Relief for India Inc. via social security bodies

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  Relief for India Inc. via social security bodies

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• The story: The Union government has initiated steps to offer relief and liquidity boost to Indian companies, through its social security organizations, in the middle of a raging second wave of the pandemic. The pandemic has forced businesses shut in many states due to strict lockdowns.
• Details: The labour ministry will offer flexibility to industries to submit Employees State Insurance Corporation (ESIC) deductions and contributions for April by mid-June, giving them a liquidity boost of Rs.1,400 crore. The ministry is considering a similar measure via the Employees’ Provident Fund Organisation (EPFO), which would be a liquidity boost of Rs.12,500 crore to companies. These are facing a severe dent in demand, and any additional liquidity is welcome.

1. The ESIC and EPFO put together will offer a liquidity of at least ?14,000 crore, for one month 
2. Currently, each month, industrial employers contribute 3.25% of their basic salaries and employees contribute 0.75% for ESIC statutory deductions. The ESIC subscribers and their families receive healthcare benefits from primary to tertiary care at ESIC hospitals and dispensaries across India, and it also offers unemployment benefits to the subscribers. ESIC receives around ?16,745 crore a year on account of this statutory deduction.

• Provident Fund: The EPFO collects almost ?12,500 crore from subscribers via statutory deductions every month. While an employee pays 12% of his or her basic salary, the employer offers a matching contribution. Companies who are enrolled with ESIC and EPFO are required to submit the deductions within 15 days once a month ends. An extension of the submission deadline would give more short-term liquidity in the hands of employers. The extended window will benefit employers. 
• In 2020: Last year, the government had granted relief for at least three months. The general economic environment is not that bad like last year, but some segments have started demanding relief and hand holding. The MSME sector is seeking support of the government as the second wave has impacted their production, supply chain and general demand. The pandemic has impacted consumption, retail, auto and consumer durables, and even the wholesale markets.
• Manufacturing sector: Manufacturers across sectors are idling production as lockdowns to curb the pandemic have decimated sales, and diversion of industrial oxygen to hospitals has crimped production of raw materials such as steel,Mint reported on 11 May. Several automakers such as Maruti Suzuki India Ltd, Hero MotoCorp Ltd, Hyundai Motor India Ltd and India Yamaha Motor, have either suspended production at their factories or sharply cut output. 

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