Opinion | Rajasthan’s Gig Workers Law: Good Intention or Good Optics?

In July 2023, the state of Rajasthan passed a new law Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023 (Rajasthan Gig Law). First of its kind and seemingly a welfare measure, the legislation was passed hastily and suddenly, sidestepping the due process of rulemaking. Speed and surprise could be a useful war strategy, but not in public policy.

The buzz around gig workers

As per the new Labour Codes [see, section 2(35) of Code on Social Security, 2020], a gig worker is a person working outside of the traditional employer-employee relationship. Think of blue-collar workers like a plumber, an electrician, a mechanic, or a white-collar freelancer. Gig workers are part and parcel of our economy. However, the term “gig worker” has reacquired attention over the last decade with their growing participation in the platform economy (cab aggregators, food delivery, logistics). Then came the pandemic which fueled the gig economy and platform gig workers shot into the limelight for their invaluable contribution. Simultaneously, there has been a growing concern among governments about the welfare of gig workers, resulting in a nudge to the private sector. While government concerns are valid, knee-jerk policy interventions are not.

Rajasthan government in a tearing hurry

Early this year (May 2023), a draft bill, purportedly the Rajasthan Gig Law, circulated over WhatsApp. While the bill carried the signature of a senior bureaucrat from the labour department, there was no official confirmation of the same. Following a few weeks of lull, a bill popped up on the website of the labour department of Rajasthan.

As per stakeholders, the bill was uploaded on July 1, 2023, but the date shown on the website is June 20, 2023. Surprisingly, the State Government own’s news bulletin carried the news of the bill on July 1, 2023. Before the industry could gather its response, a hush-hush tick-the-box public consultation was convened in Jaipur on July 5, 2023. Worse still, neither notice of the meeting nor the outcome of the meeting was made public. In a marathon style, within less than a month’s time, the state legislative assembly passed the bill on July 24, 2023.

Good regulatory governance assumes no intervention as the best intervention. Most importantly, laws are passed on the touchstone of public consultation. Ironically, the draft bill presumes the exploitation of gig workers with a message in bold letters “Ab nahi hoga yuvaon ka soshan” (loosely translated as – a law to end the exploitation of platform gig workers) along with the picture of Chief Minister Ashok Gehlot, projecting him as the champion of their rights. Although Rajasthan Gig Law demolished norms of public consultation and evidence-based law-making, public choice theory shows the timing and speed could not have been better with state elections due end of this year.

Problems of the Rajasthan Gig Law

First, the Rajasthan Gig Law seeks to set up a fund — Gig Workers Fund (GWF) — of Rs 200 crore for the betterment of gig workers. Politicians often romanticise the creation of funds as a silver bullet to complex social problems. However, data shows that the administration of funds remains a challenge in India. The absence of special skills and a combination of state interferences often leads to sub-optimal outcomes. To illustrate, India is sitting on an unutilised Universal Services Obligation fund of over $4 billion collected from telecom operators.

Renuka Sane, a macroeconomist, writes that the CAG report of 2021 observed irregularities in the Coal Mines Provident Fund Organisation. Even in the past, the Seamen’s Provident Fund Organisation lost almost Rs 100 crore because of irregularities in the trading of securities. Sadly, populist measures like welfare funds often prevail over past lessons.

Second, the Rajasthan Gig Law will impose a certain percentage of the fee (yet to be decided) on the value of each transaction recorded on every platform registered in Rajasthan. Collected contributions will feed into the fund. However, the levy will be ad-valorem i.e., the value of each transaction. For instance, if you order food worth Rs 1000 or buy an iPhone worth Rs 1.5 lakh, the fee will be calculated as a basis percentage as decided by the government. This may have an impact on the cost of the product which would be eventually passed on to consumers. Raising costs might also reduce the discount margins provided on the platforms.

Third, the Rajasthan Gig Law will run in parallel to the Central law which contemplates setting up a national fund for social security and welfare of unorganised workers, including gig workers. Similarly, both the Rajasthan Gig Law and the Central law require the registration of gig workers with prescribed authorities to avail of benefits of funds. However, the manner of calculation of contribution under the Central law differs, which requires that contribution by an aggregator (like an online platform) shall not exceed 5 per cent of the amount paid or payable by an aggregator to gig workers and platform workers. When a Central law is already in the offing, the Rajasthan Gig Law sets a precedent which may motivate other states to follow. Should this become a reality, it might be a compliance nightmare for platform businesses operating across India.

Fourth, statistically, India has an overwhelming workforce performing roles in a non-salaried arrangement (self-employment), both in the formal and informal sectors. This is necessary given the size of the informal workforce and difficulties in creating enough salaried jobs. If retaining gig workers becomes too cumbersome, or increases the cost of doing business or becomes inflexible, why would employers want to engage gig workers? Can this eventually impact the booming gig economy?

It is not obvious whether the Rajasthan Gig Law contemplates any of the above questions.

The problem of bad rulemaking

The Rajasthan Gig law exposes a larger problem of the absence of a robust regulatory governance framework in India. For instance, the US has an Administrative Procedure Act which requires federal administrative agencies to follow a rulemaking procedure for formulating, amending, and repealing a rule. In the UK, the Better Regulation Executive is a unit within the Department for Business and Trade. It works with government departments to monitor the measurement of regulatory burdens and coordinate their reduction.

In 2014, a committee of Secretaries adopted a pre-legislative consultation policy. While the policy provided for evidence-based and consultative rule-making, its implementation has been mixed. Some of the recent instances are:

• Bills introduced in the Lok Sabha to replace three foundational Indian criminal laws without any public consultation.
• Feedback sought from stakeholders on the landmark Telecommunications Bill was not published on the grounds they form part of the cabinet note.
• A provision for a penalty to be calculated on global turnover was suddenly introduced to the final draft of the amended competition bill without any public consultation.

Sadly, the list is long. Developed democracies publish cost and benefit analyses for public debate before introducing a new statute (see, example). We are struggling to conduct public consultations.

What happens now in Rajasthan?

For the Rajasthan Gig Law to be up and running, the following steps must be met.

1. It must obtain the assent of the state governor.
2. The date of operation of the law needs to be notified.
3. The administrative machinery (like the creation of a new welfare board as contemplated under the law) must be established.
4. Rules under the law must be issued.

Whether, how, and when the above steps would be covered is unclear. However, with state elections knocking on doors, a law carrying the seal of the state assembly (although not in force) is likely to serve its political purpose.

Closing thoughts

States, Centre, and stakeholders need to coordinate to develop an informed and reasonable approach for the welfare of gig workers. We need a balance between social benefits for gig workers and the flexibility of platforms to retain them. Political clamour through sudden and isolated laws will not help the cause of the welfare of gig workers.

The Rajasthan Gig Law is a travesty of the rule-making process. India needs a law to cast a statutory obligation on the state (Central government, state government and regulators) to conduct evidence-based and consultative process for making laws, rules, and regulations.

The writer is a public policy consultant. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect News18’s views.