Monday, January 28, 2008

Social security for the unorganised sector Workers ?

A bill to provide social security to the unorganised sector workers is pending in the Parliament. A standing committee had scrutinised it and submitted their recommendations. The Left has rejected the Bill in its present form and wants the government to change the proposed legislation, which aims to cover 309 million workers.
because it does not incorporate committee's suggestions.

The Parliament Standing Committee on Labour invited suggestions, views, comments from individuals, institutions and organisations on the Unorganised Sector Workers' Social Security Bill, 2007. The Bill, introduced in Rajya Sabha on September 10, 2007, was referred to the Standing Committee on Labour under the Chairmanship of Lok Sabha MP, Suravaram Sudhakar Reddy for examination.

The Unorganized Sector Workers' Social Security Bill, 2007 talks about the social security and welfare of unorganized sector workers.

The bill provides for setting up of a National Social Security Advisory Board by the Central Government and the State Social Security Advisory Board by the State Governments respectively, for recommending suitable welfare schemes for different sections of unorganized sector workers.

A health insurance for workers of unorganised sector would be implemented from April 1. It provided a Rs 30,000 free health insurance cover to a five-member-family belonging to BPL category.

The labour ministry is reluctant to incorporate any major change suggested by the parliamentary standing committee.

The labour ministry doesn't see merit in the two main suggestions of the standing committee the creation of a dedicated fund for schemes for the sector and an administrative authority to implement these schemes.

Whether there is a dedicated fund or not is immaterial. Our only concern is availability of money. The government is already providing funds for the BPL (below poverty line) families. There is no shortage of funds,� said a top official in the labour ministry.

Ministry sources cite the example of the dedicated fund for north- eastern states. The huge amounts these funds are supposed to have are absent. Ministry officials say the welfare of unorganised labourers boils down to providing pension and life insurance. Since most of the schemes will be implemented by insurance companies and government agencies, there is no need to create another administrative body, they say.

The labour ministry says it has already extended old-age pension to all BPL families which is expected to cover a large section of unorganised workers. Then there is the Rashtriya Swasthya Bima Yojana for BPL families which will be functional from April 2008. After these schemes, where money for the beneficiaries� health needs is paid for, the government is framing schemes for other unorganised labourers.

We will soon moot schemes for autorickshaw drivers, domestic helps, fishermen, tailors, taxi-drivers and other unorganised sector workers. However, these schemes will be participatory,� said Union Labour Minister Oscar Fernandes.

Another important demand of the Left and the standing committee's separate arrangements for the agricultural workers is not a priority for the ministry. Most farmers or agricultural workers shift to other manual jobs in off-season, so it�s difficult to assess them as a different category, officials say.

A final decision on the recommendations of the standing committee will be taken by the Cabinet. We will try to pass the Bill in the coming session of Parliament, said Fernandes.

It is to be seen how much pressure the Left can exert on the government when the ministry is not ready to accept its major demands. A stubborn approach of the Left might stall the passage of the Bill and the Congress would have a political opportunity to campaign that the Left was obstructing the welfare of unorganised workers.

Business Standard reported on January 18, 2008 that “Pension scheme for mine workers” by April, 2008 is on the cards.

Impatient with parliamentary delay in passing the omnibus legislation for the unorganised labour, the labour ministry has decided to strike out on its own.

The ministry plans to launch a provident fund/pension scheme for mine and cine workers with contributions from both the worker and the government from April.

The scheme, under the rubric of the Unorganised Sector Workers’ Social Security Bill, comes amid the expectation that the enabling Bill will be passed during the Budget session of Parliament.

As labour is on the concurrent list, both the Centre and state governments can legislate on it. But the complaint has always been that state governments have been unable to sustain them because of a resource crunch. By claiming ownership of a scheme wholly funded by it, the Centre hopes to avoid that situation in the case of this scheme.

Initially, the scheme will cover around 500,000 mine and cine workers registered with the Labour Welfare Organisation. Later, all workers in the unorganised sector which constitutes 94 per cent of the country’s workforce will be brought under the scheme.

This is the first-of-its-kind scheme for the unorganised sector where the workers will also contribute a share. The ministry expects to bring a vast mass of the working population that has stayed outside the pale of the formal economy so far, under this scheme.

The scheme will be run by the labour ministry. Of the Rs 100 subscription per month, Rs 75 would be paid by the worker, while Rs 25 would be contributed through Labour Welfare Funds.

The government’s contribution for the pilot scheme covering two sectors is likely to cost around Rs 810 lakh annually. The funds will come from the labour ministry’s internal resources.

Workers of limestone, dolomite, iron/manganese/ chrome ore mines along with cine workers in the age group of 18 to 52 years, who are not already covered under a provident fund scheme of the government, are eligible under the scheme. Subscribers will be eligible for provident fund/pension at the age of 58.

�Workers will deposit the monthly premium in a designated post office/bank or with the Labour Welfare Organisation�s dispensaries. The money would be transferred to UTI which would act as the fund manager of the corpus created from the contribution from workers and government,� a labour department official said.

UTI will provide the members’ list to the Welfare Commissioners who will deposit the central government’s share, as a subsidy, with UTI periodically.

The worker would be eligible for a lump sum amount at the time of maturity, equivalent to the value of the units issued to him by UTI from time to time. An option for a pension scheme in lieu of the lump sum amount will also be provided to the worker.

The only other pension scheme for unorganised labour is the government’s proposal to pay Rs 200 per month to all below the poverty line (BPL) persons above 65 under the National Old Age Pension Scheme.

There is no structured contributory pension/provident fund schemes for workers in unorganised sector. So, the ministry is working on a scheme to provide old age security to this segment of unorganised workers.

As the scheme is contributory, a worker is free to join any other scheme as well. In case of default, the deposited money will not be confiscated and the member can rejoin the scheme later.

A member is eligible for pension only after attaining 58 years of age which will be paid through a bank or post office. If a worker wants to withdraw his money, he is free to do so but in such cases he will not get the pension and is only eligible to get his deposits and growth amount subject to deduction of 1 per cent exit load.

Background to Omnibus legislation for the unorganised labour based on a PIB Release

A survey conducted by the National Sample Survey Organization (NSSO), shows that the total employment in both the organized and the unorganised sectors in the country is 39.7 crore, of which 2.8 crore are in the organized sector and 36.9 crore (about 93%) are in the unorganised sector. Of this, 23.7 crore workers are in the agricultural sector and 1.7 crore are engaged in construction sector. Remaining workers are engaged in mining, manufacturing and services sector. On account of their unorganised nature, these workers do not get adequate social security and welfare.

Some welfare schemes are being implemented by the Central Government for specific occupational groups of unorganised sector workers such as beedi workers, non-coal mine workers, cine workers, handloom weavers, fishermen, etc. These are apart from the National old Age Pension Scheme and National Rural Health Mission. Some of the State Governments have also been implementing welfare programmes for certain categories of the unorganised sector workers. Some NGOs are also providing social security to certain categories of workers. Despite all these efforts, there is a deficit in the coverage of the unorganised sector workers in the matter of labour protection and social security measures.


In line with the commitment made by the United Progressive Alliance (UPA) Government in the National Common Minimum Programme (NCMP), the National Commission for Enterprises in the Unorganised Sector (NCEUS) was set up in September 2004 under the chairmanship of Dr. Arjun Sengupta as an advisory body and as a watchdog for the unorganized sector. The Commission has the mandate to examine the problems of the unorganized sector (also referred to as informal sector) and suggest measures to overcome them. The term of the Commission, which was initially fixed at one year, was extended to three years. The Commission has been assigned wide-ranging terms of reference. Being an advisory body, the Commission is supposed to submit its recommendations to the Government of India. An Advisory Board has also been constituted to enable the Commission to have the benefit of the advice of experienced persons in the relevant areas.

The Commission has been focusing on a few significant programmatic interventions, which could be adopted in the immediate term. These interventions are aimed at bringing about improvement in the productivity of enterprises in the unorganized/Informal Sector, generation of large-scale employment opportunities on a sustainable basis and enhancing the welfare of the workers in the unorganized sector.


The Commission’s findings show that forty per cent of the workers in the unorganised agricultural and non-agricultural sector are wage workers and sixty per cent are self-employed. Among the self-employed, the overwhelming majorities are own account or assisting family workers and only 1.15 % (among non-agricultural workers) are employers.

The vast majority of the self-employed in the unorganised sector themselves work under poor conditions and the productivity of their enterprises is very low. Measures to protect the livelihood of the self-employed workers and to promote the productivity of the unorganised enterprises, will not only have an impact on the condition of the self-employed, but also on the condition of the unorganised wage workers who work in the unorganised enterprises. Thus, regulation of the condition of work of wage workers needs to go hand in hand with the protection and promotion of livelihood of the self-employed workers and enhancing the growth and productivity of the unorganised sector enterprises.


The Commission had initially proposed a draft Bill “Unorganised Sector Workers (Conditions of Work & Livelihood Promotion) Bill, 2005” for comments and feedback. Based on the comments received from states, trade unions and other stake holders, the Commission revised the earlier proposal and has now proposed two Bills “Unorganised Non-agricultural Sector Workers (Conditions of Work and Livelihood Promotion) Bill, 2007” and the “Unorganised Agricultural Sector Workers (Conditions of Work and Livelihood Promotion) Bill, 2007” to cover unorganised agricultural workers and non-agricultural workers respectively. Part 1 of each of the Bills contains provisions relating to the regulation of conditions of work of wage workers. Part 2 of the Bill relates to the protection and promotion of livelihoods of the unorganised workers.

The Draft Bills provide for basic and minimum conditions of work for all unorganised wage workers and home workers. Instead of relying on bureaucratic implementation and costly and time consuming legal redressal procedures, the Commission has accorded priority to conciliation and has proposed the participation of workers’ representatives and elected representatives of the local bodies in the conciliation and dispute resolution committees.

The proposed Bills also mandate that the appropriate governments take the necessary steps to protect and promote these livelihoods through appropriate policies and programmes, and have provided for an institutional machinery to take a holistic view of the sector and to mobilise the necessary resources to help the sector overcome such constraints and facilitate its growth.


The NCEUS has proposed the formation of a National Fund designed to meet the multi purpose needs of both enterprises and workers in the unorganized sector. The tasks proposed to be handled by the Fund are extensive as the sector needs a holistic approach for its development taking into account all essential needs covering finance, technology, raw material, marketing, infrastructure, skill and entrepreneurship and would cover both farm and non-farm sectors and also rural and urban areas.


In a significant move the Union Cabinet on 24th May, 2007 gave its approval for social security for the unorganised sector workers. It said that the welfare schemes for workers in the unorganized sector would be introduced in a phased manner to fulfil the commitment made in the National Common Minimum Programme. Besides, the Government would constitute a National Advisory Board to design, from time to time, suitable welfare schemes for different sections of unorganized workers and recommend the same to the Government. On the recommendations of the National Advisory Board, the Central Government will, from time to time, notify scheme or schemes for one or more sections of unorganized workers.

Apart from designing model schemes for workers in unorganized sector, the National Advisory Board shall monitor the implementation of all notified welfare schemes; ensure that every eligible worker in the unorganized sector is registered and receives an identity card; oversee the record keeping functions performed at the district level and the State level.

The Cabinet also paved the way for a Bill to be introduced in Parliament as early as possible for this purpose. The Bill would provide for setting up a National Advisory Board and enable the Central Government to notify welfare schemes from time to time.

The Bill will also provide for constitution of a State Level Advisory Board by the State Government concerned.

The schemes notified by the Central Government will contain provisions for: (a) life and disability cover; (b) health benefits; (c) old age protection; or (d) any other benefit as decided by the Central Govt.

The procedure for registering the workers in the unorganized sector will be prescribed and implemented. Every worker in the unorganized sector shall be eligible for registration subject to the following conditions: (a) he/she should have completed 18 years of age; (b) he/she should make a self-declaration affirming that he/she is a worker in the unorganized sector.

Every registered worker in the unorganized sector shall be issued an identity card, which shall be a smart card. It shall carry a unique identification number and shall be portable.

The record-keeping agency for this purpose shall be the district administration and the record keeping function shall be performed by the District Panchayat in rural areas, and Urban Local Bodies in urban areas. This will be directed by the concerned State Governments.

These schemes and proposed Bill/Bills, if introduced, will go a long way to mitigate the plight of the unorganized workers in the country.

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