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Localised Protectionism In Private Sector Is A Flawed Idea

Affirmative action, a tool introduced to bring the most economically and educationally backward sections at par with the rest of the population, has now at the hands of the populist governments turned into an assurance, albeit a false one, of a shortcut to success.

Localised protectionism , also called as sons-of-the-soil concept, underlines the view that a state specifically belongs to the people inhabiting it who deserves special treatment, under the garb of affirmative action. Paramount causes for the demand of this protectionism are agricultural and economic crisis, unequal access to resources, lack of social security net, unemployment and iniquitous access to education.

Recently, Haryana has become the fifth state to introduce the domicile methodology wherein the state government is to reserve 75% seats in all private sector jobs with gross salary under Rs. 50,000 per month for locals born in the state or living there for five years.

Rationale behind the move is to provide qualified and trained local workforce to the employers and to tackle unemployment among locals which will further discourage the influx of migrants seeking low-income jobs, which has a significant impact on infrastructure leading to proliferation of the slums.
Intended objective of domicile reservation should be seen in juxtaposition with adverse consequences that it necessarily entails.

This new law is basically an exclusion policy, which aims to exclude people of other states , having the tendency to create social tension and disharmony which could be dangerous to the unity of a country and could lead to fragmentation of the society. It could lead to balkanisation of India’s labour market in contrary to the vision of having anintegrated and mobile labour market in the country to achieve the objective of ‘One nation, One market’ of the central government.

It is against the spirit of competition as the industries would hinder choosing the meritorious candidates, irrespective of the linguistic background or domicile of the person, to comply with the rule, which would impact the competitiveness of the state as they have to lower their hiring standards. This would spell disaster for the state’s economic growth by affecting the ease of doing business, as ease of recruiting talent influences the index, which would further lead to capital flight from the state and disrupt post Covid-19 recovery of the private sector.

Incorporating such sweeping provisions have the tendency to open a Pandora’s box, wherein there will be no stopping other states from coming up with similar populist policies resulting in complete chaos. On the lines of Haryana, Jharkhand is set to pass 75% local quota in private jobs. Even political parties campaigning in Tamil Nadu are promising slew of sops including 75% jobs to locals in the state industrial units.

To see this from the prism of constitutional mandate, suchlaw based on residence, cannot stand the legal scrutiny as it violates article 14 which speaks of equality of all citizens, article 15(1) and (2) which prohibits the state from discriminating against any citizen on the grounds of religion, race, place of birth etc, article 16(2) which prohibits discrimination on the grounds of place of residence in respect of employment or office under the state, article 19(1)(e) which grants every citizen the right to reside and work or settle in any part of the country and article 21 of the constitution which gives right to life to every citizen of the state.

It is article 16(3) which empowers the parliament to provide domicile based reservation in public employment and jobs with local or any other authority under a state but state governments don’t have any such powers to pass laws directly on domicile-based reservation. Under Article 19(1)(g), all citizens have a fundamental right to practice any profession or to carry on any occupation, trade or business and by mandating private institutions to employ a certain set of candidates , this policy constricts their right to carry on their occupation freely, which will be a major leg of challenge to the law.

Supreme Court (SC) in a catena of judgements have decried this practice of localised protectionism. In Dr.Pradeep Jain vs Union of India (1984) case, SC noted that to regard the individual from one state as an outsider in other state would be to deny him his constitutional right and to derecognise the essential unity and integrity of the country by treating it as if it were a mere conglomeration of independent states.

Further in Kailash Chand Sharma vs. State of Rajasthan (2002), SC has held that sweeping measures taken by the state on the considerations of localism is not sanctioned by the constitutional mandate of equality and liable to be rejected on the plain terms of Article 16(2) and in the light of Article 16(3). Also, in both the judgements of Indira Sawhney vs. Union of India (1992) and M.Nagaraj vs. Union of India (2006), SC haveunderscored that reservation cannot exceed beyond 50% unless there are extraordinary reasons to justify why this ceiling has to be breached. Domicile based state law of Andhra Pradesh is already challenged in the High Court and Haryana government law challenged by Industrial units in the High Court was allowed to be withdrawn on the grounds that state government is yet to enforce the act.

Incentivising the industry by giving lower electricity charges, offering land use charges and in turn asking them to invest in skill development policies for the locals might be a better approach. States must create an ecosystem where more investment comes and hinder creating such provision which is conceptually flawed, having little practical value beyond political jingoism and have the tendency of fostering and strengthening narrow parochial loyalties based on language and residence within a state.

Written By: Ayush Sarna - Assistant Advocate General, Punjab

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