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Updated: Dec 04, 2015 16:10 IST

The government is considering the possibility of levying a 2% cess on individual and corporate income tax to fund its ambitious nationwide skill development programme after managing to set aside only a fraction of the Rs 4 lakh crore required for the mission.

The report comes months after Prime Minister Narendra Modi launched the campaign in July to promote entrepreneurship and equip 500 million Indians with skills by 2022 that would enable them to find jobs.

“As of now, the 2% cess is a proposal that we are submitting,” Union skill development minister Rajiv Pratap Rudy told HT. “We will keep on pursuing it and not give up. I am sure resources will not be a constraint.”

As per the ministry’s estimates, it requires resources to the tune of about Rs 4 lakh crore to achieve the target of training nearly 500 million people while only Rs 15,000 crore has been allocated for 2015-16.

Officials in the skill development ministry said a proposal for such a cess had been made to the ministry of finance earlier this year, but it was rejected. The plan has now been revived.

According to government data, only 4.7% of India’s population has vocational education, compared to about 60% in industrialised countries.

This means India could squander the potential demographic dividend of 12 million people joining the labour market every year at a time when China’s workforce is expected to lose 6 million over the next decade because of its ageing population.

A 2% cess would add to the basket of 27 cesses and surcharges. The latest such levy to be imposed was a 0.5% Swachh Bharat cess that came into effect on November 15 to fund the government’s Clean India campaign. About 17% of central tax earnings are from these cesses.

While the revenue from a cess is used to fund a particular project or programme, proceeds from surcharges flow into the Consolidated Fund of India.