The Union Cabinet is set to clear a draft labour Bill that allows companies employing up to 300 workers to shut without seeking government permission.

This is in contrast to a Cabinet decision last year that firms with up to 1,000 workers did not need permission to shut. The decision was shelved after differences cropped up within the government.

The new Bill drafted by the labour ministry, called the Labour Management Relations Bill, 2003, encapsulates three laws: the Industrial Disputes Act, 1947, the Industrial Employment Standing Orders Act, 1946, and the Trade Unions Act, 1926.

The Bill will be introduced in the Budget session of Parliament.

In what could be termed a total turnaround by the government, the draft Bill does not conform to the guidelines set by the group of ministers on labour reforms headed by Planning Commission Deputy Chairman K C Pant, who had recommended that the requirement for permission for the closure of a unit with 1,000 or less staff strength be waived.

Though trade union leaders discussed the issue at length with Union labour minister Sahib Singh Verma and could not arrive at a consensus, the ministry has nevertheless prepared a draft Bill and pegged the staff strength at 300 in the belief that the legislation will face less political resistance.

The Congress, which has a majority in the Rajya Sabha, is averse to the idea of facilitating closure of unviable units with staff strength beyond 300.

The draft Bill has a five-tier mechanism for resolving industrial disputes. Workers will get an immediate hearing at the unit-level grievance redressal committee.

Appeals can then be made subsequently to Lok Adalats, arbitrators, labour commissions and the national labour commission, which will be endowed with quasi-judicial powers.

"This will facilitate early redressal of problems," said officials. The Bill will make it harder for promoters of units to unilaterally alter the service conditions of workers.

The draft Bill represents a piquant problem for the government. The Cabinet had agreed to “in principle” acceptance of a retrenchment limit of 1,000 workers when amendments to the Industrial Disputes Act were proposed some months ago.