The Union government has initiated steps to offer relief and liquidity boost to India Inc through its social security organizations amid a raging second wave of the pandemic that has forced businesses shut in many states due to strict lockdowns
The Union government has initiated steps to offer relief and liquidity boost to India Inc through its social security organizations amid a raging second wave of the pandemic that has forced businesses shut in many states due to strict lockdowns.
The labour ministry has decided to offer flexibility to industries to submit Employees State Insurance Corporation (ESIC) deductions and contributions for April by mid-June, giving them a liquidity boost of ₹1,400 crore. The ministry is also considering a similar measure via the Employees’ Provident Fund Organisation (EPFO), which would mean a sizable liquidity boost of ₹12,500 crore to companies and other establishments who are also facing a severe dent in demand.
“The ESIC and EPFO put together will offer a liquidity of at least ₹14,000 crore. This is just for one month and if the relief is extended even for one more month, the amount will only double. While the ESIC has already decided, the EPFO issue is on the table," said a government official requesting anonymity.
“We have already approved the ESIC proposal. They are allowing the submission of deductions for April by 15 June. EPFO following the same is only a logical extension. It’s being considered, and we shall announce details once a final decision is taken," said Apurva Chandra, union labour and employment secretary.
Currently, each month, industrial employers contribute 3.25% of their basic salaries and employees contribute 0.75% for ESIC statutory deductions. The ESIC subscribers and their families receive healthcare benefits from primary to tertiary care at ESIC hospitals and dispensaries across India, and it also offers unemployment benefits to the subscribers. ESIC receives around ₹16,745 crore a year on account of this statutory deduction.
Similarly, EPFO collects almost ₹12,500 crore from subscribers via statutory deductions every month. While an employee pays 12% of his or her basic salary, the employer offers a matching contribution. Companies who are enrolled with ESIC and EPFO are required to submit the deductions within 15 days once a month ends. An extension of the submission deadline would give more short-term liquidity in the hands of employers.
“The extended window will benefit employers. We are not charging penalty or damages during this period," an ESIC spokesperson said.
“Last year, the government had granted relief for at least three months. The general economic environment is not that bad like last year, but some segments have started demanding relief and hand holding. For example, the MSME sector is seeking support of the government as the second wave has impacted their production, supply chain and general demand. The situation will be clearer in a couple of weeks," said the government official cited above, who declined to be named.
K.R. Shyam Sundar, a labour economist said the pandemic has impacted consumption. “Look at retail, auto and consumer durables, and even look at the wholesale markets," he said.
Manufacturers across sectors are idling production as lockdowns to curb the pandemic have decimated sales, and diversion of industrial oxygen to hospitals has crimped production of raw materials such as steel,Mint reported on 11 May. Several automakers such as Maruti Suzuki India Ltd, Hero MotoCorp Ltd, Hyundai Motor India Ltd and India Yamaha Motor, have either suspended production at their factories or sharply cut output.
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