I would also like to join the discussion with our learned friend Mr. Khola because of the practical importance underlying the query. With reference to the nature and duration of performance, generally, the overall activities of any business/industrial organization can be broadly classified into two categories: core/regular or incidental activities.
Again, this classification would certainly escape precision as it is always possible that a core activity of a particular organization can be an incidental one of another and vice versa because of the complexity of the activities involved in any modern industry, be it manufacturing or service.
To describe this phenomenon in other words, every activity, irrespective of its nature, undertaken by any establishment to achieve the object for which the establishment is set up is the activity of the establishment. That's why the terms "core/main/primary/regular activity" and "incidental/ancillary activity" do not find a place in the definition clauses of the CLRA Act, 1970 [but for the amendment u/s 2(dd) by the Andhra Pradesh State].
Therefore, the legal position, as rightly observed by Mr. Khola, is that contract labor can be engaged by the principal employer in any activity which has not been prohibited u/s 10 of the Act by the appropriate Government.
However, in view of the bond created by the permanency of tenure between the employer and employees and the similarity of conditions of employment between regular employees and contract labor imposed by the restrictive provisions of the CLRA Act, 1970 and case laws, the only advantage of contract labor remains that of the ease of hire and fire under market-driven economic activities.
Hence, keeping the workmen as contract labor over a period of years together under "sham" or "umbrella contracts" by changing the contractors would not only be an unfair labor practice but also a valid reason for the demand of their absorption by means of industrial adjudication in the long run.
When any employer is unable to assess the requirement of regular labor exactly, the better alternative, in my opinion, is to engage some section of employees on a Fixed Term Contract Employment basis in tune with the recently amended provisions of the Industrial Employment (Standing Orders) Rules.