The government is planning to create a commercially viable body that will take care of all the financial obligations of the employees working in the small and medium enterprises (SMEs). The proposal is being discussed by the ministry of commerce and industry and the ministry of labour and employment.
In the meantime, the Department of Policy and Promotion (DIPP) is going to issue a discussion paper within the next couple of days on the relevance and importance of creating such a body in order to seek feedback and views of stake-holders. At present, employers working in the SME sector deposit money in the Employees’ State Insurance Scheme of India (ESIC) and Employees' Provident Fund Organisation (EPFO).
“Basically, it will be a framework organisation, which can come up as a commercial viable entity in the private sector and which will take over the obligations of SMEs … This will be an alternative mechanism to EPFO and the ESIC. This will make financing very easy for SMEs,” RP Singh, secretary, Dipp told Business Standard.
The new body would basically collect money from the SMEs and would generate a “giant corpus fund”. In the event a specific company shuts down, the employees can approach this body for all their financial matters.
The body, which would work based on subscription, might also take care of other issues such as distributing retrenchment compensation and medical benefits.
The government is also planning to rope in some corporate biggies such as Reliance or the Tatas for creating such a financial body so as to encourage competition based on the nature and quality of service provided.
Dipp has also taken up the matter with the ministry of micro, small and medium enterprises and the ministry of corporate affairs to ascertain the feasibility of creating such a body.
The SME sector accounts for 45 per cent of the country’s industrial output and 40 per cent of exports. It employs around 60 million people, creating 1.3 million jobs each year. It contributes 17 per cent of the gross domestic product, which is expected to increase to 22 per cent by 2012.
At present, there are 26.1 million MSME units across the country and 12 million people are likely to join the workforce by 2014, according to the Small and Medium Business Development Chamber of India.
