'Internship scheme a complicated solution to a complicated issue': Fin secy

At 'Budget with BS: The Fine Print,' Finance Secretary TV Somanathan said companies costs for interns will be funded through their CSR budgets

Many graduates lack the necessary skills to be immediately employable in the private sector, Finance Secretary T V Somanathan told  A K Bhattacharya, editorial director at Business Standard, at the ‘Budget with BS: The Fine Print’ event on Wednesday. The internship scheme proposed by the central government in the Budget 2024 document attempts to address this “complicated problem” through a “complicated attempt”, the finance secretary said.

T V Somanathan noted that while the government can establish educational institutions and appoint teachers for academic subjects, it struggles to provide training in specific industry-required skills. He explained the government’s new internship scheme was designed to address the skills gap between education and industry requirements.

 

“Either you have a well-established guild system or you have a national apprenticeship system which some countries have, or you have what we have – which is a poorly organised system to match skills to employers. Will this solve the problem? Not completely,” the finance secretary said outlining the complexities and ambitions of this initiative.

Internship scheme financed through CSR

The internship scheme, framed with inputs from top 500 companies, seeks to leverage corporate social responsibility (CSR) funds to enhance skill development, Somanathan said.

“20,000 companies had spent about Rs 26,000 crore on CSR spending. Often money was spent on good things, but these good things are generally initiatives the government already does. What we are suggesting to them is to take a part of the CSR, say 40 per cent, and devote it to skilling instead,” Somanathan added.

The Ministry of Corporate Affairs will coordinate with these companies to direct resources toward industrial skills training. Somanathan emphasised that the financial burden on companies would not impact their bottom line, as funds would come from their CSR budgets, which constitute 2 per cent of their profits.

Somanathan also explained that the scheme involves a significant financial commitment, with a projected cost of Rs 60,000 crore. Of this, Rs 30,000 crore will be provided by state governments, and the remaining will be supported through CSR contributions, particularly for equipment. The government will cover 90 per cent of the internship allowances, while companies will contribute the remaining 10 per cent and bear training costs within their operations.

No obligation to hire interns permanently

Internships will be offered through suppliers or value chain partners of the top 500 companies. Unlike apprenticeships, there is no obligation for companies to hire interns permanently. The scheme aims to encourage companies to take on individuals they might not typically employ without the subsidy.

Govt to track scheme through EPFO

To ensure transparency and accountability, the scheme will utilise the Employees' Provident Fund Organisation (EPFO) as a measurement mechanism.

“The reference to the EPFO is because we need a measurement mechanism that is above board. We need to know that somebody was actually employed. Now, we cannot rely purely on self-certification for that, and in the case of tax benefits, it relies on audited accounts and certification of certain things by an auditor. Here, you do not have to go through an auditor, but if you have hired a person under the EPFO, the EPFO knows he or she has been hired, and that is the trigger for the subsidy to flow. So there are not going to be too many bureaucratic requirements. It is going to be a very simple process,” the finance secretary explained.