Noida: For 16 years, Raju Singh sewed shoes at Mirza International Ltd, an Uttar Pradesh-based exporter. Last April, the company decided to close its Noida unit claiming it had become unviable. Singh, 38, lost his job along with 200 others. He, however, was a bit luckier than others.
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Singh had contributed 1.75% of his salary every month to Employees’ State Insurance Corporation (ESIC) since 1992. ESIC is a government-run social security organization that serves as a safety net for employees. That contribution entitled Singh to a one-time dole of Rs11,340.
The money, roughly a quarter of what he used to earn in a year, came from Rajiv Gandhi Shramik Kalyan Yojana, an unemployment allowance scheme introduced in 2005. Earlier this year, the scheme was revised as a slowing global economy pushed Indian exporters and other firms to trim their workforce. Laid off workers who are part of the scheme are now eligible for a year’s pay.
Still, the scheme hasn’t found too many takers. And no one appears to be particularly worried about this. Sumangala Damodaran, who teaches economics at Lady Shri Ram college, says, “Most European Union states have a background of social welfare. In India, while there is a thrust for social schemes such as education and health, broad-based social security as cushion against poverty has never been the agenda of the government.”
Singh, for instance, is one of only 2,773 people who have benefited from this scheme in the past four years. That number compares poorly with the nearly half-a-million that lost their jobs in the country between October 2008 and January 2009, according to the Labour Bureau.
Pillar to post: Raju Singh, who lost his job with Mirza International, looks for odd jobs even though there are at least five laws that oversee the provision of healthcare, accident cover and pension for such workers. Ramesh Pathania / Mint
To be sure, more recent numbers from the bureau show that around 280,000 new jobs were created between January and March this year, but the actual number of people who lost their jobs in the wake of the economic slowdown could be much higher as the data does not take into account retrenchment in the unorganized sector, which accounts for at least 90% of India’s 457 million workforce.
On paper, workers who lose their jobs are adequately protected in India. The country’s Constitution promises them some sort of a safety net and there are at least five laws that oversee the provision of healthcare, accident cover and pension to such workers.
In reality, people who lose their jobs are pretty much left to take care of themselves.
Government officials and experts who have studied the subject say many companies do not officially close their units to avoid paying compensation to workers. And a large number of workers do not exist on payrolls. States too, rarely file reports to the Union labour ministry on job losses.
“Non-reporting makes it difficult to formulate any policies and workers, by and large, are not treated as entities at all,” a labour ministry official in New Delhi said, asking not to be identified.
Despite India’s growth through the 1990s and the early part of this decade, employment in the so-called formal or organized sector in India has dropped from 7.3% in 1993-94 to 5.3% in 2004-05, according to the National Commission for Enterprises in the Unorganized Sector (NCEUS).
To be sure, rapid growth in excess of 9% in at least three years in the second half of the decade may have altered that equation some, though analysts do not expect it to have made a significant difference.
India is yet to ratify the International Labour Organization’s (ILO’s) convention on social security, and also lags in providing adequate social security to workers—budgetary allocation towards public social security has remained stagnant at 2.6% of gross domestic product (GDP) in the country while some developed nations have been able to push for higher allocations, spending 25% of GDP, according to the NCEUS report.
Many schemes, including ESCI and Employees Provident Fund, continue to be funded by employees and employers with little or no contribution from the government.
Government officials and experts say social security benefits, such as the unemployment allowance, also do not often reach the intended target group due to corruption and a lax labour administration. According to an official at ESIC who did not want to be identified, the programme hasn’t succeeded because firms don’t report retrenchment.
One of the top priorities of the United Progressive Alliance government will be to improve the country’s flagging growth rate and energize industry in an effort to create jobs. Even as it does so, however, it will have to ensure minimum rights to workers, say experts. The Unorganized Sector Workers’ Social Security Bill was cleared in December to extend benefit to workers who live below the poverty line or the poorest among them.
Companies do not always view such employee protection schemes kindly, and see tham as hurdles in the path to rapid growth.
“It’s high time to talk about productivity. After all, skilled people in our country do not have such protection,” Michael Dias, secretary of the Employers Association Delhi, which offers legal guidance to establishments, said.
Ravi S. Srivastava, who teaches economics at Jawaharlal Nehru University and is a former member of the NCEUS, argues that while employers must have the flexibility to downsize their workforce, this needs to be backed by higher retrenchment insurance for people who lose their jobs. “One has to recognize that there is a relationship between on-job learning and skilled development, between job security and productivity.”
India’s multi-layered labour laws don’t make the process of protecting workers any easier. For instance, under both the Central and Uttar Pradesh Industrial Dispute Acts, companies are expected to inform the government 60 days before closing a unit.
But laws on informing employees vary from state to state. While the Central Act requires companies to inform workers about closure when there are at least 100 employees, the rule is flexible in Uttar Pradesh, where the worker has the right to a closure notice only when the establishment employs above 300 people.
Workers who lose their jobs can, however, look forward to some respite.
One of the most closely watched moves of the new government will be its effort to implement a social security scheme for workers in the unorganized sector which will cover 11 times as many workers as it currently covers.
“It will be a real challenge to plug leakages and implement the new Act to cover all eligible citizens,” said Barindra Nath Som, secretary general of Social Security Association of India, a non-profit organization.
Still, even proper implementation of existing laws would help workers get their due, said an expert. “Companies often want to sack people without paying compensation,” said C.S. Venkata Ratnam, director of New Delhi-based International Management Institute.
In the case of Mirza International, workers insist that the company employed at least 1,000 people across its three units in Noida, and they allege that the closure is illegal.
Mirza International said it had to close down the Noida unit as it had become unviable. Irshad Mirza, the group’s chairman, said over the phone that dues to all the workers were cleared. He also said that workers were offered jobs at the company’s new unit near Kanpur.
Mint spoke to 12 employees who denied that they were either served the closure notice or offered alternative employment.
An Uttar Pradesh labour department official said that the government was informed about the closure on 19 April 2008, two days before the employees found the factory gates closed.