If the labour ministry has its way, there will now be a labour cess to fund social security for 370 million unorganised sector workers. This is the thrust of the Unorganised Sector Workers Social Security Bill, drafted by the National Commission for Enterprises (NCE). | |
| The etymology of the word cess, in the sense of rate or tax, as opposed to sewage of cess-pits, is itself interesting, although the tax usage has disappeared everywhere in the world, including Ireland and Scotland. |
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| India is sui generis and loves cesses, the argument being that tax revenue disappears into a black hole known as the Consolidated Fund, whereas a cess can be linked to specific outcomes and therefore neutralises tax fatigue. |
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| This is a doubtful argument. If tax rates have to increase, that is better done through transparent means, instead of using subterfuges like cesses, surcharges and the FBT. There may be a counter-argument about the highway programme and the successful use of the cess on motor spirit and high-speed diesel. |
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| But the cess that has funded the highway programme is more in the nature of a user charge, and different from things like the education cess, where the payer and the user are quite different people. |
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| That is perhaps why the education cess (Rs 10,000 crore in 2005-06) has not amounted to much, since there isn't a non-lapsable fund and less than half has trickled through to the HRD ministry. The rest has been swallowed by the finance ministry and many states haven't been able to spend what they got. |
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| In the ordinary use of the word "cess", the education cess is therefore not a cess at all, it is simply a tax. Will the cess in the name of social security for unorganised workers end up in the same way, by simply contributing its mite to the Consolidated Fund? |
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| While the objective of extending social security to unorganised workers is desirable, the Bill proposes nothing except a national fund financed through worker/employer contributions and the government (the central government chipping in with Rs 13,500 crore), and a bureaucracy through sundry boards and worker facilitation centres. |
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| Plus, there is the mandatory reference to panchayats. The Left has often complained about non-enforcement of the Minimum Wages Act, but is a vociferous supporter of the present Bill. If the former can't be enforced, how does one enforce the latter, when more than half the unorganised work force is self-employed? |
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| Social security has many dimensions, encompassing unemployment insurance, disability or death benefits, and post-retirement pensions. A model that works for one form of social security may not work for another. Nor can the same model work everywhere in India. |
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| But irrespective of the model, the key is offering the consumer a choice. The proponents of the Bill would have been well advised to consult the findings of ministry of finance's National Data Survey on Savings Patterns of Indians. Some 95 million individuals (including those in rural India) are under 40, not covered by the provident fund organisation, not in the civil services, and can contribute Rs 10 per day, compared to Rs 2 per day that the new Bill has in mind. |
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| Unfortunately, the National Commission for Enterprises is stuck with a statist, no-choice mindset, contemplating something like extension of the provident fund organisation to the unorganised sector through legislative fiat. Hence, the emphasis on funding, bureaucracy and legislation, and not on delivery. The last will be devised by state boards and panchayats. At its best, the idea is a sham. At its worst, a scam. |
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