The Union Cabinet on Wednesday approved a social security scheme to be implemented as a pilot project as a prelude to a central legislation for the unorganised sector, while finalising the guidelines for wage negotiations in public sector undertakings.

As per the social security scheme covering the entire working population in the informal sector, a monthly pension of Rs 500 would be offered on retirement, permanent or temporary disability or to the widow of a worker.

The Cabinet approved the scheme in place of the labour ministry-proposed central legislation for benefiting 37 crore (370 million) workers in the unorganised sector, which would have required a cess on petrol and diesel to bear the cost.

"Since there is no legislation, the issue of cess does not arise," Parliamentary Affairs Minister Sushma Swaraj told reporters after the Cabinet meeting chaired by Prime Minister Atal Bihari Vajpayee after his return from Islamabad.

She said the new 9-point guidelines to enable PSU managements to negotiate for a five-year wage structure from January 2002 were cleared on the condition that there would be no budgetary support for the wage increases.

Swaraj said the Cabinet approval of guidelines for wage revision will enable central public sector undertakings to start negotiations for the next round of wage settlements effective for five years from January 1, 2002 onwards.

However, no budgetary support for the wage increase shall be provided by the government, she said.

The PSEs, which are monopolies or near monopolies or operate under the administered price mechanism will ensure that any increase in wages after negotiations does not result in increase in administered prices of their goods and services, she added.

The minister said the management will be free to negotiate the wage structure for the employees not covered by the Justice Mohan Committee report in respect of pay revision in the PSUs.

This was keeping in view the generation of resources or profits by the concerned PSUs, she pointed out.

Swaraj said the pilot social security scheme aims to benefit the entire 37 crore (370 million) workers in the unorganised sector.

The specially constituted tripartite board will administer the scheme with active support of the labour ministry offices.

The scheme provides an option for the workers in the age group of 36-50 for whom there is an identifiable employer to join the scheme.

The contribution for this category will be at the rate of Rs 200 per worker to be paid by both the employer and employee in equal share, she added.

She said once the pilot scheme is implemented, government will be able to earmark and plug loopholes if any in it and thereby make the proposed legislation sound.

"If the pilot scheme is successful, we will come up with the legislation for its nationwide implementation."

At a separate briefing, Labour Minister Sahib Singh Verma said that the scheme follows recommendations from the second labour commission and Indian Labour Conference and demands in this regard made at a two-day national seminar on unorganised sector and a day-long conference of state labour ministers.

Verma said the scheme also provides for a personal accident insurance cover of Rs 100,000.

Another important feature is convergence of universal health insurance scheme for a worker and his family at the cost of Rs 548 per annum for a family of five or Rs 365 per annum for a three-member family.

If the bread-earner falls ill, he would get an additional Rs 50 a day for a total period of 15 days in a year, he said adding that a worker would get a maximum of Rs 30,000 a year in case of hospitalisation.

It would cover all workers drawing below Rs 6,500 a month and financed by contributions from workers at the rate of Rs 50 per month in the 18-35 age group and Rs 100 a month in the 36-50 age bracket.

Employers' contribution would be Rs 100 a month while government will pitch in with 1.16 per cent of the national floor wage, which is at present Rs 1,800 per month per worker.