Introduction: Public Utilities
Public utility is a unique form of business organization in the sense that it provides services to the consumers in the form of gas, electricity, water, transport and communication, etc. Public utility issues and problems are, therefore, of great socio – economic significance. In our country also, the public utilities play an important role in the economic development, since they provide infra-structure for our socio – economic advancement.
In order to define public utility more clearly it is essential to know the four obligations that are essential for a public utility:
- the duty to serve all consumers,
- the duty to render adequate service,
- the duty to serve at reasonable rates, and
- the duty to serve without unjust discrimination.
In some countries like the U.S.A. public utilities operate with government approval as monopolies and supply a service which is indispensable to modem living. But in India, it is the government which runs most of the public utilities. There is no interference by private individuals. It sets its prices and operates the business with no consideration of market forces. Besides, public utilities are distinguished from the other businesses because they are: (1) free from business competition and are pure monopolies, (2) supposed to charge only reasonable rates that are not unjustly discriminatory, (3) allowed to earn but not guaranteed a reasonable amount of profit, (4) required to provide adequate service to the entire public on demand, and (5) involved with the processes of transportation and distribution.
Meaning of Public Utility Services under Industrial Disputes Act, 1947
According to Section 2(n) of Industrial Disputes Act, 1947,
“Public utility service” means
(i) any railway service [or any transport service for the carriage of passengers or goods by
[(ia) any service in, or in connection with the working of, any major port or dock;]
(ii) any section of an industrial establishment, on the working of which the safety of the
establishment or the workmen employed therein depends;
(iii) any postal, telegraph or telephone service;
(iv) any industry which supplies power, light or water to the public
(v) any system of public conservancy or sanitation;
(vi) any industry specified in the [First Schedule] which the appropriate Government may,
if satisfied that public emergency or public interest so requires, by notification in the Official Gazette, declare to be a public utility service for the purposes of this Act, for such period as may be specified in the notification.
Provided that the period so specified shall not, in the first instance, exceed six months but may, by a like notification, be extended from time to time, by any period not exceeding six months, at any one time, if in the opinion of the appropriate Government, public emergency or public interest requires such extension;
Interpretation of definition
Public Utility Services mean:
- The railways, air transport, and any service related to major port or deck.
- Any particular section of an industrial establishment such as fire & safety which is important for the safety of workmen
- Postal, telegraph services like Indian Post office, etc. Telephonic services like BSNL.
- Any industry which supplies power, light or water to the public like Electricity board, Water board, etc
- Any system of public conservancy or sanitation like Municipal authorities
- The First Schedule contains the following services:
- Transport (other than railways) for the carriage of passengers or goods, by land or water]
- Cotton textiles.
- Iron and Steel.
- Defence establishments.
- Service in hospitals and dispensaries.
- Fire Brigade Service.
- India Government Mints.
- India Security Press.
- Copper Mining.
- Lead Mining.
- Zinc Mining.
- Iron Ore Mining.
- Service in any oil-field.
- Service in the Uranium Industry.
- Pyrites Mining.
- Security Paper Mill, Hoshangabad.
- Services in the Bank Note Press, Dewas.
- Phosphorite Mining.
- Magnesite Mining
The ‘appropriate Government’ may declare any above services to be a public utility service for a period of six months by issuing a Notification in the Official Gazette which may extend from time to time for any period not exceeding six months if in the opinion of the appropriate Government public emergency or public interest requires extension.
Relevant Provisions of Industrial Disputes Act, 1947
The main purpose of the Industrial Disputes Act, 1947 is to ensure fair terms between employers and employees, workmen and workmen as well as workmen and employers. The objective of the Industrial Disputes Act is to secure industrial peace and harmony by providing machinery and procedure for the investigation and settlement of industrial disputes by negotiations.
The objective of the Industrial Disputes Act is to secure industrial peace and harmony by providing machinery and procedure for the investigation and settlement of industrial disputes by negotiations.
The laws apply only to the organised sector. Chapter V-B, introduced by an amendment in 1976, requires firms employing 300 or more workers to obtain government permission for layoffs, retrenchments and closures. A further amendment in 1982 (which took effect in 1984) expanded its ambit by reducing the threshold to 100 workers.
- Section 2A : Appropriate Government
Any industry carried on by or under the authority of the Central Governmentt, or by a railway company or a Dock Labour Board, or the Industrial Finance Corporation of India Ltd, or the ESIC, or the board of trustees of the Coal Mines PF, or FCI, or LIC or in relation to any other industrial dispute, the State Government.
- Section 2J : Industry
The definition of Industry under the Act is taken from the Supreme Court’s judgment in Bangalore Water Supply and Sewerage Board v. A. Rajappa, 1978 SCR (3) 207.
Triple Test formulae to determine which Orgaisation is an Industry
The organization is Prima Facie an industry if it is
a. A systematic activity
b. Organized by co-operation between an employer and an employee
c. for the production of goods and services calculated to satisfy human wants and wishes. (not spiritual or pious in nature but inclusive of material things or services geared to seek celestial bliss)
- Section 2BB: Banking company
- Section 2G : Employer
- Section 2J : Industry
- Section 2K : Industrial dispute
- Section 2A : Industrial dispute between individual and employer
- Section 2KA: Industrial establishment or undertaking
- Section 2KK: Insurance company
- Section 2LA: Major port
- Section 2LB: Mine
- Section 2N : Public utility service
- Section 2O : Railway Company
- Section 2RR: Wages
- Section 2S : Workmen (Including an Apprentice)industrial act
- Schedule II – S7 : Matters Within The Jurisdiction Of Labour Courts
- Schedule III – S7A : Matters Within The Jurisdiction Of Industrial Tribunal
- Schedule IV – NOTICE OF CHANGE
- Schedule V – UNFAIR LABOUR PRACTICE
Banking declared as public utility service (PUS) under Industrial Disputes Act, 1947 for 6 months
The banking industry has been declared as a public utility service for six months till October 21, 2020, under the provisions of the Industrial Disputes Act. The Industrial Disputes Act is a labour law passed in 1947. The section 22 of the Industrial Disputes Act provides that the persons engaged in public utility services cannot resort to strikes without prior notice to the employers. The department of Financial Services in its circular issued on 20 April, 2020 said, the Labour and Employment Ministry through a notification has declared banking as a public utility for six months with effect from 21 April, 2020. The notification was issued by Labour and Employment ministry on April 17, 2020, against the backdrop of coronavirus, COVID-19, pandemic which has significantly impacted economic activities.
Significance for development
This step was taken by the Union to discourage strikes and protests in banks. There are more than a dozen employees and officers unions in the banking sector. The banking unions enjoy a considerable say in the wage negotiations, which the Indian Banks’ Association has to deal with in every three years. All public sector banks and old generation private sector banks are a part of the Indian Banks’ Association such as ICCI, HDFC, Axis Bank and Federal Bank. Some of the old generation foreign banks HSBC, Citibank and Standard Chartered Bank are also a part of it. All of these banks come under wage settlements and other employee issues that are taken up by IBA. The new generation private sector banks such as IndusInd, Yes Bank and Kotak Bank are outside the purview of IBA norms.
There are several decisions of the government that the bank unions do not agree. For instance, several bank unions protested against the bank mergers. The Labour Ministry notification said that bank employees would be required to give a prior notice before going on strike so that conciliatory proceedings could be started. The main purpose behind declaring the banking industry as a public utility is to ensure protection to the customers and to serve them in a better way, amid the economic crisis in the wake of the coronavirus pandemic.
This action taken by Union Government is a robust decision amid difficult times for the nation. The decision has many positive as well as negative aspects. Which we will see one by one, below:
- Prevention of Strikes: The step to include banking industry for next 6 months in public utilities service was a clever step taken by the government to prevent the bank officials from going on strike. As the section 22 of Industrial Disputes Act, 1947 clearly states that employees of any industry held as public utility service can’t go on strike in case of breach of contract, (a) without giving to the employer notice of strike, as hereinafter provided, within six weeks before striking; or (b) within fourteen days of giving such notice; or (c) before the expiry of the date of strike specified in any such notice as aforesaid; or (d) during the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings.
- Prevention of lockouts by bank: Though banks generally don’t conduct lockouts, but if they are not left with any other option they may announce lockout. To prevent such a situation the Union Government declared banking industry as public utility service as section 22 of Industrial Dispute Act, 1947 declares that no public utility service can carry lockdown.
- Protection to Customers: The step to include banking industry as public utility service would ensure protection to customers as it would allow them to enjoy the benefit of regular availability of loans at reasonable rates. They will also be entitled to other banking facilities.
- Pressure on banks: Banks would face increased pressure due to their new though temporary status of being public utility service, as they have manage the unions as well as they have to conform to the general guidelines of the public service utilities.
- Reduced Profits: Some banks would experience lower profits than usual in these coming 6 months. As the banking has been declared as a public utility service, banks would be forced to charge lower rates on loans from the customers as compared to what they charge normally. Moreover, banks would be pressurized by RBI to lend more so as to maintain demand in the economy to ensure lower inflation rates.
- Frustration among working environment: As discussed above, the PUS status of banks would discourage the bank staff and officials to go on strike due to which there may originate negative working environment among bank personnel.
After looking at the meaning of public utility services, their functions and roles in the society and after critically analyzing the rationale behind the move of the government to include banking industry as public utility service, it appears that the decision made by government would be beneficial not only to economy only but also to the public.
- The Industrial Disputes Act, 1947.
- Economics of Public Utility Service.