This limited protection turns out to be weaker in practice since the actual
realization of rights in SEZs is subject to pressures emanating not only on account of
the interface of state legislation with production law 72 but systemic law 73 as well.
Finally exclusionary regimes are at worst marked by either non-existence of labour
69
“Employing Workers”, available at http://www.doingbusiness.org, in Adelle Blackett “Trade
Liberalisation, Labour Law and Development,” in Tzehainesh Tekle (ed.), Labour Law and Worker
Protection in Developing Countries 107 (Hart Publishing, Oxford, 2010).
70
Ibid.
71
Adelle Blackett, “Trade Liberalisation, Labour Law and Development,” in Tzehainesh Tekle (ed.),
Labour Law and Worker Protection in Developing Countries 106 (Hart Publishing, Oxford, 2010).
72
Production law is a set of regulations and normative standards that rule the everyday life of wage labour
relations etc. Production law is marked by the power prerogatives inherent to the ownership of means
of production and is a form of law not based on universal rights but on production interests. See
Boaventura de Sousa Santos, Toward a New Legal Common Sense (Butterworths Lexis Nexis, London
2002).
73
Systemic law is the sum total of rules and normative standards that organize the core/periphery
hierarchy and the relations among the nation states in the interstate system. It exists on the reverse of
the official legality that governs the relations among states sometimes complimenting it, sometimes
conflicting with or undermining it. See Boaventura de Sousa Santos, Toward a New Legal Common
Sense (Butterworths Lexis Nexis, London 2002).
rights or provide a mere semblance of a regime or are at best extremely weak labour
law regimes,
4.4 Parliamentary Debates and Evolution of the SEZ Legislation in India
Parliamentary debates with respect to the SEZ legislation offer an insight into the
government’s approach to the issue of labour rights within SEZs as well as, the
concerns of the members of Parliament and their role with respect to securing labour
rights within SEZs. With a brief reflection on the overall issues and concerns raised by
members of Parliament, this section primarily focuses on the debates with respect to
applicability of labour laws in SEZs.
A number of members of Parliament welcomed the Bill on account of its potential to
further economic growth (especially through exports), employment generation, 74 give
a fillip to foreign investment and promote development of infrastructure. 75 Concern
was raised by some with regard to the employment generation potential 76 degradation
of environment 77 overlooks the role of states 78 especially the relationship between the
centre and the states with respect to SEZs in the context of the federal structure of
India, 79 quality of employment generated in SEZs, 80 notion, range, structure and
effectiveness/misuse of incentives, 81 constitution of the board, 82 absence of time limit
74
Madhusudan Mistry, M. Ramadass, Lok Sabha Debates, 10th May’ 2005, available at
http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564. Vijay Darda, C. Ramachandraiah,
Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22.
75
Shri Vijay Darda, Shri C. Ramachandraiah, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22.
76
Shri Manoj Bhattacharya, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22. Madhusudan Mistry, Lok Sabha Debates, 10th May’ 2005, available at
http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564.
77
Ibid.
78
Ibid, M.Ramadass, Lok Sabha Debates, 10th May’ 2005, available at
79
Rupchandpal, M.Ramadass, Lok Sabha Debates, 10th May’ 2005, available at
80
Shri Nilotpal Basu, E.M.Sudarsana Natchiappan, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22.
81
Shri Manoj Bhattacharya, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22.Rupchandpal, Gurudas Dasgupta. M.Ramadass
82
K.S.Rao, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22.
for approval of SEZs, 83 absence of punishment for erring officer, 84 absence of

guidelines for developers 85 or mechanism to monitor them, 86 equitable growth
throughout India, 87 operation of foreign banks in SEZs, 88 protection of labour rights 89
within SEZs though some suggested restricting the scope of labour rights in these
zones “to an extent where it should not affect the growth.” 90 Reference was also made
to Chinese experience during the debates. 91
Nilotpal Basu emphasized the critical role of the legislation in ushering investment for
export, growth and employment generation, the need to secure cooperative federalism
in ensuring investment and specifically raising the concern for labour moved an
amendment to clause 49 (Section 49 of the Act) of the Bill. Referring to the power of
the central govt. to suspend application of laws to special economic zones embodied
in clause 49 the member proposed insertion of clause “save and accept (sic) labour
laws.” 92 Shri Gurudas Dasgupta mentioned during debate in Lok Sabha “Mr. Kamal
Nath and the Government he represents agreed to delete the paragraph in page 21
from 14 to 23 lines.” Thus the pressure from the left of the political spectrum which
made clear to the government “that if the labour laws of the country are not allowed to
be operated in Special Economic Zones, we shall not support” resulted in deletion of
the said lines from clause 50 of the Bill. Specific reference to the problematic
provision proposed in clause 50 of the Bill was also made by Shri Rupchandpal during
debate in the Lok Sabha. It is clear from the discussion above that the debates with
83
Ibid.
84
Ibid.
85
Ibid.
86
Gurudas Dasgupta, Lok Sabha Debates, 10th May’ 2005, available at
87
C. Ramachandraiah, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22, Madhusudan Mistry, M.Ramadass, Rupchandpal, Lok Sabha Debates, 10th May’
2005, available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564.
88
K.S.Rao, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22, M.Ramadass,
89
Shri Vijay Darda, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22, Gurudas Dasgupta Madhusudan Mistry, Lok Sabha Debates, 10th May’ 2005,
available at http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564.
90
K.S.Rao, Lok Sabha Debates, 10th May’ 2005, available at
http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564
91
M.Ramadass, Rupchandpal, Lok Sabha Debates, 10th May’ 2005, available at
92
Nilotpal Basu, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22, Rupchandpal, Lok Sabha Debates, 10th May’ 2005, available at
http://164.100.47.132/LssNew/psearch/result14.aspx?dbsl=2564
respect to application of labour laws in SEZs related specifically to two clauses in the
Bill i.e. clause 49 and 50. While responding to the concern for labour rights in SEZs
Bill raised by the abovementioned members the minister of Commerce and Industry
said, “Special Economic Zones Bill does not and will not allow violation of any such
right. We consider workers' rights to be supreme. They will be maintained.” This
statement of the Minister is difficult to reconcile with the action of the government in
introducing this Bill (approved by the Council of ministers) in the form which allowed
for complete exclusion or modification of labour laws in SEZs.
The following table compares the provisions of the Bill and the Act
Table 4.2 – Comparison of the SEZs Bill and SEZs Act, 2005
Cl. Bill Act
No.
49 49. (1) The Central Government may, by 49. Power to modify provisions of
notification, direct that any of the this Act or other enactments in
provisions of this Act (other than sections relation to Special Economic Zones.
54 and 56) or any other Central Act or any - (1) The Central Government may,
rules or regulations made thereunder or any by notification, direct that any of the
notification or order issued or direction provisions of this Act (other than
given thereunder (other than the provisions sections 54 and 56) or any other
relating to making of the rules or Central Act or any rules or
regulations) specified in the notification-- regulations made thereunder or any
(a) shall not apply to a Special Economic notification or order issued or
Zone or a class of Special Economic Zones direction given thereunder (other
or all Special Economic Zones; or than the provisions relating to
(b) shall apply to a Special Economic Zone making of the rules or regulations)
or a class of Special Economic Zones or all specified in the notification--
Special Economic Zones only with such (a) shall not apply to a Special
exceptions, modifications and adaptation, as Economic Zone or a class of Special
may be specified in the notification. Economic Zones or all Special
Economic Zones; or
A copy of every notification proposed to be (b) shall apply to a Special
issued under sub-section (1), shall be laid in Economic Zone or a class of Special
draft before each House of Parliament, Economic Zones or all Special

Cl. Bill Act

No.
while it is in session, for a total period of Economic Zones only with such
thirty days which may be comprised in one exceptions, modifications and
session or in two or more successive adaptation, as may be specified in
sessions, and if, before the expiry of the the notification.
session immediately following the session
or the successive sessions aforesaid, both Provided that nothing contained in
Houses agree in disapproving the issue of this section shall apply to any
the notification or both Houses agree in modifications of any Central Act or
making any modification in the notification, any rules or regulations made
the notification shall not be issued or, as the thereunder or any notification or
case may be, shall be issued only in such order issued or direction given or
modified form as may be agreed upon by scheme made thereunder so far as
both the Houses. such modification, rule, regulation,
notification, order or direction or
scheme relates to the matters
relating to trade unions, industrial
and labour disputes, welfare of
labour including conditions of work,
provident funds, employers’ liability,
workmen’s (sic) compensation,
invalidity and old age pensions and
maternity benefits applicable in any
Special Economic Zones.
A copy of every notification

proposed to be issued under sub-
section (1), shall be laid in draft
before each House of Parliament,
while it is in session, for a total
period of thirty days which may be
comprised in one session or in two
or more successive sessions, and if,

Cl. Bill Act

No.
before the expiry of the session
immediately following the session or
the successive sessions aforesaid,
both Houses agree in disapproving
the issue of the notification or both
Houses agree in making any
modification in the notification, the
notification shall not be issued or, as
the case may be, shall be issued only
in such modified form as may be
agreed upon by both the Houses.
50 50. The State Government may, for the 50. Power of State Government to
purposes of giving effect to the provisions grant exemption.- The State
of this Act, notify policies for Developers Government may, for the purposes
and Units and take suitable steps for of giving effect to the provisions of
enactment of any law:- this Act, notify policies for
(a) granting exemption from the State taxes, Developers and Units and take
levies and duties to the Developer or the suitable steps for enactment of any
entrepreneur; law:-
(b) Directing that any of the provisions of (a) granting exemption from the
any State Act relating to trade union State taxes, levies and duties to the
industrial and labour disputes, welfare of Developer or the entrepreneur;
labour including conditions of work, (b) delegating the powers conferred
provident funds, employers’ liability, upon any person or authority under
workmen’s compensation, invalidity and any State Act to the Development
old age pensions and maternity benefits or Commissioner in relation to the
any other activity relating to Special Developer or the entrepreneur.
Economic Zones
(1) shall not apply to a Special Economic

Cl. Bill Act

No.
Zone or a class of Special Economic Zones
or all Special Economic Zones; or
(2) shall apply to a Special Economic Zone
or a class of Special Economic Zones or all
Special Economic Zones only with such
exceptions, modifications and adaptation,
as may be specified in the notification.
(c) delegating the powers conferred upon
any person or authority under any State Act
to the Development Commissioner in
relation to the Developer or the
entrepreneur.
No doubt that the legislation was passed in the Parliament after a few hours of
discussion in both the houses of the Parliament and also that a much wider
consultation with all the stake holders as well as civil society in the process of
legislation would have ensured a more effective and protective legislation however,
the credit of avoiding the worst evil in the form of complete and explicit enabling of
exclusion of SEZs from applicability of labour laws was avoided through effective
intervention of the members of the Parliament. However this fact must not deviate
one’s attention from the fact that the cabinet, the functional executive of the state did
propose a Bill which reflected its willingness to sacrifice labour rights at the altar of
export led growth. Further it is appalling to note that the formulation of the proposal
with respect to labour in SEZs Bill was analogous to the EPZ law prevalent in
Bangladesh until 2004 and which now stands repealed with the enactment of EPZ
Workers Association and Industrial Relations Act, 2004. Section 11A of Bangladesh
Export Processing Zone Authority Act provided as follows:
The Government may by notification in the official gazette, exempt a zone
from the operation of all or any of the provisions of all or any of the
following enactments, or direct that any such enactment or any provision
thereof shall, in its application to a zone, be subject to such modifications or
amendments as may be specified therein namely, the Employment of Labour
Act 1965, the Industrial Relations ordinance1969, the Boilers Act 1923, the
Factories Act 1965.
4.5 Labour Rights Regime in SEZs in India

The nature of labour rights regime that exists for SEZs in India must be discerned
through a comprehensive process encompassing the following:
1. Analysis of substantive provisions embodied in SEZs Act pertaining to
applicability of labour laws i.e. section 49 and 50 of SEZs Act along with their
interface with the provisions of various state legislations on SEZs and the SEZ
policies formulated by various states.
2. Mechanism envisaged under the SEZs Act for the implementation of labour
laws
3. The use of already existing spaces within the labour law regime prevalent at the
national level
4.5.1 Analysis of Substantive Provisions : Interpreting Section 49 and 50 OF SEZs Act

4.5.1A Section 49: Meaning and Implications
A statute being “the will of the legislature” 93 the purpose of interpretation is to

ascertain the meaning of the text “according to the intent of them that made it.” 94 The
meaning of the text therefore has to be ascertained in the light of the intention of the
legislature, which in turn “must be found in the words used by the legislature itself.” 95
Thus the “cardinal rule of construction of statutes is to read the statutes literally, that
is by giving to the words their ordinary, natural and grammatical meaning.” 96
However, only if as pointed out by Lord Simon of Glaisdale “. . . when such an
approach produces injustice, absurdity, contradiction or stultification of statutory
objective the language may be modified sufficiently to avoid such disadvantage,
though no further.” 97 Therefore, to begin with, it is necessary to put together the plain
meaning of the words used in section 49 to establish what the section connotes.
93
P.St. J. Langan (ed.), Maxwell on the Interpretation of Statutes, 1 (Lexis Nexis Butterworths, New
Delhi, 1969).
94
Coke, 4 Institutes 330, quoted in P.St. J. Langan (ed.), Maxwell on the Interpretation of Statutes, 1
(Lexis Nexis Butterworths, New Delhi, 1969).
95
Padma Sundara Rao v. State of Tamil Nadu (2002) 3 SCC 533, at p. 542.
96
Jugalkishore Saraf v. Raw Cotton Co. Ltd., AIR 1955 SC 376, at p. 381 (per S.R.Das J.).
97
Suthendran v. Immigration Appeal Tribunal (1976) 3 All ER 611, at p. 616, followed in Harbhajan
Singh v. Press Council of India (2002) 3 SCC 722, at p. 728.
The marginal note to the section reads, “power to modify provisions of this Act or
other enactments in relation to Special Economic Zones.” Natural meaning of the term
power is “ability or capacity to exercise control” 98 and to modify means to alter,
change, vary, 99 or to “make partial changes to” 100 adjust, adapt, mutate, change,
revise, mutate or amend. Thus the marginal note indicates that the provision relates to
the authority to make alterations or changes in either SEZ Act itself or any other
legislation. According to clause 1 of the section the authority is vested in the Central
government and it is to be exercised by the central government by issuing notification.
The subject matter of the notification may be any of the following:
1. Any provisions of this (SEZ) Act, except sections 54 to 56
2. Any other central Act
3. Any rules, regulations, notification, order or direction given under either SEZ Act
or any other central Act
The object of the notification may be to direct the following with respect to either one
SEZ, a class of SEZs or all SEZs:
1. Exclusion or non-application of the subject matter of the notification
2. Application of the subject matter of the notification only with such exceptions,
modification or adaptation as specified in the notification
Since the word modify only means alteration or change and not complete exclusion
and the enacting section includes not only modification, adaptation or exception but
also exclusion thus the enacting part of the section and the marginal note are not
completely co extensive. In this context the “weight of authority is in favour of the
view that marginal note appended to a section cannot be used for construing the
section.” 101 Moreover Supreme Court in Nalinakhya Bysack v. Shayam Sunder
Haldar 102 held that in case of discrepancy between the marginal note and the enacting
part of a section, the section overrides the marginal note. Thus the intention of the
legislature as apparent from the reading of clause 1 was to vest central government
98
The New International Webster’s Comprehensive Dictionary of the English Language 990 (Trident
International Press, 2003).
99
Id., at p. 818.
100
Catherine Soanes, Angus Stevenson, Concise Oxford English Dictionary 918 (Oxford Press, 2009).
101
36 Halsbury Laws of England 373 (3rd ed.), in G.P.Singh (eds.), Principles of Statutory Interpretation
166-167 (Lexis Nexis Butterworths Wadhwa Nagpur, New Delhi, 2008).
102
AIR 1953 SC 148.
with a power to exclude application of certain laws completely or to notify their

application but with modifications.
Further clause 1 is followed by a proviso added through an amendment to the Bill

before the Bill was voted upon in the Parliament and passed. Generally, “the proviso
takes birth because something which was not thought of at the original stage of the
Bill, later occurred to the draftsman, or was suggested to the draftsman in subsequent
instructions.” 103 Secondly, the paragraph added through the amendment in the Bill
serves the true function of a proviso i.e. to “remove special cases from the general
enactment and provide for them specially.” 104 From the subject matter of clause 1 i.e.
SEZs Act and any other central legislation and pursuant subordinate legislations the
subject matter of the proviso removes legislations and subordinate legislations
pertaining to labour i.e. “trade unions, industrial and labour disputes, welfare of labour
including conditions of work, provident funds, employers’ liability, workmen’s (sic)
compensation, invalidity and old age pensions and maternity benefits applicable in
any Special Economic Zones.” However, the following introduce ambiguity into the
proviso:
1. “Provided that nothing contained in this section shall apply to any modifications
of any Central Act or any rules. . . “ Thus whereas the section extends to
modification, exception, adaptation as well as complete exclusion 105 the proviso
only refers to modification.
2. Use of expression “applicable in any Special Economic Zone” after listing the
legislations which are sought to be excluded from the subject matter of this
section again relates to the ambiguity mentioned above i.e. whether the intention
of the legislature expressed through the proviso was to limit the power of the
central government only with respect to modified application of the labour laws
and retain its power to completely exclude application of labour laws in
accordance with clause 1 (a) of section 49 and thus on account of the same the
subject matter of proviso i.e. labour laws is qualified by expression “applicable
in any SEZ.”
103
Georgia Railroad and Banking Co. v. James M. Smith, 128 US 174; Kershi Pirozsha Bhagvagar v.
State of Gujarat, 2007 Cri LJ 3958, at 3970.
104
G.P.Singh, Principles of Statutory Interpretation, 203 (Lexis Nexis Butterworths Wadhwa Nagpur,
New Delhi, 2008).
105
Though the terms modification, exception and adaptation still fall within the broad genus of
modification/ alteration exclusion is not something that falls within the same.
3. This is the only provision dealing with applicability of labour laws to SEZs and
reference to labour laws in this provision is limited to Central legislations and
subordinate legislation with respect to labour. Labour being a matter in the
Concurrent list of the Constitution of India, not only Union but the states also
have power to make laws with respect to labour. However, the words used in the
proviso offer protection (of whatever degree) only to labour legislations of the
Centre and the proviso is silent on the labour legislations enacted by the states.
4. The main clause only refers to rules, regulations, notification, order or direction,
the proviso in addition to the aforesaid refers to “schemes” and therefore in that
sense it no longer only excepts something from the purview of the main clause
but seeks to expand the scope of the restriction with respect to labour laws to
include something which is not even part of the enabling main clause. In the
light of the aforementioned ambiguities It remains uncertain whether the
legislature added the term “schemes” as an abundant caution in order to
comprehensively and completely seal the matters pertaining to labour in SEZs
from the purview of the power of modification conferred on the central
government.
Thus the plain meaning of the proviso as discussed above is highly ambiguous and on
account of lack of reference to the scope and limits of the power conferred on the
central government with respect to modifications in SEZ and other legislations and
subordinate legislations it is desirable to move to external aids for interpretation of the
proviso. In this context it is pertinent to refer to the debates in the Parliament. As
discussed in the previous section, the issue of applicability of labour laws in SEZs was
focus of the debate and amendments introduced in the Bill. The support of the left to
the Bill was contingent upon the promise they elicited from the Minister of Commerce
and Industry that labour laws will be applicable in the Zones. Moreover the minister
made a statement in the Parliament that an amendment to the Bill will be introduced to
the same effect and this proviso was added through the said amendment. However, the
proviso introduced through the amendment is highly ambiguous and but for the
reference to Parliamentary debates the intention as apparent from the words of the Act
is limited only to curbing the power of the central government to modify the labour
laws applicable to SEZs while retaining its power of excluding the applicability of the
same to SEZs. The plain meaning as well as the principles of interpretation of a
proviso that a proviso is subservient to the main provision and that it should receive

strict interpretation also support this construction. Thus it is desirable to amend the
said proviso in the light of the true intention of the legislature by removing
ambiguities that it is infested with and to provide formidable protection to labour
rights in SEZs else the provision will remain incapable of effectively “subjecting
human conduct to governance of rules,” 106 which is the basic purpose of law. A rule
that is unclear, ambiguous or un-understandable lacks one of the eight characteristics
enumerated by Fuller which law should possess to be worthy of being referred to as
law. 107
Another issue that may be raised with respect section 49 of the Act relates to
delegation of power to the executive to exclude or modify SEZs Act itself or other
central legislations with respect to an SEZ, a class of SEZs or all SEZs. Though this
aspect does not directly affect the labour legislations on account of their special
treatment through the proviso, yet it is of significance generally with regard to an
overall impact of SEZs on people’s rights generally. The questions that arise in this
context are whether section 49 of the Act suffers from excessive delegation and
secondly the nature of legislative control over delegated legislation. Since the issues
do not affect the labour laws within SEZs a brief comment on the two will suffice.
Firstly, the basic principle established through case law with regard to delegated
legislation is that though the legislature cannot delegate its “essential legislative
function which consist in declaring the legislative policy and laying down the standard
which is to be enacted into a rule of law” but can delegate the task of making
“subordinate legislation which by its very nature is ancillary to the statute.” 108 As far
as legislative policy is concerned the court has relied upon not only the delegating
provision but also other provision in the statute, 109 the preamble to the Act, 110
legislative history in terms of rules adopted from previous legislation 111 to discern the
policy. It has been suggested that the Supreme Court leans towards upholding the
validity of the delegating provision. 112 In the light of the established law it is
106
Lon L. Fuller, The Morality of Law 96 (Universal Law Publishing Co, Delhi, 2004).
107
Id., at pp. 35-40 and 63-65.
108
In Re Delhi Laws Act, 1951 SCR 747 (per Mukherjea) reaffirmed in Gwalior Rayon Co. v. Asst.
Commr of Sales Tax, AIR 1974 SC 1660; K.S.E. Board v. Indian Aluminum AIR 1976 SC 1031;
Registrar, Co-Operative Societies v. K. Kunjabmu AIR 1980 SC 350; State of Maharashtra v. Indina
Medical Association (2002) 1 SCC 589.
109
D. S. Garewal v. The State of Punjab and others AIR 1959 SC 512.
110
Hari Shankar Bagla v. State of Madhya Pradesh AIR 1954 SC 465.
111
Bhatnagars and Co. ltd. v. Union of India AIR 1957 SC 478.
112
M.P.Jain, S.N.Jain, Principles of Administrative Law 70 (Lexis Nexis Butterworths Wadhwa Nagpur,
Gurgaon, 2007).
necessary to note that though section 49 itself does not explicitly provide guidance
with regard to exercise of delegated power by the central government but the long title
of the Act indicates that the purpose of the Act is to “provide for the establishment,
development and management of the Special Economic Zones for the promotion of
exports.” Therefore the scope of the power delegated to the central government is
determined by its role in “promotion of exports” thus only those exclusions or
modifications in the central legislations in force fall within the purview of the
delegated power which have the potential of promoting exports. In that sense going by
the trend of the courts in upholding the validity of delegating provision the aforesaid
policy embodied in the Act is likely to be relied upon by the court for the same
purpose.
Further in the context of legislative control over subordinate legislation (power of
notification in this case) the route embodied in the SEZs Act for the said purpose is
not a strong one. Clause (2) of section 49 provides for legislative control over the
notifications issued by the central government by enshrining the laying procedure.
Laying procedure refers to the process of laying the notification in the Parliament so
as to enable the Parliament to oversee and check objectionable or unwarranted use of
delegation by the administration. Laying procedures are of three types viz. 113
1. Simple Laying – this process only involves laying the subordinate legislation
before the Parliament
2. Laying with annulment – this process involves laying the rules in draft before
the Houses and the rules can be annulled by a resolution of a House
3. Laying subject to Affirmation – this process also involves laying of rules in
draft before the Houses and they come into operation only when the Houses
pass a resolution affirming them. It is also known as negative laying
procedure. 114
The primary distinction between the second and the third categories of laying
procedures is that in the second procedure “the legitimacy of delegated legislation
precedes, not follows, the negative laying procedure.” 115 In the latter “the initiative to
move a resolution to annul or modify the rules has to be taken by the members of the
House. The government is under no obligation to take any initiative.” 116 Unfortunately
113
Id., pp. 176-177.
114
Id., at p. 176.
115
Ibid.
116
Id., at p. 178.
out of the three procedures the one embodied in the SEZs Act is not ‘laying subject to
affirmation’ which is the most effective but the negative laying procedure.
4.5.1B Section 50: Meaning and Implications
Section 50 of the Act relates to the “power of the state government to grant
exemptions.” 117 The meaning and implications of this provision assume significance
on account of the fact that it was this provision in the Bill (clause 50) which included
enabling clauses for either excluding application of state laws relating to labour to the
Special Economic Zones or for introducing exceptions, modifications and adaptation
to those laws, including subordinate legislation. After discussion in the Parliament it
was deleted and as discussed earlier a proviso was instead added to clause 49. The
provision is geared towards enabling the states to give effect to the provisions of SEZs
Act and it is appalling to note that exclusion and alterations in labour laws was
envisaged as playing such a role. However, the will of the legislature did not support
this proposal of the cabinet enshrined in the Bill and therefore it was deleted from the
same. In that sense now the Act is silent on the power of the states to exclude or alter
application of labour laws enacted by the states to SEZs though as discussed above the
power of the central government with respect to the central labour legislations stands
ambivalently excluded to a large extent.
This change raises a significant issue regarding protection of labour rights in SEZs in
the light of the Constitutional framework. The subject matter of laws enumerated in
section 49 of the Act and clause 50 of the Bill find mention in List III i.e. Concurrent
list of the 7th Schedule to the Constitution of India. With respect to the Concurrent list
both the centre and the states have the power to legislate 118 however, in case of
inconsistency, the law made by the Parliament prevails 119 unless the state law is made
in accordance with clause 2 of Article 254 i.e. provided it has received assent of the
President. SEZ Act enacted under entry 33 of list III 120 as notified restricts the
modification of central labour legislations (including subordinate legislations) with
respect to their application to SEZs. However as discussed above the amendment in
117
Special Economic Zones Act, 2005, section 50, marginal note.
118
The Constitution of India, 1950, Article 246 (2).
119
Id., Article 254 (1).
120
E.M.Sudarsana Natchiappan, Rajya Sabha Debate, 11th May’ 2005, available at
=%22sez%20bill%22.
the Bill entailed deletion of the enabling provision from clause 50 and addition of
restrictive proviso in section 49 leaves the arena of state legislations with respect to
labour un-occupied by the central SEZ legislation. The proviso added through the
amendment in the Bill pertains only to Central legislations on labour and not the state
legislations. Therefore it remains open to the states to exclude or modify the
application of state labour legislations with respect to SEZs. In the absence of any
debate on the words of the proposed amendment with respect to clause 49 and 50 of
the Bill 121 and its acceptance by the majority it remains uncertain whether the
reiteration in the Parliament by the minister about the intention to bring SEZs within
the purview of labour laws and the collective will of the Parliament was only limited
to protection as far as central legislations are concerned. Though it may not seem to
have been the intention but the words of the legislation are extremely restrictive. Since
the intention as reflected in proviso to section 49 is limited to central labour
legislations it cannot be said that the legislature through this proviso intended to cover
entire field of labour law i.e. central as well as state legislations and silence of section
50 with respect to the same brought about through an amendment in the Bill also
points towards such intention. In the absence of intention to occupy the entire field of
labour law with respect to SEZs, exclusion of state labour legislations or their
modification with respect to their application in SEZs cannot be said to be void on
account of being repugnant to the central legislation in the same field. In other words
apart from direct conflict repugnancy can only arise when the two enactments operate
in the same field and one is inconsistent with the other. 122
This implication arising out of the intention of the legislature to only occupy the field
with respect to central labour laws as reflected in section 49 and not to extend the
operation of the limitation to state labour legislations may not at the first instance
appear to be of much significance on account of the fact that central labour
legislations encompass within their purview most of the matters pertaining to labour
and state legislations on labour are rather few. However, one of the areas that still
remains unoccupied by central labour legislations pertains to recognition of trade
unions. In the absence of any provision in The Trade Unions Act, 1926 (an
121
The demand to amend the Bill was accepted in principle by the minister however, the proposed
amendment was introduced after the deliberations on the Bill in general by the members were over and
the Lok Sabha proceeded to clause by clause consideration of the Bill which was a process that wound
up in less than 30 minutes in Lok Sabha.
122
National Engineering Industries Ltd. v. Shri Kishan Bhageria A.I.R. 1988 SC 329.
amendment to this effect was incorporated but remains unenforced) with respect to
recognition of trade unions, certain states like Maharashtra, Madhya Pradesh,
Rajasthan, Bihar have legislated with regard to union recognition. 123 Given the
significance of the issue of recognition of union in general in securing and upholding
labour rights and especially their need in SEZs given the context of their emergence
and internationally and nationally (given the competition between states to attract
investment) competitive environment in which they exist (as discussed in the first
section of this chapter) the implications of this repugnancy with regard to labour
(especially trade union) rights are likely to be severe.
Further as labour is a matter embodied in the concurrent list the states have
Constitutional power to introduce amendments to central legislations after following
procedure provided in the Constitution. However, the proviso only refers to the power
of the central government to modify central legislations without referring to the power
of the state governments to introduce amendments to the central legislations. Even
though the words of the proviso refer only to the power of the central government but
since the intention is to retain the applicability of the central labour legislations in
SEZs (through an ambiguously worded proviso as discussed above), any attempt by
states to do the same would be repugnant to the central legislation. However, one must
not lose sight of the fact that since labour is a matter embodied in the concurrent list
the effect of ambiguous formulation of the proviso to section 49 does not only
introduce vagueness to the power of the central government but also introduces
vagueness to the power of the state governments with regard to exclusion or
modification of central labour legislations. Only when one goes by the interpretation
emerging in the light of the Parliamentary debates that state law excluding or
modifying central labour legislation with respect to SEZs would stand repugnant to
the central law. In this context the repugnancy would arise on account of the fact that
the field occupied by the state legislation embodying amendment of central labour
legislation applicable to SEZ in that particular state is the same as that covered by the
proviso to section 50 of SEZs Act. Exclusion or modification of Central labour
legislations by the states here amounts to undoing the protection sought to be
guaranteed to central labour legislations in section 49 of SEZs Act. Thus on the basis
of the doctrine of “occupied field” whereby the proviso to section 49 occupied the
field pertaining to central labour legislations and intended through the proviso to
secure applicability of labour laws to SEZs, a state legislation on SEZs which seeks to

exclude or modify application of central labour legislations to SEZs in that particular

state would be inconsistent with the intention expressed in the central legislation. The
conflict in such cases between the central and state legislations is not a direct conflict
since the prohibition with respect to exclusion and modification in central labour
legislations imposed under proviso to section 49 of the SEZs Act is limited to central
government. However, where the state government on account of its concurrent power
does what the central government under the Act is
prohibited from doing and thus distorts the operation of the central legislation, it
amounts to repugnancy. This has been very succinctly put by Dixon, J. in Victoria v.
Commonwealth 124
Substantially it amounts to this. When a State law, if valid, would alter,
impair or detract from the operation of a law of Commonwealth Parliament,
then to that extent it is invalid. Moreover, if it appears from the terms, nature
or the subject-matter of a federal enactment that it was intended as a
complete statement of the law governing a particular matter or set of rights or
duties, then for State law to regulate or apply the same manner or relation is
regarded as a detraction from the full operation of the Commonwealth law
and so is inconsistent.
The Supreme Court has also followed this doctrine in cases like Zaveribhai v. State of
Bombay, 125 Deep Chand v. State of U.P., 126 State of Assam v. Horizon Union. 127 On
the basis of aforementioned reasons it is appropriate to hold that the euphemistically
referred “simplification in labour laws” envisaged in section 18 of Gujarat SEZ Act,
2004 and specifically provided in schedule II of the Act embodying exclusion or
amendment to various central labour legislations would be repugnant to the SEZs Act,
2005. It is also pertinent to point out here that no such modification or simplification
as envisaged in section 18 read with schedule II has been done till now.
4.6 Implementation Mechanism of Labour Laws under SEZs Act
Generally implementation of labour laws in enterprises is secured through labour

inspection which is a vital part of labour administration. Standards pertaining to
123
Government of India, Report: National Commission on Labour 329 (1969).
124
(1937) 58 CLR 618, at 620.
125
A.I.R. 1954 SC 752.
126
A.I.R. 1952 SC 648.
127
A.I.R. 1967 SC 442.
labour inspection are embodied in the Labour Inspection in Industry and Commerce
Convention (No. 81) adopted by ILO in 1947. There are three associated
Recommendations Nos. 81, 82, 85. The Convention provides that the labour
inspection should be organized as a system 128 and it should be placed under the
supervision and control of a central authority. 129 The labour inspectors must be
recruited with sole regard to their qualifications and they should be adequately trained
for the performance of their duties, 130 be properly equipped 131 and their number
should be sufficient. 132 Most importantly it provides that workplaces must be
inspected as often and as thoroughly as is necessary to ensure effective application of
relevant legal provision. 133 Moreover it recognizes that adequate penalties should be
imposed for violations of legal provisions enforceable by labour inspection. 134
As noticed in the context of variable overall labour regimes prevalent in different

countries even with respect to implementation mechanism there is absence of
uniformity in state practice. In some countries like Costa Rica, Honduras, Indonesia,
Kenya, Mauritius and Sri Lanka the Ministry of labour which has jurisdiction over all
workplaces in the country is also responsible for implementation of labour laws in
EPZs. 135 Some of these countries have “smaller and specialized units with sectoral or
technical specialists that deal with specific issues.” 136 However, in Bangladesh EPZ
authority, BEPZA (Bangladesh Export Processing Zones Authority) is the absolute
authority for any legal process in EPZ and the Ministry of Labour and Employment is
not responsible for implementation of labour laws in the Zones. 137 It has also been
remarked that the main role of EPZ authority being “to protect the investors’ interest
so there is a gap of confidence of workers on their role.” 138 Even though BEPZA has
an industrial relations department in every EPZ bearing the responsibility for
enforcing labour conditions but the workers have expressed discontent over the
128
Article 1.
129
Article 4 (1).
130
Article 7.
131
Article 11.
132
Article, 10.
133
Article 16.
134
Article 18.
135
Helena Perez Vasquez, “Good Labour Practice Compilation of Labour Inspection Practices and
Guidelines for Effective Labour Inspections in EPZs” ILO 13 (2010).
136
Id., p. 14.
137
Id. p. 13.
138
Ibid.
remedial action of the counsellors in BEPZA and claim that the dispute resolution
mechanism is not fully transparent. 139
Mechanism envisaged in the SEZs Act of India with respect to implementation of

labour laws typically reflects adoption of “low visibility” 140 strategy to reduce
effectiveness of labour laws and is akin to the mechanism prevalent in Bangladesh. As
noted earlier the substantively the labour laws applicable in SEZs are the same as
prevalent in rest of the country but the implementation mechanism established for the
same is different. This is primarily done by ascribing a plethora of functions to the
Development Commissioner and implementation of labour laws just being one of
them. Development Commissioner is an officer of the rank of Deputy Secretary to the
Government of India who may be designated as the former by the Central
Government. 141 He is ex officio member of the Board of approval 142 and approval
committee. 143 The main function of the board of approval is to grant/reject/modify
proposals for establishment of the SEZs. 144 The function of the approval committee is
to approve/modify or reject proposals for setting up units in SEZs, facilitate their
functioning and monitor and supervise compliance of conditions subject to which
approval is granted to the entrepreneurs. 145 The general and primary function of the
Development Commissioner is to “ensure speedy development of the Special
Economic Zone and promotion of exports therefrom.” 146 However he is also required
to guide entrepreneurs for setting up units in SEZ, ensure effective promotion of
exports from SEZ, coordinate between state and central government departments for
the purposes of aforesaid functions, monitor performance of developer, discharge
functions delegated by the board, 147central or state government. 148 The SEZs Act
recognises the overriding power of the central government to “prescribe a single form
for furnishing returns or information by a developer or an entrepreneur under one or
more central Acts” 149 or “specify any officer or agency to carry out surveys or
inspections for securing of compliance with the provisions of any central Act by a
139
Id., at p. 15.
140
Expression used by Adelle Blackett to reflect the current methodological advise by the World Bank to
states seeking labour market flexibility. See supra note 71 at 107.
141
The Special Economic Zones Act, 2005, section 11(1).
142
Id., section 8(1) (g).
143
Id., section 13(2) (a).
144
Id., section 9 (2) (1) (a).
145
Id., section 14 (1).
146
147
Id., section 12 (2), section 9(4).
148
developer or an entrepreneur . . .” 150 Further it enables the states to make laws or

notify policies for the purposes of giving effect to the provisions of the SEZs Act
especially “delegating the powers conferred upon any person or authority under any
State Act to the Development Commissioner in relation to the developer or the
entrepreneur.” 151 All this facilitates the establishment of a separate implementation
and monitoring mechanism with respect to central laws (including central labour
legislations) as well as state laws in SEZs. Thus even if the labour laws were intended
to remain applicable in SEZs their implementation was sought to be taken out of the
hands of the authority having expertise to perform this task and which is dedicated to
perform this single task of monitoring with respect to labour laws and vests it in the
hands of the Development Commissioner who is not specifically designated only for
this but may be required to perform this function along with many others and thus it
raises concerns regarding the effectiveness with which a single officer may fulfill
these obligations.
Various states through their SEZ legislations or policies 152 whether enacted or
formulated before or after the enactment of the central SEZs Act have delegated the
powers of the labour Commissioner, 153 Chief inspectorate of factories 154 as well as of
all officers under labour legislations 155 to the Development Commissioner in SEZs.
However, SEZs policies of the states like Jharkahand, 156 Karnataka, 157 West Bengal 158
and Uttar Pradesh 159 provide for placement of an officer from the labour department
under the supervision of the Development Commissioner for the performance of the
abovementioned functions. The powers and functions of the Labour Commissioner
under the labour law regime in India are enormous. They relate to monitoring and
149
Id., section 19 ( c).
150
Id., section 20.
151
Id., section 50 (b).
152
For comparison of labour law regimes prevalent in SEZs in different states see appendix 4.1.
153
Gujarat SEZ Act, 2004, section 17 (1); The Punjab Special Economic Zones Act, 2009, section 12 (2)
(a); The Haryana Special Economic Zone Act, 2005, section 12 (2) (a); Jharkhand SEZ Policy, 2003
para 5.1; Karnataka State Policy for Special Economic Zones, 2009, para 4; West Bengal Special
Economic Zone Policy, para 6.1; Chandigarh 2005, para 5; Government of Uttar Pradesh, Notification
No. 987/36-1-03-40(S.T.)/ 99, dated 28th July, 2003.
154
The Haryana Special Economic Zone Act, 2005, section 12 (2) (a); The Punjab Special Economic
Zones Act, 2009, section 12 (2) (a), West Bengal SEZ Policy, para 6.3.
155
Gujarat SEZ Act, 2004, section 17 (1).
156
Para 5.2.
157
Para 4.
158
Para 6.1.
159
Para 3(1).
ensuring implementation of a number of labour legislations. 160 Vesting of functions in

one authority under all these legislations pertaining to labour ensures specialized
monitoring and promotes efficiency in securing compliance. Development
Commissioner however, already has a number of functions to perform under the Act,
adding monitoring of so many labour laws makes his task onerous. Further as pointed
out by Jaivir Singh unlike the labour Commissioner, Development Commissioner’s
“job is not primarily to look into labour matters but to ensure that SEZ is able to
attract sufficient investment and generate earnings. This clearly generates a conflict of
interests in the office and there is no built in guarantee that labour interests will be
privileged efficiently in relation to those of employers.” 161 Concerns about the ability
of the Development Commissioner “to learn about the implementation of the plethora
of laws” have also been raised 162 along with the idea of equating ‘good governance’
with speedy decisions and generation of quick outcomes. 163 The overzealous attitude
towards quick decision making (single window clearance for almost everything in
SEZs) somewhere compromises establishment of adequate checks and balances with
regard to “other normative concerns” 164 primarily that of labour. The high probability
that “premium on speed acts primarily to reinforce the concentration of power in the
office of the Development Commissioner, initiating the institution of an important
centre of rent seeking activity” has also been indicated. 165 Thus a different
mechanism for implementation of nationally prevalent labour laws is facilitated
through the SEZs Act. The centre and the states have used these provisions to
operationalise a different implementation mechanism for labour law in SEZs. The
same is bound to be less effective given the variety of other functions assigned to the
Development Commissioner as well as on account of the likelihood of incongruence
between other functions and the function of implementation of labour laws.
Apart from delegation of powers of Labour Commissioner to the Development

Commissioner, the other mechanisms of implementation of labour laws that are
witnessed in SEZs are not specific to SEZs alone but their expression is seen generally
in the labour market outside SEZs in India. However, in SEZs the same mechanisms
160
For details of the legislations falling within the purview of Labour Commissioners of Haryana and
Uttar Pradesh see appendix 4.2.
161
Jaivir Singh, “Labour Law and Special Economic Zones in India,” 11 CSLG/WP/09/01.
162
Ibid.
163
Id., at p. 12.
164
Ibid.
165
Ibid.
appear not alone but in combination with the changes discussed above and other
realities of implementation of labour laws in SEZs, resulting in the differential impact
of the same on labour in SEZs. Thus it is desirable to view the changes common to
both SEZs and non-SEZ areas in the broader context prevalent nationally.
In general the contemporary life of labour law in India is being shaped by the
unequivocal acceptance of the neo-liberal model of development not only as a means
to promote economic growth but also to enhance the employment net and thus secure
well being of labour. In this context the response to the challenge of strong political
resistance to changes in labour laws has been through withdrawal of the state from
rigorous enforcement of labour laws. State governments in India are engaged in
“frenzied competition to attract capital to their regions.” 166 The state of Uttar Pradesh
for instance ordered 5% inspection of industrial units and establishments on a random
basis in 1994, in 1998, “restrictions on inspections were removed, but industries were
protected from unnecessary interference by introducing a system of prior written
permission of inspections from the concerned District Magistrate/Divisional
Commissioner,” subsequently in 2006 it “introduced a system of “self certification”
whereby the establishments are required to submit report on their activities, followed
by inspection of 20% of establishments by enforcement authorities, where those found
in violation of legal provisions are to be motivated to follow them rather than
imposition of punishment which is viewed as the last resort. 167 “The states of
Rajasthan and Andhra Pradesh have also reduced the scope of labour inspection, and
have exempted several establishments from the purview of labour inspection.” 168
Similar changes have been introduced with respect to implementation of labour laws
in SEZs primarily on basis of the need to provide single window mechanisms. The
Government of Punjab SEZ policy, 169 Chandigarh SEZ Policy 170 provides for
establishment of single window committee for clearances, approvals and permissions
inter alia with respect to labour. SEZ policies of Maharashtra 171 and Madhya
166
Alakh N. Sharma, V. Kalpana, “Labour Regulation and Industrial Development in Uttar Pradesh: Some
Recent Trends” 7 ISID 70. Fiscal incentives are also being offered to industries in terms of tax
exemptions to attract capital investment.
167
Id., at pp. 55-56.
168
A.N.Sharma “Flexibility, Employment and Labour Market Reforms in India” in S. Mahendra Dev, N.
Chandrasekhara Rao (eds.), India: Perspectives on Equitable Development 211 (Academic Foundation,
New Delhi 2009).
169
Para 14.
170
Para 5.
171
Para 8.
Pradesh 172 also provide for single point or single window services with respect to
clearances and registration under labour laws. Karnataka and Jharkhand SEZ Policies
allow filing of a consolidated annual report to the Development Commissioner instead
of periodical returns under most of the labour laws. 173 Uttar Pradesh 174 and Madhya
Pradesh SEZ Policies 175 provide that the government would permit the units in SEZs
to get inspections relating to workers’ health and safety done through “accredited
agencies” that may be notified by the government/Development Commissioner. 176
SEZ Policies of Punjab 177 and Uttar Pradesh require prior permission of Development
Commissioner before any authority can conduct inspection in units in SEZs. SEZs
policies of Chandigarh 178 and Maharashtra 179 also provide for the same but explicitly
allow for inspection without permission in urgent circumstances and West Bengal
SEZs Policy provides for inspections in consultation with Development
Commissioner. 180
All these processes diluting supervision over the obligations of entrepreneurs vis-à-vis
labour along with fiscal and other incentives are geared towards providing congenial
atmosphere to developers and entrepreneurs to grow and in turn contribute to the
economic growth of the state. However the approach by being highly biased in favour
of the entrepreneurs in certain ways compromises the protections to which labour is
entitled. The incentives and concessions to the entrepreneurs are not justly balanced
by putting in place effective mechanisms to ensure their accountability in terms of
their treatment of labour. The zones are thus progressively and supportively special
for the former while special in ushering adversity for the latter.
4.7 Use of Existing Spaces under National Labour Rights Regime in SEZs
The labour rights regime in SEZs is not only determined by the recognition of
application of labour laws or a separate mechanism envisaged for its implementation,
172
Para3.
173
Karnataka SEZ Policy, 2002, para 4, Jharkhand SEZ Policy, 2003, para 5.3.
174
Uttar Pradesh SEZ (Amended) Policy, 2007, para 3(3).
175
Madhya Pradesh SEZ Policy, 2000, p. 3.
176
Uttar Pradesh SEZ (Amended) Policy, 2007, para 3(3), Jharkhand SEZ Policy 2003, para 5.5,
Jharkhand policy provides for inspections by agencies accredited by Development Commissioner.
177
Para 10.
178
Para 5.
179
Para 8.
it is also shaped by the use of already existing spaces within labour law. When these
spaces are used in order to encompass within their fold all the establishments in SEZs,
which may otherwise be varied in terms of nature of processes carried on in them and
in turn their impact on public good, then the usage appears to be a mere euphemism
for the subjection of SEZs to different labour rights standards. In India, this is done by
designating all the establishments in SEZs as “public utility.” SEZ Policies of
Karnataka, 2002, 181 Chandigarh, 182 West Bengal, 183 Punjab, 184 Maharashtra 185 and
Uttar Pradesh 186 have designated all the units in SEZs as ‘public utility’ under the
Industrial Disputes Act, 1947. The recognition of status of a unit as public utility
implies certain restrictions on the right of the labour to strike work. According to
section 22 read with section 23 of the Industrial Disputes Act, 1947, a strike by
employees in a public utility service is illegal unless
• A notice of strike is given to the employer within six weeks before

striking, or
• Strike commences within fourteen days of giving such notice, or
• Strike commences before the expiry of date of strike specified in such
notice, or
• Strike is during the pendency of conciliation proceedings, or
• Strike takes place seven days after the conclusion of conciliation
proceedings
Since upon service of notice conciliation is deemed to begin, 187 “the cumulative
effect of these provisions is, in practice, to prohibit strikes in these public utility
services which is contrary to the principles of freedom of association.” 188 The
rationale behind such a prohibition of strikes in public utility services is that they are
considered to be against public good. 189 Article 4 of the Voluntary Conciliation and
Arbitration Recommendation 1951 provides that parties to the dispute should be
180
West Bengal SEZs Policy, para 8.1.
181
Para 4
182
Para 5
183
Para 6.4.
184
Para 9( c).
185
Para 9.
186
Para 3(4).
187
Kamala Sankaran, Freedom of Association in India and International Labour Standards 191
(LexisNexis Butterworths Wadhwa Nagpur, Haryana, 2009).
188
Ibid.
189
Satyavir Singh v. Union of India A.I.R. 1986 SC 555.
“encouraged to abstain from Strikes and Lockouts while conciliation is in progress.”

At the same time the recommendation also provides that “no provision of this
Recommendation may be interpreted as limiting, in any way whatsoever, the right to
strike.” 190 Moreover, the Committee on Freedom of Association of the Governing
Body of the ILO in its second meeting in 1952 held that “the right to strike is one of
the essential and legitimate means through which workers and their organisations may
further and defend their social and economic interests.” 191 These interests may be
related to occupation, labour problems or broader economic and social policy
questions. 192 Further workers and employers organisations have a right “to organize
their administration and activities and to formulate their programmes” 193 Strike is
considered to be an activity of workers within Article 3 of Convention No. 87 194 and
in several cases relating to India the Committee on Freedom of Association has stated
that right to strike is a “legitimate means by workers of defending their economic and
social interests.” 195 The Committee of Experts on the application of Conventions and
Recommendations (hereinafter referred to as CEACR) is also of the view that “the
right to strike is an intrinsic corollary of Convention No. 87, though it can be subject
to restrictions.” 196 Even Article 8 (1) (d) of the Covenant on Economic, Social and
Cultural Rights, 1966 (ICESCR) recognises the right to strike, provided that it is
exercised in conformity with the laws of the particular country. India, a party to
ICESCR has put a declaration on Article 8 indicating that the said article will be
applied in conformity with Article 19 of the Constitution of India. As far as
restrictions on strike in case of industrial establishments declared as public utility are
concerned, the approach of ILO has been to narrowly interpret essential services
which constitute a ground for imposing prohibition on strike. CEACR has limited the
scope of essential services to only those where there is a clear and imminent threat to
190
Article 7.
191
Case No. 5, 4th Report, para 27, in Kamala Sankaran, Freedom of Association in India and
International Labour Standards 169 (LexisNexis Butterworths Wadhwa Nagpur, Haryana, 2009).
192
General Survey, 1983, para 200, in Kamala Sankaran, Freedom of Association in India and
International Labour Standards 169 (LexisNexis Butterworths Wadhwa Nagpur, Haryana, 2009).
193
Convention concerning Freedom of Association and Protection of the Right to Organise, 1948,
Convention No. 87, Article 3(1).
194
Kamala Sankaran, Freedom of Association in India and International Labour Standards 169 (Lexis
Nexis Butterworths Wadhwa Nagpur, Haryana, 2009).
195
Case No. 5, 4th Report, para 27; Case Nos. 589 and 594, 118th Report, para 59; Case No. 793, 149th
Report, para 133; Case No. 756, 147th Report, para 167; Case No. 942, 199th Report, para 42; Case No.
1024, 211the Report, para 537; Case No. 1091, 217th Report, para 443; Case No. 1113, 233rd report,
para 149, in Kamala Sankaran, Freedom of Association in India and International Labour Standards
170 (Lexis Nexis Butterworths Wadhwa Nagpur, Haryana, 2009).
196
General Survey, 1994, para 151, in Kamala Sankaran, Freedom of Association in India and
International Labour Standards 170 (Lexis Nexis Butterworths Wadhwa Nagpur, Haryana, 2009).
the life, personal safety and health of the whole or the part of the population. 197
However, en masse declaration of all the units in SEZs as public utility and practically
prohibiting the right to strike in those units is thus not in tune with the approach of
ILO. Further unlike the central Industrial Disputes legislation, Uttar Pradesh Industrial
Disputes Act, 1947 with the aim to prevent strikes and lock outs confers power upon
the state government for “requiring any public utility service, or any subsidiary
undertaking not to close or remain closed and to work or continue to work on such
conditions as may be specified in the order.” 198 The said order can be made under the
condition that the state government thinks it necessary or expedient to do so for
securing the public safety or convenience or the maintenance of public order or
supplies and services essential to the life of the community, or for maintaining
employment. 199 Inclusion of grounds like convenience, public order in the Act gives a
wide leeway to the state government to prohibit strike in many industrial
establishments than would fall under the narrow approach to the grounds recognized
by ILO in this regard.
The en masse declaration of every unit in SEZs as public utility thus adversely affects
the right to strike and in turn the bargaining power of the labour. It amounts to
depriving workers of “their greatest source of power, the power concertedly to
interrupt work.” 200 Uninterrupted production through industrial peace is viewed as an
absolute collective interest in modern society which must be protected all the time.
However, this protection which reaps benefits to the entrepreneurs is secured at the
cost of disempowerment of labour. In this sense unions are placed in “the
uncomfortable position of serving as fiduciaries of an imagined societal interest in
industrial peace.” 201 Further declaration of all the units in SEZs as public utility stands
as another expression of how the legal system is organized by the state to “guarantee
the conditions for private accumulation . . . that are necessary for it to survive in the
context of a capitalist economy.” 202
197
Digest, 2006, para 581, in Kamala Sankaran, Freedom of Association in India and International
Labour Standards 191 (Lexis Nexis Butterworths Wadhwa Nagpur, Haryana, 2009).
198
Uttar Pradesh Industrial Disputes Act, 1947, section 3(e).
199
Id., section 3.
200
Karl E. Klare, “Labour Law as Ideology: Toward a New Historiography of Collective Bargaining Law”
4 IRLJ 466 (1981).
201
Republic Steel Corp. v. UMV 570 F. 2d. 467, 479, in Karl E. Klare, “Labour Law as Ideology: Toward
a New Historiography of Collective Bargaining Law” 4 IRLJ 452 (1981).
4.8 Conclusion
SEZs, perceived as a formidable vehicle for export led growth within the neo-liberal
ideology, is necessarily premised upon cheap labour as an input required in order to be
competitive in not only attracting domestic and foreign investment but also to win
scarce export markets in the contemporary context of simultaneous adoption of export
led growth strategy in most of the countries. In such a competitive world three
categories of labour law regimes have emerged in SEZs – inclusionary, exclusionary
and special/altered regime. Increasingly because of varied pressures the exclusionary
regimes are gradually disintegrating. The most prevalent labour law regimes in SEZs
are the special/altered labour law regimes. Even inclusionary regimes suffer from the
nationally prevalent lacunae in de jure recognition of labour rights as well as from the
practice of “low visibility” strategy of under enforcement of labour laws. Despite
assurance of the Minister of Commerce and Industry in the Parliament about the
subjection of SEZs to the existing labour laws in India, the formulation of the
provisions securing the same in the SEZs Act, 2005 is highly ambiguous. But for the
reference to Parliamentary debates the language of provisions relating to labour laws
in SEZs Act, 2005 imbibe prohibition only of modified application of central labour
legislations in SEZs without ruling out the possibility of completely excluding the
application of labour laws. Moreover, labour being a subject in the concurrent list, the
influence of this ambiguity also reverberates in the powers of the states. Therefore it is
desirable to remove this ambiguity by amending the provision in order to clearly
embody the will of the legislature to uphold applicability of labour laws in SEZs.
However, the extent to which such a change will secure labour rights in SEZs is
uncertain on account of the different implementation mechanism of labour law
envisaged in the Act, extension of the trend of compromised/weak enforcement
generally prevalent in some states to SEZs as well as the prompt reliance of the states
on the already existing spaces within the nationally prevalent labour law in order to
legally restrict the labour rights in SEZs. It is thus clear that despite Parliamentary
proclamation of protection of labour rights in SEZs the special labour rights regime
established in SEZs is weak.
202
Boaventura de Sousa Santos, Toward a New Legal Common Sense 73 (Butterworths Lexis Nexis, U.K.,
2002).

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Development of Special Economic Zones and its Impact on Labour Rights and Livelihood in NCR

reference to the proclaimed necessity of SEZ legislation which seeks to establish

4.2.3 Implications of the Rationale for Labour Rights

The globalization of poverty endorses the development of a worldwide

Secondly, similar structural adjustment policy prescription stipulating export oriented

Thirdly, simultaneous promotion of export led growth in the developing countries

World unemployment becomes “a lever” of global capital accumulation

4.3 Labour Laws in SEZs/EPZs: Inter Country Comparison

2. Exclusionary Regime – It encompasses those systems where the application of

4. Chart 4.1 – Classification of SEZ/EPZ Labour Rights Regimes

Labour Regime within SEZ Law 212

S. Country Application of Nuances in the Reality Check

S. Country Application of Nuances in the Reality Check

S. Country Application of Nuances in the Reality Check

Labour Regime within SEZ Law 216

S. Country Application of Nuances in the Reality Check

S. Country Application of Nuances in the Reality Check

S. Country Application of Nuances in the Reality Check

S. Country Application of Nuances in the Reality Check

S. Country Application of Nuances in the Reality Check

automatically imply a strong regime of labour rights in EPZs. In fact de facto

4.4 Parliamentary Debates and Evolution of the SEZ Legislation in India

for approval of SEZs, 83 absence of punishment for erring officer, 84 absence of

Labour Regime within SEZ Law 225

Cl. Bill Act

A copy of every notification

Labour Regime within SEZ Law 226

Cl. Bill Act

Labour Regime within SEZ Law 227

Cl. Bill Act

4.5 Labour Rights Regime in SEZs in India

4.5.1 Analysis of Substantive Provisions : Interpreting Section 49 and 50 OF SEZs Act

A statute being “the will of the legislature” 93 the purpose of interpretation is to

with a power to exclude application of certain laws completely or to notify their

Further clause 1 is followed by a proviso added through an amendment to the Bill

Labour Regime within SEZ Law 232

4.5.1B Section 50: Meaning and Implications

Labour Regime within SEZ Law 237

exclude or modify application of central labour legislations to SEZs in that particular

4.6 Implementation Mechanism of Labour Laws under SEZs Act

Generally implementation of labour laws in enterprises is secured through labour

As noticed in the context of variable overall labour regimes prevalent in different

Mechanism envisaged in the SEZs Act of India with respect to implementation of

developer or an entrepreneur . . .” 150 Further it enables the states to make laws or

ensuring implementation of a number of labour legislations. 160 Vesting of functions in

Apart from delegation of powers of Labour Commissioner to the Development

• A notice of strike is given to the employer within six weeks before

“encouraged to abstain from Strikes and Lockouts while conciliation is in progress.”

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