PARADOXES TO BE RESOLVED
–– PROVIDENT FUND FOR CONSTRUCTION WORKERS
–– P R Swarup, Director General, CIDC
Providing Social Security to the citizens, specially to those, who contribute to the growth and development of the National Economy, is one of the major responsibilities of the State, and enactment of the Employees Provident Fund Act of 1952, by the Govt. of India was a positive step in this direction. The act was to provide for the institution of Provident Fund, Pension Fund and deposit linked Insurance fund for employees in factories & other establishments, engaged both in commercial and or developmental activities.
To administer and conduct the business, an EPF organisation also came in to being in 1952, following the enactment of the EPF Act.
The funds, established under the Act vest in to, and are administered by Central Board of Trustees constituted by the Central Government, and functions under the overall regulatory control of the same.
The Act has since been revised four times, starting from the year 1953, 1960, 1971 & 1996, apart from several notifications from time to time and is applicable in all states of India except Jammu & Kashmir and Sikkim, and is applicable to a variety of establishments, notified by the Central Government, with a provision of now applicability on those employing less than 20 persons. Central Government, however, reserves the authority to apply this Act, where the employee strength is less than 20.
Under the provision of this Act, an employee through his employer, has to contribute to the fund, after joining as a member. The contributions generally vary between 10% to 12% of the Basic Pay, DA, and some allowance, and the employer is duty bound to do following:
Enrol the eligible employees as EPF subscriber from the right date. Send initial return in Form 5A, Form 9, accompanied by Form 2, Form 10, Form 12A, accompanied by challans and annual returns in Form 3A accompanied by Form 6A in the month of April every year.
The contribution should be paid within 15 days of the close of the month both the shares of contribution and administrative charges.
Every employer shall maintain an inspection note book in such form as the Commissioner may specify for an Inspector to record his observations on his visit to the establishment.
Now observance of these obligations may result in cash fines and /or imprisonment for the Employer.
The Provisions of EPF Act 1952, were made applicable to Building & Construction Industry, however with a qualifying period of employment for applicability of the scheme to employee was 240 days. The limitation of 20 employees being the minimum strength, however remained intact.
The limit of employment period subsequently was brought down to 90 days continuous service or 60 days random employment, within a period of 3 months.
The paradoxes emerged since then, and remain unresolved till date. Much litigation is resorted to, and it is time that we should attempt to find solutions.
In order to understand the genesis of this major paradox, let us analyse the mindset of those, who frame our regulatory framework, and also the situations, which led to the present day predicament vis-à-vis the follies of situation. Enactment of EPF Act was indeed a laudable effort by the Government, where a conscious effort to institute a social security framework was made for those, who served Organised Sector, yet did not have benefit of pension schemes, like the one enjoyed by the Government Servants. Covering manufacturing sector employees at almost all levels, was also a practical approach to enlarge the net of beneficiaries. Construction Sector, however, had its own peculiar nature, and while using a uniform yardstick, the exigencies governing the employment system in this sector, was neither considered, nor opinion of those administering the business were sought.
The result of extension of this good Act, meant to benefit the employees of this sector, was quite contrary, and has therefore caused much anguish all over. Possibly an audit of cost-benefit was also not done, while the provisions were being introduced. Let me elaborate.
With casual employment (60/90 days) coming under the fold, even ordinary construction workers were termed as the beneficiaries, however following was over looked:
i. The cost to employer to maintain the records and observe the obligations defined above was in many cases more than the value of the contribution itself.
ii. The worker was given to understand that the Government has introduced a welfare measure for him/her, and while receiving his wages, to his/her dismay it was found that his/her money is being deducted and is being kept for “his/her welfare” with an unknown / faceless organisation, causing great disappointment.
iii. The disappointment turned to anger, when he/she found that in order to retrieve his/her money, numerous forms need to be filled and records to be produced for a sum which did not exceed six days wages for him/her.
After all every one understands & knows that construction workers are temporary and casual workers, part agricultural workers and meet the seasonal demands of the Construction Industry.
So, the monies thus deposited ended up as dormant monies with EPF trusts, with the real beneficiaries losing their right dues.
The issue was raised time and again by the employers through their associations, Builders Association of India, and several others, both as representations, and by taking even legal recourse, however the situation remains static, and no tangible solutions are visible. Meanwhile a sum of Rs.26,000 crores (appx.) remains lying with EPF trusts. This sum has been deducted from the wages of the workers over last 13 years, and is unclaimed.
Irony of the situation is that the deductions continue without any conscious effort to find the solutions. It is true that solution be found to insure that the benefits really reach those, for whom this welfare scheme is meant, and who have been contributing to the fund for a considerable time.
The Central Government, in the Union Budget 2001-2002 directed IRDA to formulate a Scheme for providing terminal benefits to the citizens working for unorganized sector, and it is understood that IRDA has made their recommendations in this regard. The details of these recommendations are not known, however, while implementing these, necessary steps could be taken to resolve this present day problem, adversely affecting the largest section of unorganized sector workers. Following could be resorted to:-
Create a subsidiary trust, under the overall umbrella of EPF trust, which receives and manages the monies thus deducted.
This sub-trust would invest and spend monies for common welfare of construction workers, and may do following.
i) Training, skill up-gradation, and continuing professional development of construction workers.
ii) Development of Geo-Socio regions from where construction workers are drawn. These areas are well known to Construction Industry e.g. Chattisgarh, Andhra Pradesh, Bihar, Malda region of West Bengal and Orissa. The development programme would include, home building assistance, healthcare primary education, portable water supply systems, sewerage disposal systems etc.
iii) Development of a National Registration Network for those workers who have made contribution to the P.F. Schemes, so that individual beneficiary can be identified and their P.F. deposits paid back to them.
The scheme, could stipulate that there would be a minimum lock-in period for the deposits and also a two head account, where the contributions from those, who serve for a limited duration say 30 days/ year, would go for general benefit schemes, and those, who serve for longer period would be kept in individual account.
After all, it is the money belonging to the workers who need to be looked after, should we as a Nation sincerely desire to dispense social justice to the common citzen.