Labour cess on its way

Another cess is in the offing with the Central government looking at a bill of nearly Rs 13,500 crore (Rs 135 billion) per annum for setting up a national fund to ensure social security benefits for the unorganised sector, according to a draft Bill on the issue submitted to the labour ministry.

The bill envisages the setting up of a National Fund to provide social security to the nearly 37 crore workers in the unorganised sector and provides for a cess to finance this fund.

The Bill, called the Unorganised Sector Workers Social Security Bill, 2005, has been drafted by the Arjun Sengupta-led National Commission for Enterprises in the Unorganised Sector and is likely to be introduced in the winter session of Parliament, according to labour ministry sources.

The money for the fund is to be sourced from various sources, including workers, employers and the Centre and state governments. The worker and the employer are both expected to pay Rs 1 per day per worker towards the fund.

In case the worker is below the poverty line, then the contribution on his/her behalf is to be made by the Centre. In cases where the employer is not identifiable, the Centre and state governments will have to share the cost in the ratio of 3:1.

The bill also provides for a cess or tax on commodities and/or services in lieu of the employer's contribution, especially if the contribution is difficult to collect or employers are not identifiable.

Over and above that, the Central government is to pay Rs 0.75 and the state government Rs 0.25 per day per worker as their contribution to the fund.

In a worst case scenario, the bill for the Centre could add up to Rs 13,500 crore. A state level board is also recommended to be set up under the Bill, which will be funded through means such as a cess or tax, contributions towards additional social security scheme formulated by the state board and voluntary contributions.

Both the Centre and state governments are free to impose a cess to fund the programme. The state board though, shall be mainly responsible for implementing the national minimum social security scheme and shall maintain all individual accounts and keep track of contributions.

Local Panchayati Raj institutions are to be roped in to implement the programme in interior areas, with the setting up of Worker Facilitation Centres. The draft bill takes care of many of the objections raised by the Left parties like the CPM, which opposed a similar legislation mooted by the previous NDA regime.

In fact the setting up of the fund and the lions share of the fund being provided by the Centre was an important demand of the Left.