New Delhi: A retirement fund manager for the organized sector workers until now, the Employees’ Provident Fund Organisation (EPFO) plans to manage the retirement savings of unorganized workers too, potentially benefiting hundreds of millions of India’s poorest.

The labour ministry, which controls the EPFO, is building a system of providing provident fund (PF) and pension to unorganized workers—ranging from the farm hands to labourers working at construction sites, to domestic helps and tea sellers.

The ministry will launch a scheme within the existing EPF to extend social security benefits to unorganised sector workers, who make up around 93% of India’s total workforce.

Once implemented, such a move will not only provide a social security net to unorganized sector workers but will also give EPFO access to a huge pool of subscribers at a time when a proportion of its current subscriber base may migrate to the National Pension System after the government announced a provision offering the choice in its budget proposal.

As part of the move, the labour ministry has decided to insert a new clause in The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 after consulting the central board of trustees of EPFO.

“Notwithstanding anything contained in Section 6, the central government may, by notification in the Official Gazette, frame a scheme to be called the Unorganized Sector Social Security Scheme for the purpose of providing social security benefits," the clause says.

These benefits will include provident fund, “pension including superannuation pension, retiring pension or permanent total disablement pension, widow or widower’s pension, children pension or orphan pension payable to the beneficiaries and deposit linked insurance".

Mint has reviewed a copy of the proposed amendments that are expected to be introduced in the current session of Parliament, now on a recess.

The amendments say the “central government may, by notification in the Official Gazette, specify that subject to the provisions of this Act, the Voluntary Social Security Scheme may provide for all or any of the matters specified by the central government".

A labour ministry official said that like the flexibility of a mutual fund, subscribers will be allowed to put money in this PF scheme at their will—whenever they have money, and not necessarily every month, as is the current provision.

“The owners or proprietor of establishments shall also be allowed to contribute to this scheme online on behalf of the employee but the owner or proprietor cannot withdraw money from or seek ownership of the account. The account shall be linked to the Aadhaar number of the unorganized sector worker for better safety and identification," said the official, requesting anonymity. The EPFO currently has an active subscriber base of 42-43 million—compared to India’s total labour force of over 470 million, a second government official said. Besides, at least 12 million workers enter the labour market every year. If EPFO can serve just 10% of the unorganized sector workers over a period of time, the number will be equivalent to, or more than, its current subscribers.

EPFO currently manages a corpus of over ₹ 6 trillion.

The details of the proposed scheme are expected to be worked out within the next two weeks. A tripartite meeting of government, worker and industry representatives has been called for Tuesday to discuss the proposal.

The second official said that while the government is in favour of giving a choice to organized sector employees to choose between NPS and EPF, it is also mindful of the needs of the unorganized sector.

Labour minister Bandaru Dattatreya has spoken about unorganized sector workers several times in the last few months.

The official said the government has begun taking a census of unorganized sector workers that will give policymakers more information on this mammoth labour force.

G. Sanjeeva Reddy, president of the Indian National Trade Union Congress, the worker’s union affiliated to the Congress, confirmed the move and said that the details will be worked out after the tripartite meeting.

The move has the union’s in-principle support. “The agriculture workers, construction workers, people working in numerous shops, etc. are deprived of social security benefits, and EPFO’s move would be a good step to give them some retirement corpus," Reddy said.

The first government official cited above said that while unorganized sector workers will be a key focus, establishments deploying up to nine workers will also have the option to join the scheme.

The official said in the EPF Act amendment, the labour ministry has said that it is making this scheme applicable to all companies who deploy 10 people or more, instead of the current stipulation of 20 and above. This means that the new scheme will allow micro companies to avail of the benefits.

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