Prime Minister Narendra Modi. Photo: Bloomberg
Prime Minister Narendra Modi. Photo: Bloomberg

Narendra Modi to launch three key labour reform initiatives

Modi will launche a single window system for labour law compliance, PF number portability and a revamped inspection system for companies on Thursday

New Delhi: Efforts to roll out labour reforms and make it easier for companies to do business in India are set to reach a milestone on Thursday when Prime Minister Narendra Modi launches a trio of key initiatives—a single window system for labour law compliance, provident fund (PF) number portability and a revamped inspection system for companies.

The labour ministry, which is hosting the event, said Modi’s Make In India mission will pick up speed if the nation’s archaic labour laws, seen as an impediment to manufacturing, are reformed and new initiatives are put in place.

This will be a “win-win for both the employees and employers", a labour ministry official said on condition of anonymity. Modi launched the Make In India campaign on 25 September to promote manufacturing and create more jobs in the labour-intensive manufacturing sector.

A labour ministry note said Thursday’s programme “will be centred around five themes of ministry of labour and employment, including Unified Labour Portal and Labour Inspection Scheme in Central Sphere, (PF) Portability through Universal Account Number (UAN) for Employees’ Provident Fund, Apprentices Act, 1961, to improve training facilities to apprentices, the Industrial Training Institutes (ITIs) that supply skilled manpower to manufacturing industry, and competitions to foster the healthy spirit of competitiveness".

Mint has reviewed a copy of the note.

Through the single window system, companies will be able to file just one return online for 16 labour laws, replacing the current system where returns are filed manually for each of the laws. “Once, the scheme is launched by the PM, we would talk to states so that more than 25 other laws under the state jurisdictions can be brought under one platform," said the ministry official.

India has as many as 44 labour laws.

Currently, four different bodies of the labour ministry— the Central Labour Commission, Employees’ Provident Fund Organisation (EPFO), Employees State Insurance Corporation (ESIC) and Directorate General of Mines Safety (DGMS)—are involved in running the labour law compliance process to aid 1.3 million companies.

“But we believe that once the single window system is in place, this number (of companies) will come down to around 700,000 as we believe duplicacy of records are only adding up numbers. Once, the number comes down, the inspection system would become more transparent and data driven," said the official.

The official said that each of these units would be given a labour identification number, which will help them file one-shot labour returns online.

The PF number portability scheme is expected to help millions of organized sector employees who contribute 12% of their basic salary to EPFO as part of their retirement savings. The employer matches the contribution. Once number portability is in place, an employee would get a permanent PF account number—just like a bank account—and it will stay with them despite job changes. This will also help employees track their PF corpus in realtime. The PF contribution and claim settlement will be become automatic and online.

“We are reducing the employers’ interference in the PF corpus of an employee. Employers’ mediation will go," said a second official in the ministry.

The labour ministry-controlled EPFO has already issued the unique account numbers (UAN) to 41.7 million workers who are active subscribers via their employers. Central PF commissioner K.K. Jalan on 10 October had said that it has already collected KYC (know your customer) documents for 36.7 million active users. A bank account, the Permanent Account Number (PAN) issued by the income-tax department or Aadhaar unique identity number are mandatory for KYC compliance to activate number portability. EPFO manages more than 6 trillion retirement corpuses.

On skills, the ministry said Modi will appoint brand ambassadors to promote the ITIs and make these vocational schools aspirational. India has more than 11,000 ITIs established with the aim of boosting employment as well as providing a critical skill base to the manufacturing sector.

Sushil Jiwarajka, chairman of Artheon Group, a company that has interest in telecom to renewable energy, said industry believes labour law reforms and the push to manufacturing through the Make in India initiative augur well for the sector.

The government has approved amendment to three key labour laws—the Factories Act, 1948; Apprentices Act, 1961; and the Labour Laws (exemption from furnishing returns and maintaining registers by certain establishments) Act, 1988. All the three pieces of legislation have already been tabled in Parliament.