On June 22, the Narendra Modi government announced some crucial labour reforms for the garment sector, including the introduction of fixed-term employment, and offered a R6,000-crore special package, aimed at creating one crore additional jobs over the next three years.
On June 22, the Narendra Modi government announced some crucial labour reforms for the garment sector, including the introduction of fixed-term employment, and offered a Rs 6,000-crore special package, aimed at creating one crore additional jobs over the next three years. More than three months after the announcement, the government has notified most of the measures, barring fixed-term employment and voluntary contribution to the EPFO by employees earning less than Rs 15,000 a month. Textiles secretary Rashmi Verma says the draft notification on fixed-term employment is being vetted by the labour ministry and will be notified within the next 7-10 days. In an interview with Banikinkar Pattanayak, she also says the optional contribution to EPFO will require an amendment to the EPF Act, and the process for that has already been initiated by the labour ministry. Excerpts:
When will the government implement the changes to fixed-term employment rules?
All formalities, including stakeholder consultations and approval by the Cabinet on fixed-term employment are done. The final draft notification has been sent by the labour ministry to the law ministry for vetting, after which it will be notified. We expect it to be notified in the next 7-10 days.
The government had announced a new scheme to refund the state levies under the duty drawback scheme to boost the competitiveness of garment exporters. What is the progress on that and how much of claims have been submitted under this new scheme?
The latest duty drawback scheme for the garment sector was rolled out in late September. Till date, claims worth around Rs 35 crore have been submitted with the government by the industry. Even certain benefits under the Section 80JJAA of the income tax Act have also been notified by the Department of Revenue.
Is there any fresh assessment of the cost to the exchequer due to the duty drawback scheme, or are you still going by the initial estimate of Rs 5,500 crore a year?
Well, it is expected to be a little less than the earlier estimate.
What about allowing voluntary contribution to the EPFO by employees earning less than Rs 15,000 a month?
Well, such a measure requires an amendment to the EPF Act. So it’s under the process of stakeholder consultations. But as far as the government’s decision to bear the entire (12%) employers’ contribution towards the Employers Provident Fund Scheme is concerned, that has been implemented. Currently, 8.33% of the employer’s contribution is being provided by the government under the Pradhan Mantri Rozgar Protsahan Yojana. With the latest changes, the ministry of textiles will provide the additional 3.67% of the employer’s contribution (with the expected outgo of Rs 1,170 crore, over the next three years). Already, claims from 91 garment units have come to the textile commissioner’s office and we are forwarding them to the labour ministry.
Also, we have notified the additional 10% output-linked subsidy for garment units under the amended Technology Upgradation Scheme. About 200 applications for claims under the new scheme have come.
Will the reforms in terms of fixed-term employment be extended to other sectors?
Not yet. The reason why it’s made applicable to only the garments sector as of now is due to the highly seasonal nature of such businesses. Orders flow in in specific seasons, so the requirement of the employer to keep the employees is for a limited period.
Are you going to suggest applying contractual employment rules to the textile sector as well?
The purpose of allowing fixed-term employment in garments was that it was seasonal in nature. But in textiles, spinning or weaving are not highly seasonal, as such activities go on throughout the year. So, there is no strong reason, as of now,make it applicable to other sectors.