The Siddaramiah-led Congress government in Karnataka late on Wednesday night suspended the introduction and implementation of a proposed jobs quote bill for locals in the private sector after backlash from the industry. In a social media post, the CM claimed that the bill was still under preparation but gave no explanation on why if this was the case so, it had been passed by the cabinet on Monday. Earlier in the day industry leaders and associations hit out at the government in Karnataka and finally, the state government went into damage control mode.

Industries Minister MB Patil said that the draft bill reserving jobs to locals in the private sector will be discussed with the Chief Minister, IT-BT Minister, Law Minister, and Labour Minister. Several industry leaders as well as IT software and services association

Nasscom argued that the proposed measure will deter talent and investment in the state.

On Monday the state cabinet had approved the ‘Karnataka State Employment of Local Candidates in Industries, Factories and Other Establishments Bill 2024’ which makes it mandatory for the private sector to reserve jobs for Kannadigas only, in their establishments. The bill mandates 50 per cent of management jobs and 70 per cent of non-management roles to be reserved for locals in the private sector. The bill was slated to be tabled in the assembly on Thursday.

A statement from the Chief Minister’s Office said that the proposed bill - which had been approved by the cabinet earlier - will be in abeyance till a ‘detailed discussion is done in the next cabinet meeting before arriving at any further measures.’

Nasscom earlier expressed its ‘disappointment and deep concern’ pointing out that the tech sector which contributes 25 per cent to the GDP of the state and houses a quarter of the country’s digital talent may be forced to relocate. Kiran Mazumdar-Shaw, executive chairperson of Biocon Limited, said “As a tech hub we need skilled talent and whilst the aim is to provide jobs for locals, we must not affect our leading position in technology by this move. There must be caveats that exempt highly skilled recruitment from this policy”

Similarly, former Infosys CFO T V Mohandas Pai called the bill ‘fascist.’ He said that the bill in its current form should be junked as it is discriminatory, regressive and against the Constitution.

After the backlash, the state government has tried some damage control measures. On the official X account of the Chief Minister, a post in which he had earlier endorsed a 100 per cent quota for Kannadigas in Group C and Group D jobs (blue-collar workers) in the private sector has now been deleted without any explantion. 

Industries minister M B Patil said, there will be wider consultations to protect the interests of Kannadigas. “Karnataka is a progressive state, and we cannot afford to lose in this once-in-a-century race of industrialization. The industries need not have fear or apprehensions, and can rest assured,” he said. 

Other states

To be sure Karnataka is not the first state in the country to try and reserve jobs for locals. In November last year, the Punjab & Haryana High Court had quashed a Haryana government’s law that mandated 75 per cent reservations of locals in private sector jobs having gross salary of less than ₹30,0000.

It had held that the Haryana State Employment of Local Candidates Act, 2020 was “unconstitutional” and “violative of Part III of the Constitution”. Industry bodies had argued that the law creates an “unprecedented” intrusion by the state government into the fundamental rights of private employers to carry on their business and trade. However, the Haryana State Government moved the Supreme Court appealing against the order and the matter is now pending before the Apex court.

Rajeev Chawla, Chairman, IamSMEofIndia, an industry body, that was one of the petitioners in the Haryana reservations case, said, “ Any proposal of this kind of reservations on parochial grounds in the private sector hurts the competitiveness of the industry, impacts ease of doing business and also increases the compliance burden. Karnataka is the hub of start-ups and IT companies, has one of the highest levels of industrialisation and is home to a large number of higher education and professional educational institutions. Hence, such a reservation proposal is not logical.”

The Telangana Government too had similarly introduced a policy in August 2020, announcing incentives for companies that provided jobs to local employees. “It was not mandatory. Mandating it will act as a deterrent and companies may stay away. We offered incentives to those who complied with,” a government official said. 

The policy offered incentives like rebates in SGST and lower power tariffs based on the level of localization in Category I (skilled) and Category (Semi-skilled) jobs. The reservations ranged from 50 p.c. to 70 p.c. across the two categories. 

Andhra Pradesh too had tried something similar. During the previous YSR Congress Party (YSRCP) government in Andhra Pradesh led by Y S Jagan Mohan Reddy, the Government mandated 70 per cent employment to locals in the new industries to be set up. However, according to a senior official, the rule was not implemented strictly as many investment proposals remained on the paper. The new NDA Government of N. Chandrababu Naidu is yet to decide on its continuation. 

Meanwhile, Nara Lokesh the Minister for IT, electronics, and education of Andhra Pradesh fishing in troubled waters posted on a social media site ‘Dear @Nasscom members, We understand your disappointment. We welcome you to expand or relocate your businesses to top our IT, IT Services, AI and data center cluster at Vizag.’

He went on to add ‘We will offer you best-in-class facilities, uninterrupted power, infrastructure and the most suitable skilled talent for your IT enterprise with no restrictions for the government. AP is ready to welcome you. Please get in touch.’

(with inputs from Kurmanath K V, Meenkashi Verma Ambwani and Naga Sridhar G)

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