Karnataka job quota-for-locals bill: IT-BT and Commerce and Industries departments kept in the dark

Karnataka is known as the IT, start-up, and R&D hub of India

As the Karnataka state cabinet cleared the draft mandating job reservation for locals in the private sector, two crucial state departments were kept in the dark.

Karnataka is known as the IT, start-up, and R&D hub of India. However, the Information Technology and Biotechnology Department and the Department of Industries and Commerce were not consulted on the bill drafted by the State Labour Department before it was sent to the cabinet on July 15, sources told Moneycontrol.

The draft Karnataka State Employment of Local Candidates in the Industries, Factories, and Other Establishments Bill, 2024, which drew flak from industry leaders and associations, mandates that 50 percent of management jobs and 70 percent of non-management roles be reserved for local candidates (Kannadigas). The state cabinet also approved a 100 percent quota for Kannadigas in Group C and Group D jobs (blue-collared workers) in the private sector.

Also, read: Karnataka cabinet approves draft bill mandating 50% reservation for locals in management jobs, 70% in non-management categories

A senior government official told Moneycontrol that the timing of the bill was not right, given that the state is now coming up with the Global Capability Centres (GCC) policy, Knowledge, Healthcare, Innovation, and Research (KHIR) city, Bengaluru Tech Summit, Global Investors Meet, and other initiatives.

"This bill was not on the agenda for Monday's cabinet meeting, but it was later added. We don't know why the labour department was in a hurry to present it to the cabinet without any wider consultation and then place it in the current legislative session. Both departments are major stakeholders, and prospective investors, industry associations, and others are panicking and contacting us, but we have limitations in allaying their fears," the official said.

The industry body National Association of Software and Service Companies (NASSCOM) issued a statement criticising the bill mandating quota for locals, the second such statement in less than a week. The first was in response to the draft Karnataka Platform Based Gig Workers (Social Security and Welfare) Bill, 2024. The labour department, which drafted both bills, was planning to table them in the current session of the legislature.

Also, read: Junk this bill: Industry leaders slam Karnataka's job quota for locals

When contacted, a senior labour department official refused to comment on whether the draft bill was prepared after consulting the IT-BT and Commerce and Industries Departments. "It is still a draft bill, and it will go to the legislature, and provisions can be modified."

Sources said there appears to be confusion within the government over the job reservation policy. On July 17, the Karnataka CM deleted his earlier post on social media platform X about 100 percent quota for Kannadigas in 'C and D' grade posts in all private industries in the state. Instead, he posted a new tweet stating that 50 percent of management jobs and 70 percent of non-management roles should be reserved for local candidates.

Also, read: Siddaramaiah deletes post on private job quotas in Karnataka amid backlash

"It is our government's wish that Kannadigas should not be deprived of jobs in Karnataka and should be given the opportunity to build a comfortable life in their motherland. We are a pro-Kannada government, and our priority is to look after the welfare of Kannadigas," said Siddaramaiah.

However, BJP said Congress-led state government is trying to divert attention from scams. Opposition leader in the Karnataka Legislative Assembly R Ashok wrote on X: "The @INCKarnataka Govt's ploy to bring up the issue of reservation for Kannadigas in private sector jobs is nothing but sinister politics to divert people's attention from its series of scams and failures."

Also, read: Bengaluru tech summit on November 19-21; Karnataka CM hosts breakfast for corporate leaders

TThe controversy is also a setback to Deputy CM and Bengaluru Development Minister DK Shivakumar's efforts to promote Brand Bengaluru and attract investments. In February, Shivakumar had said the government would not mandate multinational companies (MNCs) to publicly display the number of Kannadigas they employ, following public outcry over the proposal by Kannada and Culture Minister Shivaraj Tangadagi.

Shivakumar said, "Investors need not worry. We welcome them to Karnataka. There are certain sections of the people who are talented and have come from outside the state. We want them to work in Karnataka. We are concerned about accommodating Kannadigas, and we will prioritise their needs."

Also, read: MNCs don't need to display Kannadiga staff numbers: DK Shivakumar

Ministers unhappy

Sources said both IT-BT Minister Priyank Kharge and Industries Minister MB Patil are also unhappy about the draft bill but tried to allay fears of industrialists.

Kharge admitted that there was no consultation conducted over the draft bill with the IT-BT department ."I've requested the CM and Labour Minister to have broader consultations with us and industry leaders to find common ground. This will ensure more jobs for locals and attract more investments to the state," he said.

Also, read: Karnataka quota-for-locals bill: Team of four ministers to discuss with CM, says minister MB Patil

"We'll consult industries, bodies, and thought leaders to foster a conducive environment for local job creation and global workforce needs. No detrimental rules will be enforced without stakeholder consultation," said Kharge.

Patil said the issue has already been brought to the notice of the CM. "A team of ministers comprising the Law minister, IT/BT minister, Labour minister, and myself will soon discuss the issue with the CM to resolve any confusion."

However, State Labour Minister Santosh Lad said that they respect the apprehensions and views of industries, and will engage in discussions with them. "If adequate skills are not available in the state, industries can outsource from other states. Karnataka has a skilled workforce thanks to its higher educational institutions, including engineering and medical colleges, IT, diploma, and international schools," he said.

GCC Policy

Amidst the controversy, Karnataka will soon come up with a dedicated GCC policy to prioritise clusters beyond Bengaluru.

Also, read: Karnataka set to be the first state to come up with GCC policy by August

The IT-BT department also launched 'Karnataka GCC Landscape Report' on July 15. "Karnataka has set a target to host more than 15 per cent of the GCCs of the world’s top 2,000 companies by 2030, which will generate more than 10 lakh jobs," Kharge said.

The department also engaged in stakeholder consultations with industry leaders and bodies like NASSCOM for the GCC policy.

Also, read: Nasscom wants Karnataka to scrap bill reserving jobs for locals in private sector

Ironically, NASSCOM was the first association to demand the scrapping of the quota for locals in the private sector, saying it would force businesses to relocate.

"NASSCOM members are seriously concerned about the provisions of this bill and urge the state government to withdraw the bill," the industry body said in a statement.

Also, read: Karnataka wants to be home to 15% of global GCCs by 2030, eyes 1 million jobs

Meanwhile, IT-BT department is also organising 27th Bengaluru Tech Summit (BTS) 2024 from November 19 to 21.

Kharge had said Karnataka’s ambition is to elevate its startup ecosystem, aiming to break into the top 5 globally. “We have already funded 983 startups and are hosting the TiE Global Summit in Bengaluru this year,” Kharge said.

Knowledge Health Innovation and Research City

Meanwhile, Karnataka  Commerce and Industries department is planning Knowledge Health Innovation and Research (KHIR) City on the lines of Singapore’s Biopolis Cluster and Japan’s Kobe Biomedical Innovation Cluster.

Patil recently said KHIR will be launched tentatively on August 21. "I don’t believe in just announcing; it will be the official launch with complete details and quick implementation. KHIR will be a city that can’t be paralleled in India. The wait is worth it.”

Also, read: Karnataka likely to set up SPV for Knowledge, Healthcare, Innovation and Research city

The state aims to attract Rs 40,000 crore in investments in healthcare, innovation, and knowledge sectors, creating 80,000 jobs in the proposed KHIR City. This new investment region will be developed within 60 km of Bengaluru in a phased manner.

Invest Karnataka meet

Separately, Karnataka's flagship three-day Global Investors Meet (GIM) - 'Invest Karnataka,' which is held once every two years, will take place at Palace Grounds in Bengaluru from February 12 to 14.

Also, read: Karnataka to conduct Global Investors Meet in Bengaluru from Feb 12-14 next year

The last GIM in Karnataka was conducted from November 2 to 4, 2022, under the then CM Basavaraj Bommai, which saw investment commitments worth Rs 9.8 lakh crore. The state, which is facing stiff competition from neighboring states, is eyeing more investments this time.

Also, read: Karnataka nets Rs 6,450 crore investment commitment from Japan, South Korea; to create 1,000 jobs

"We have visited countries like the US, Japan, and Korea, and we are planning to visit more countries. We are also following up on earlier investment commitments to make them a reality. However, controversies of this nature may discourage firms and prompt them to prefer other states. Bengaluru is already burdened by poor infrastructure and traffic issues. We are also encouraging investment in clusters beyond Bengaluru." said a source.

Gig Aggregators Bill

Aggregators and industry leaders also opposed the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Draft Bill, 2024, prepared by the labour department.

In a letter to the CM, NASSCOM flagged several provisions of the gig workers bill proposed by the Karnataka government, saying they can hurt aggregators’ businesses.

Also, read: Karnataka Gig Workers Bill: Aggregators, industry bodies seek more time, wider consultation

“The public consultation period should be extended to at least 45 working days from 10 working days for ‘meaningful’ consultation,” it said.

“The government should convene a meeting of the departments of labour, electronics, information technology, biotechnology and science & technology, and commerce and industries. Such a meeting should invite participation from platform businesses operating in Karnataka, industry associations, and other relevant stakeholders," NASSCOM said.

Separately, the Internet and Mobile Association of India (IAMAI) raised concerns over the Karnataka Gig Workers' draft bill, warning that it could hinder business operations and negatively impact the ease of doing business in the state.

Labour department officials said they are planning to table the draft bill during the monsoon session of the legislature, which will be held for 11 days starting July 15. “We have conducted 18 meetings with more than 50 stakeholders including aggregators, unions, law experts, and others. We have received around 30 suggestions/objections on the draft bill,” said an official.

However, Kharge said, “We recognise that the welfare of gig workers is very important. We will do a deep dive and ensure the Bill will be a win-win for all. Companies have sought more time and also requested the CM and Deputy CM for a wider consultation on the Bill. They said 10 days for feedback was too short, and they needed more time. The CM will take the final call on this.”