Outsourcing of PF, gratuity payments, insurance work in SMEs mooted

In a discussion paper, the Department of Industrial Policy and Promotion has suggested creation of new service entities to which most of the statutory compliances, under the labour laws for SMEs, can be outsourced

The small and medium enterprises (SMEs) should be allowed to outsource their statutory obligations such as provident fund management, gratuity payments and insurance for workers to enable them to focus on their core business, Industry Ministry has proposed.  
In a discussion paper, the Department of Industrial Policy and Promotion (DIPP) has suggested creation of new service entities to which most of the statutory compliances, under the labour laws for small and medium enterprises (SMEs), can be outsourced.

It said that the proposed entity could create a trust, as allowed under the Employee Provident Fund (EPF) Act.
The industry can have the option of asking the entity to provide pension in lieu of or in addition to the provident fund.
Similarly, the service entities could have its own medical facilities or could tie-up with other hospitals to guarantee the services required under the Employees State Insurance (ESI) Act. The move would not even need an amendment to the ESI Act since there is already a provision for such an option.      
"The proposed concept implies that, short of assuming the criminal liabilities of the companies, most business related statutory liabilities can be assumed by this entity," it said.      

Under the proposal, the outsourcing service entities can double up as insurance companies and provide a job loss policy cover in case of retrenchment.      
Giving the rationale for the proposal, the paper said that while large industries can engage professionals to comply with the statutory obligations, SMEs are largely single-man or family-managed entities. They do not have resources to employ full-time professionals to manage the legal compliances.    
The paper also raised questions such as whether the business model was capable of attracting private sector participation and if the existing players in the insurance sector will be willing to take up the activity in addition to their present mandate.      

"The new service entity... is expected to be more efficient, economical and financially better equipped to serve the interests of both the employers and the employees. The industry can then concentrate more on their core activities like production and marketing," it added.      

The paper said given the multiplicity of compliances, it becomes virtually impossible for SME units to fulfil all the obligations as required by law. The compliances range from remitting contributions to filing periodic returns besides maintenance of registers and records.  
"As a result they are often forced to sidestep the burden of compliances by engaging casual/contract labour or resorting to more and more mechanisation," it said.

Seeking comments on its discussion paper, DIPP has raised questions like requirement of a regulator for such entities and whether the Insurance Regulatory and Development Authority (IRDA) can be entrusted with the responsibility.

As an alternative to a policy for tackling job loss, the entity may opt for a sinking fund mechanism or operate a combination of a job loss policy plus a sinking fund on behalf of the industrial establishments, the paper said.

This entity could also take up the responsibility of other statutory payouts under other laws like disability compensation and compensations on account of accidents, injury or death, it said.

The paper said the proposed entity can constitute a profitable business model and can function on commercial lines.

"If a proper legal framework is put in place for such an entity, number of such entities can emerge which could provide competition and bring down the eventual cost to the industry, particularly the SMEs," it added.

Further, the workers will also be saved from approaching multiple agencies requiring complex paper work and bureaucratic hurdles for getting their legitimate dues. DIPP has sought stakeholders' comments till 16th August.


Cabinet reshuffle: Medicine cabinet has been re-arranged, but toilet is still filthy

Things—as far as governance is concerned—cannot be worse in Delhi. It’s time to start asking questions now. The only way to fix things in the near future is to start asking questions now

When times are tough, the one-liners become even better, something I have seen in the old USSR and recently in Pakistan. These seldom, if ever, get picked up by the mainstream media. The two doing the selective rounds in Delhi in the context of the recent Cabinet reshuffle at the Centre are:
1) If you want to feel happy about the Prime Minister, just look at the President.
2) Premier President (a car) was designed in Italy. (It was known as the FIAT 1100.)

The simple question here, then, that needs an answer is this, "Are times bad in India?" The answer is simple: The times are terrible, especially in and around Delhi, where what looks like a total lack of governance is enhanced by a loot-as-much-as-you-can attitude. The recent Cabinet reshuffle, for example, is, in this writer's opinion, like re-arranging the soap dish and hand towels in a toilet which continues to remain as dirty and unsanitary as before.

But does that mean all of us sit back, fold our hands, and bemoan matters? Or can we do something?
The answer is a resounding YES; you and I can and should do something. Especially if we are educated and have access to the internet and have a basic minimal understanding of the Right to Information Act, 2005. Let me give a few examples of how it has, and can change, especially in the context of Moneylife and articles already published here.

1) The most famous episode, of course, has to do with how the RTI Act motivated and moved the search into the Commonwealth Games/Indian Olympics Association and telecom scams. It is not as though everybody involved in these two now well-documented episodes was corrupt. I know of officials who worked there who would even bring their own drinking water as well as coffee from home in their own flasks, travel by their own vehicles, and put their dissent in writing wherever it was required.

Some of us started asking questions as long ago as in 2005-2006, on issues here, and got the run around. Applications were not acknowledged. When they were finally "accepted", they were pushed around, and then all sorts of tricks were used to avoid answering them. However, the fact remains, at each point of correspondence, they (a) left a paper trail and (b) more interestingly, reached some person or the other who would quietly provide leads and information to take matters further.

Yes, it took 5-6 years, and it will take another long time to meander through the justice system, but so be it. At least it works.

2) A few months ago Moneylife carried some articles that I had written on what is increasingly being referred to as "Formula None", on the basis of some inputs I had received and enquiries I had made as a motoring enthusiast, and also as somebody who drives past the site frequently. These grew into full-fledged RTI enquiries with a variety of public authorities, and just around the same time, the Supreme Court judgment on land acquisition opened a Pandora's box of real estate scams nationally.

One of these RTI queries on the status of the national federation pertaining to motorsports, which claims on its website to be the official federation and recognised by the government as well as the Indian Olympics Association, received an amazing response from the ministry; the relevant part goes like this: "Although, Federation of Motor Sports Clubs of India (FMSCI) is recognised National Sports Federation, but it has not been granted annual recognition for 2010 and 2011".

While some babu in the Ministry of Youth Affairs and Sports will probably be under the impression that he has squeezed out of a particularly troublesome RTI application with this double-speak nonsensical kind of response, the fact remains that this response is now engraved in stone, and will come back to demand due diligence every time even a single paisa of public funds are spent or subsidised on anything to do with the FMSCI. Which, in the very near future, means this Formula None race.
3) Basic corruption on the ground is something everybody complains about. And then, when it impacts us, we choose to keep quiet. So, ladies and feminists will talk about streets being unsafe for them, and then ride around without helmets, while the casualty wards of our hospitals fill up with head injury cases, especially during the monsoon. Cricketers and actors will talk about eradicating corruption, and then go right ahead and endorse products which we know are bad for our health.

A series of RTI applications, addressed to the relevant ministries, enquiring about the liability that a person endorsing a product carries, for example, will soon bring some form of sense and order here. No ministry will like to answer that the endorser has nil liability; that power they won't want to lose. So, by default, some liability will accrue on the person endorsing the product or the service. And that will kill multiple forms of corruption at its root.

An example is the real estate scam in Greater Noida Extension, where some projects were endorsed by national level cricketers, and who are now being sought out by people who booked properties there on the basis of those very advetisements. The matter is all the more complicated because a Supreme Court judgment is also involved, and is bound to see some interesting results, soon. It will be a test case, since the Supreme Court is taking all aspects into consideration, and that does not exempt endorsements.
In short, while my colleague Vinita Deshmukh has been doing sterling service writing on the subject here, it is time that more of us also started working on what can best be called 'Larger Interest RTIs'.
Go for it. Things-as far as governance is concerned-cannot be worse in Delhi. Believe me, I live here, and matters are pathetic. The only way to fix things in the near future is to start asking questions now. So that people in governance get worried about cleaning things now.



Shibaji Dash

6 years ago

'For coalition dharma '- is a phrase that is being held out to justify the unconvincing and unjustifiables. Yudhisthira- the weak character in Mahabarata- kept doing the same on all occasions including Draupadi's vastraharan cosequential to his losing the bet in the game of dice. Iravati Karve so sharply brings this out in her book ' Yuganta'. Incidentally, Machiavelli the father of modern politics from Italy never in any of his works gave such pseudo advice to the Prince as to how to deal with the hidden enemies and keep the authority in tact.

Is this a Humpty Dumpty government? Or can the PM pick up the pieces?

Be it rampant corruption or open rebellion in the ranks after the reshuffle, things seem to be falling apart at the Centre

"Things fall apart; the Centre cannot hold"-William Butler Yeats

This line from the English poet Yeats describes accurately the present status of the Manmohan Singh government and, by extension, the state of the economy and public ethics and morals.

A mere listing of some of the news that hit the headlines over the past week should be sufficient to buffer the above statement.

Let us begin the charge-sheet with a Latin tag "Quis custodiet ipsos custodes?"

Translated into English, it means the familiar "who shall guard the guards themselves?" Here, I refer to the Vasundhara building, a housing society in Juhu of ultra-posh flats for IPS officers.

The flats were built for the top policemen to live in; but they have rented these luxury apartments at rents which you, me and the dog at the lamppost cannot think of even in our opium dreams. The highest rent of Rs36 lakh a year is going to Dilip Shrirao, joint commissioner, vigilance, FDA. Totally, 28 IPS officers are raking in windfall gains of several lakhs a year. Who shall guard the guardians?

Let us move to matters political. Mukul Roy, of the Trinamool Congress, was the minister of state for Railways before the reshuffle. The standard practice when big train accidents occur is for some minister to visit the site of the disaster, console the victims and learn at first hand how the accident took place.

Manmohan Singh took over the Railway Ministry after Mamata Banerjee swept the elections and became the Chief Minister of West Bengal. Mukul Roy, as minister of state, should have visited the site of the accident in Assam, in which 69 were killed and 100 injured. He sat tight, probably because didi had not given him instructions. The next day, the Prime Minister asked Roy to go and take a look.

Roy actually refused! His argument was that everything had been investigated and cleared up by railway officials and therefore there was nothing for him to see.

Imagine a minister of state at the Centre refusing to obey a direct order from the Prime Minister!

Many people may not remember that Lal Bahadur Shastri, when he was railway minister under Jawaharlal Nehru, accepted moral responsibility for a terrible accident in Ariyalur in Tamil Nadu, (then Madras State) and resigned as Railway Minister, even though Nehru did not ask for it.

Are things falling apart? You can bet your mother-in-law's dentures that they are.Take the aftermath of Tuesday's ministerial reshuffle at the Centre. Gurudas Kamat resigned after he was appointed minister of state (Independent charge), for drinking water and sanitation.

And Veerappa Moily cribbed openly after being moved from Law to Corporate Affairs. In a public statement he practically accused the Prime Minister of falling prey to vested interests. Moily said: "Vested interests are at work. For the sins of administrative ministries (referring to the Telecom Ministry and the 2G scam and the Finance Ministry and the black money issue), the Law Ministry cannot be hanged."

In four decades of professional journalism, I have not come across such a scathing indictment of a PM after a ministerial reshuffle.

The satraps are indeed beginning to bare their claws. History tells us that when satraps get on to their hind legs, the Emperor's throne begins to shake.

Moving to the economy, the telecom industry, especially mobile telephony, has been racing like Michael Schumacher (Sebastian Vettel, if you prefer) in the last decade.

Now comes the speed breaker. The 2G scam has got the bankers in a tizzy. On 20 May 2011, the exposure of Indian banks to telecom companies was nearly Rs98,000 crore. On the same date a year ago, it was a little less than Rs64,000 crore. Fresh lending has almost stopped now, but bankers have said they have to continue lending to existing borrowers. A proviso, though: the tap has been turned off for companies and groups being investigated in the 2G scam. Another growth industry is coming to a shuddering halt.

Finally, a figure that is alarming. The number of individual investors has dropped from 20 million soon after liberalisation began, to 8 million at the latest count. The ordinary citizen has lost faith in the financial markets. I rest my case.

Things are falling apart. Manmohan Singh has some three years to paste the pieces together. But, remember the nursery rhyme about Humpty Dumpty?

(R Vijayaraghavan has been a professional journalist for more than four decades, specialising in finance, business and politics. He conceived and helped to launch Business Line, the financial daily of The Hindu group. He can be contacted at [email protected].)



S H Subrahmanian

6 years ago

I remember Lal Bahadur Shastri, accepted moral responsibility for a terrible accident in --- in Tamil Nadu,
Was it not O V Alagesan to resign for Ariyalur accident..?
Since when we developed the thirst to understand- a thirst to seek and find. Isn't that so? We suddenly surrender to a greater reality and suddenly we experience an empty mind!
Had life been only a bed of roses for Manmohan, his mind would have not developed to even this level of awareness or ability to understand reality. Let's remember it’s the dark shades that make light really bright!
Will it happen with our PM?



In Reply to S H Subrahmanian 6 years ago

The Fact is Lal Bahadur Shastry who was minister of railways resigned accepting moral responsibility for the accident in Ariyalur. O.V.Alagesan who was his deputy had rushed to the accident spot and was overseeing damage control operations when he heard the news that Lal Bahadur Shastri had resigned. He rushed to Delhi and offered his resignation to Nehru who refused to accept it. A hand written letter signed by Nehru himself is available as proof for this. And in the next election the DMK bretheren cleverly exploited this incident and maligned his name and projected to the people that he was responsible for the accident. " Ariyalur Alagesa aandathu podhadhaa ? Makkal maandadhu podhadhaa ? " . The irony is even after clearly established proof of corruption Raja and Maran had to be shown the door . For further correspondence you can write to me to [email protected].

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