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Rs12,000 cr push planned to plug labour skills gap

Rs12,000 cr push planned to plug labour skills gap

New Delhi: As part of a bold move to provide 150 million people with the skills needed to work on factory shop floors and assembly lines, a public-private initiative is putting the final touches to a plan to spend an estimated Rs12,000 crore over the next 10 years to plug a skill gap that leads to labour shortages despite a growing labour force. Indian industry is expected to need a workforce of 500 million by 2022, according to the government.

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One important part of this initiative is to fund 10 new professionally run and for-profit institutes for vocational training.

The skill development programme will be rolled out through the National Skill Development Corp. (NSDC), a public-private joint venture set up in 2008 under the Prime Minister’s National Council on Skill Development. The corporation has the mandate to train manpower through private initiative—one of several government measures to build trained labour capacity and help more people participate in the growth process.

The government’s scattered skill development schemes implemented by 17 ministries and departments train four million people a year, according to one estimate, and the syllabi of the public sector Industrial Training Institutes are out of sync with the needs of Indian industy.

Minister of state for labour Harish Rawat said in New Delhi on Monday that “there was no coordination and convergence mechanism" among ministries in skill development efforts. He was speaking at a seminar organized by the Confederation of Indian Industry and put India’s skill development capacity at 3.1 million.

The ambitious spending and training plan is part of a 10-year blueprint of action for NSDC prepared by consulting firm McKinsey and Co. The blueprint will be taken up for approval at a meeting of the core group of NSDC scheduled for early next week.

M.V. Subbiah, NSDC chairman and former chairman of the Murugappa Group, said, “The core group will finalize the blueprint when it meets either on 17 or 18 August." Credit rating service company Icra Ltd has been appointed to map skill needs and availability across states in the country.

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The McKinsey blueprint, which has been reviewed by Mint, recommends that financial support must be offered to those keen on offering formal skills training; about 80% of the financing should be in the form of equity and loan and only 20% should be as grants. It has also suggested NSDC could offer accreditation to trained personnel and set up 10 for-profit training institutions, which will be funded by the corporation. It has recommended a three-year tax holiday for the corporation.

To give impetus to the programme, the government has provided seed capital of Rs1,000 crore to the Skill Development Fund Trust, monitored by the finance ministry; several private associations, including the Confederation of Indian Industry and Federation of Indian Chambers of Commerce and Industry, has each contributed at least Rs51 lakh as equity. The board has a mandate to mobilize capital worth Rs15,000 crore from private, government and multilateral agencies. The 10-member board has representatives from government and industry associations.

Cheap labour is often seen as one factor that could make India an attractive and competitive manufacturing destination. But only 2% of the country’s population has undergone any skill training, one of the lowest in the world. As a result, a large section of a young and growing workforce is unemployable and not fit to be absorbed by industry.

The Planning Commission’s 2001 report on employment opportunities says 44% of all workers in 1999-2000 were illiterate; another 22.7% had schooling only up to the primary level. In the age group of 20-24, only 5% of the Indian labour force had vocational skills. In comparison, Mexico has managed to offer vocational training to 28% of its labour force.

“With a working population of about 500 million, including housewives, very few are in the formal or organized sector (around 30 million) and even fewer (around 1.7 million) undergo formal training," it said in the report.

With a rapidly growing need for skilled labour, nine proposals to set up training institutes have been received by NSDC, which still does not have a full-fledged office. Though no letter of intent has been signed as yet, the proposals include a Rs5.5 crore equipment procurement plan from a jewellery and gems training institute in Jaipur, said a labour ministry official. Another proposal has come from the Self Employed Women’s Association, a registered trade union, to scale up women’s training in rural marketing, a NSDC official who did not want to be identified said.

“We are now looking at expansion of skill development in manufacturing of jewellery," said Vasant Mehta, chairman of Gems and Jewellery Export Promotion Council and a board member. “We plan to set up three new institutes in Kolkata, Delhi and Chennai, apart from the one in Jaipur."

Despite the continuing pressures stemming from a slowdown in global business, labour-intensive export-oriented sectors such as textiles, leather and jewellery as well as automobile and heavy engineering will continue to need skilled manpower, industry representatives say.

The automobile sector, which employs 13 million people, for example, requires an additional manpower of 25 million by 2016. And with changing technology requirement, the Society of Indian Automobile Manufacturers has plans to set up a national automative institute to bridge the demand-supply gap.

India’s jewellery business, on the other hand, is expected to grow from $21 billion (Rs1 trillion) to $36 billion by 2015, said Rajiv Jain, chairman and managing director of Sambhav Gems Ltd, who’s taking the lead in setting up the institute in Jaipur’s Sitapur industrial area, home to 160 jewellery units. The 45,000 sq. ft unit will train 20,000 people in 10 years, he said.

India’s $3.65 billion leather industry will require half-a-million manpower in the next two years, said Habib Hussain, chairman of Council for Leather Exports and a board member. “The scope of employment is huge. But nobody’s looking at expansion at the moment. One would be scrambling to meet export orders."

The McKinsey report has recommended involvement of micro finance institutions for offering skill training and suggested creation of an interface with the country’s 968 labour employment exchanges to access data on skills inventory.

Industry representatives maintain that along with manpower training, the government needs to streamline the country’s at least four dozen Central labour laws. However skilled workers are, they cannot be effectively deployed when a hire-and-fire policy does not exist, they add. However, trade unions say skill development is a welcome initiative provided the government first creates employment.

“Many skilled workers in the country are unemployed today,“ said M.K. Pandhe, president of Centre of India Trade Union. “Companies train apprentices but they get paid very little when they do the work of a worker. Workers do not have job guarantee. Workers do not even get minimum wages. These need to be fixed first."

Graphics by Ahmed Raza Khan / Mint

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