By Dr. Gyan Pathak
India’s prominent Employment Linked Incentive (ELI) initiative, introduced in the Union Budget for 2024-25 to promote quality job creation, has yet to gain traction even by mid-December 2024. As the Union Ministry of Finance focuses on preparing the upcoming Union Budget for 2025-26, slated for presentation on February 1, 2025, India Inc remains hesitant to engage with the scheme. Additionally, the Union Ministry of Labour and Employment is still finalizing the specifics of the scheme, which are expected to be released in January 2025.
The Employees’ Provident Fund Organisation (EPFO) is undergoing significant changes to facilitate the implementation of the ELI scheme. Since the last week of September, following the announcement of the ELI on July 23, there have been numerous meetings involving EPFO officials and industry representatives to develop the scheme’s details and its implementation guidelines. EPFO was directed to ensure that employers activate the Universal Account Number (UAN) through Aadhaar-based OTP for the latest hire of the financial year by November 30, 2024.
Moreover, in the second phase of the activation process, the UAN activation is expected to incorporate advanced biometric authentication methods, including face recognition technology. Subsequently, employers will be expected to complete this process for all their employees.
It’s important to note that the Centre had earlier instructed all ministries and departments to utilize the Aadhaar Payment Bridge for disbursing subsidies and incentives to beneficiaries of all schemes. Consequently, the EPFO is also expected to adhere to this requirement for the employers-focused ELI scheme, aimed at creating dignified jobs in a context where over 90% of India’s workforce is engaged in informal work within both the informal and formal sectors. Although the ELI scheme targets the formal sector, many individuals have been casually employed through contracts or outsourced agencies in recent years.
EPFO and India Inc were unable to finalize the initial stage of UAN activation by the November 30 deadline, leading to an extension of the timeline. On December 4, 2024, EPFO announced an extension, moving the deadline to connect UANs for the ELI scheme to December 15. Alongside the UAN activation extension, the government has also delayed the deadline for linking Aadhaar with bank accounts.
EPFO communicated, “Dear Employers, the UAN activation and Aadhaar seeding deadline has been extended to December 15. Please ensure this is done for all employees who joined in the current financial year, starting with the most recent hires, to benefit from the Employment Linked Incentive scheme.”
This outcome was anticipated not just due to India Inc’s reluctance and sluggishness in embracing the ELI scheme but also because the Union government has yet to clarify the scheme’s details.
On December 11, just four days before the extended UAN activation deadline, Union Labour Secretary Ms. Sumita Dawra urged industry leaders to take advantage of the ELI scheme during her address at the Global Economic Policy Forum 2024, organized by CII. She encouraged collaboration between the government and the industry, stating, “The ELI is designed to incentivize the hiring of additional workers, particularly in the manufacturing sector, by offsetting the costs associated with employing new staff. This initiative is intended to enhance labour formalization, improve worker employability, and support job creation in key manufacturing sectors.”
To attract foreign multinational corporations to invest in India, she highlighted that by 2030, approximately 65% of India’s population will be of working age, positioning the country as a vital contributor to addressing global labour shortages.
Union Labour Secretary Ms. Dawra also urged the industry to embrace innovative technologies, policies, and practices to establish India as a manufacturing powerhouse. She cited the growing role of the country as a hub for global capability centers (GCCs) that employ millions in sectors such as engineering, technology, and AI, ultimately contributing to global innovation and enhancing India’s domestic manufacturing capabilities.
Ms. Dawra’s remarks underscore the Centre’s urgency in implementing the ELI scheme while grappling with its execution. The three schemes under ELI are projected to provide Rs 10,000 crore in subsidies to employers through EPFO for every new member recruited, potentially creating 8 million jobs while skilling 10 million youths over the next five years.
For the past three months, the Union government has been working diligently to establish suitable guidelines for the scheme, hosting discussions with employer and employee representatives, research and academic institutions, multilateral organizations, and officials from various government ministries and departments, including EPFO.
During the CII Global Economic Policy Forum, the Union Labour Secretary expressed hope that the industry would embrace the ELIs and utilize them to enhance their competitiveness, reflecting the uncertainty surrounding the ELI scheme’s effectiveness in its current form, particularly concerning the creation of significant numbers of quality jobs in India. (IPA Service)
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