Localised protectionism in the private sector is a flawed idea: Critique of the Haryana State Employment of Local Candidates Bill, 2020

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 populist governments, turned into an assurance, albeit a false one, of a shortcut to success.

Localised protectionism, also known as the "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 the agricultural and economic crises, unequal access to resources, lack of a social security net, unemployment, and iniquitous access to education.

Recently, Haryana introduced the Haryana State Employment of Local Candidates Bill, 2020, as per which 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. The rationale behind the move is to provide a 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.

The 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 and could lead to fragmentation of the society. It could lead to balkanisation of India’s labour market, which is opposed to the vision of having an integrated and mobile labour market in the country to achieve the Central government's objective of ‘One nation, One market’.

It is against the spirit of competition, as industries would not be able to choose meritorious candidates - irrespective of the linguistic background or domicile of the person - to comply with the rule. This in turn will impact the competitiveness of the State, which has to lower its 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. This would further lead to capital flight from the State and disrupt post COVID-19 recovery of the private sector.

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

To see this from the prism of the constitutional mandate, such law based on residence cannot stand the legal scrutiny as it violates Article 14, which speaks of equality of all citizens; Articles 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) that empowers Parliament to provide domicile-based reservation in public employment, 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. By mandating private institutions to employ a certain set of candidates, this policy constricts their right to carry on their occupation freely.

The Supreme Court has decried this practice of localised protectionism in a catena of judgements. In Dr. Pradeep Jain vs Union of India, the Court noted that to regard an individual from one state as an outsider in another 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, it was held that sweeping measures taken by the State on the considerations of localism are not sanctioned by the constitutional mandate of equality and are liable to be rejected on the plain terms of Articles 16(2) and 16(3).

Also, in the judgments of Indira Sawhney vs. Union of India and M Nagaraj vs. Union of India, the Supreme Court underscored that reservation cannot exceed beyond 50% unless there are extraordinary reasons to justify why this ceiling has to be breached.

Incentivising industries 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 in, and creating such a law is conceptually flawed, having little practical value beyond political jingoism.

The author is an Assistant Advocate General for the State of Punjab.

Disclaimer: The views and opinions expressed in this article are those of the author's and do not necessarily reflect the views of Bar & Bench.