The Union Cabinet’s decision to make employees’ contribution to Employees Provident Fund (EPF) optional in the made-ups sector on Wednesday took the Union labour ministry by surprise as officials said they had not been not consulted on the matter.
A senior labour ministry official said the Cabinet note wasn’t moved by the labour ministry. “We were not consulted on this matter,” said another ministry official.
In June this year, the Centre had proposed making EPF optional for textile and apparels workers earning less than Rs.15,000 a month as a part of a special package for the garments sector. Now, the Cabinet has extended this proposal to the made-ups manufacturing sector. Made-up products like towels and bedsheets form the second-largest employer in the textiles sector following apparel.
Draws flak
The decision is a part of reform measures approved by the Cabinet to boost employment generation and exports in the made-ups sector. These measures, however, will be embedded within the approved budget of Rs.6,006 crore for the apparel package.
The EPF exemption has already drawn flak. Terming the move ‘a retrograde step’, Subramanyam Sreenivasaiah, CEO, Ascent HR, said it went against the much-talked about objective of moving towards a ‘pensionable society’. “For one, this is an exemption given to one sector to the exclusion of others. For another, it defeats the very EPF principle of providing future protection.” EPF, according to him, is the lone state-initiated cover available in the Indian context for employees. The policy uncertainty, he said, wasn’t good for the economy.
Act amendment
However, a top EPFO official said that the move to make the EPF contribution optional for workers in the made-ups sector will require amendments to the Employees’ Provident Funds and Miscellaneous Provisions Act of 1952.
At present, EPF contribution is mandatory in all factories employing 20 or more workers. Both employer and employee compulsorily contribute 12 per cent each of the latter’s income towards EPF.
Mr. Sreenivasaiah also pointed to flip-flops in decisions vis-a-vis employer contributions and EPF withdrawals. If “take-home pay” were to guide EPF option for employees, there were several spheres within the economy when an employee got less than Rs.15,000 a month, he said. “Why then they aren’t given that option to opt out of EP?” he asked.
