The group of ministers on National Manufacturing Policy will take a final call on allowing private entities to manage retirement funds and insurance in the small scale sector. The issue has resulted in a turf war between the Department of Industrial Policy and Promotion and the labour ministry with the latter terming it as an infringement on its authority.
The draft policy cleared by DIPP has proposed creation of privately-run body(s) on the lines of the Employees Provident Fund Organisation (EPFO) for managing retirement funds and insurance in the small scale sector. The proposal got an immediate reaction from the labour ministry, which forced the government to constitute a GoM to build concensus and ensure smooth passage of the policy.
Any delay in implementing the National Manufacturing Policy could cost the country dear, as it is feared that this could prevent the sector from getting special impetus required at a time when there are real fears of sustained global economic slowdown.
?The GoM headed by agriculture minister Sharad Pawar might look at tweaking this proposal (on private bodies running social security net on behalf of the SME sector) and clear the policy at the earliest,? said a government official privy to the development.
The proposed entity, according to DIPP, can function as an alternative mechanism to EPFO and the Employees State Insurance Corporation (ESIC). As per the estimates, the move would reduce compliance burden on the small and medium enterprises (SME), which contribute about 45% to the country?s manufacturing segment.
?We have already told them that we will not allow anyone else to play the role of the chief labour commissioner or the labour ministry. It would be difficult to monitor the provident fund if each one of these units has its own set-up for the same,? a senior labour ministry official said on the condition of anonymity.
Sources also said the labour ministry?s rigid stand is likely to further delay the Cabinet approval for the manufacturing policy.
The policy was placed before the Cabinet on September 15, 2011 but it was deffered due to serious differences among ministries, especially among the environment and forests ministry and the labour ministry. The policy has been in the pipeline for the last 20 months but the ministries have failed to close the gaps, prompting the formation of a GoM to look into the contentious issues.
The policy, which seeks to create mega industrial zones with special set of rules and world-class infrastructure, is expected to catalyse manufacturing activity and increase the sector?s share in gross domestic product (GDP) to 25% from 16% at present.
Meanwhile, a DIPP official told FE: ?The department will not reach out to the labour ministry or other department to resolve the issues. A GoM has been set to resolve the issues and we will go through the same route.?
The official also added that the labour ministry had already signed the draft Cabinet note after seeking clarifications on various issues. ?Now whatever they have to say, they should put it forward in the GoM,? the official added.
The National Manufacturing Policy (NMP) aims to create over 220 million jobs in the next 15 years.
The biggest change proposed in labour related rules in this policy is to get companies to purchase job loss policies that would help faster settlement of dues in case of closure. Alternatively, for settling labour dues independent of other claims, a sinking fund has been proposed for each zone that would be built through a contribution out of the profits of all the units.