CESS Repeal by Modi Government signals withdrawal from social protection for workers

Under neoliberalism, workers’ welfare has been under attack throughout the world and it is no surprise that the Modi Government has opted to do the same here in India. On July 2016, the Central Government quietly repealed several acts which provide for welfare of workers in several unorganised sectors. These include CESS collected under Mica Mines Labour Welfare Fund Act (1946), Salt Cess Act (1953), Limestone and Dolomite Labour Welfare Fund Act (1972), The Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour Welfare Cess Act (1976) and Cine Workers Welfare Cess Act (1981). These impact lakhs of workers, who toil in some of the harshest conditions for low pittance of wage and find themselves now even removed from a semblance of social security.

Trade Unions, working with unorganised sector workers, rightly fear that the move is intended to make things simpler for businesses and to lessen and remove the burden of workers’ social security for the employers. Moreover they feel that this move is a precursor to removing CESS which are being collected more effectively in other industries such as Construction and Beedi Workers. A Joint Action Committee on GST Bill – Abolition of Cesses, has come together in Tamil Nadu to build a campaign against the withdrawal of social security for unorganised sector workers. The committee consists of Central Trade Unions and Sectoral Unions of Tamil Nadu, including AITUC, CITU, AICCTU, UWF, INTUC, LPF and HMS.

CESS not linked to growth of industry

The act of CESS repeal is but the last nail on a coffin. The process of dismantling the CESS has been in the making for many decades. For example, consider the rapidly growing Cine Industry, which supports an estimated 60 lakh predominantly contract workers. According to statistics, the industry’s annual revenue is Rs 13800 crores and is growing at over 9%. It is expected to increase to Rs 20000 crores by 2020. However, the CESS collected in last 3 years does not exceed Rs 4 crores which is just 0.03% of the annual revenue and is equivalent to 4Rs per worker! This is because the CESS is being collected based on the number of movies produced as opposed to the revenue of the industry. The Cine Workers Labour Welfare Fund Rules have set up a levy between Rs 1,000 to Rs 20,000 for production in various film industries. This does not take into account the growth of an industry which is based on growth of multiplexes nor does it consider other forms of entertainment, specifically TV based entertainment.


CESS Realized in Crores

Cess Expenditure in Crores

Cine Labour Welfare Fund


1.63 Crore








* http://www.labour.nic.in/sites/default/files/Annual_report_2013-14.pdf


Even in industry, where CESS is connected to production, CESS realization has not matched production. In the salt industry for example, the CESS is exempted in various ways, including export. While some, such as exemption to cooperative societies is meant to promote these forms of production, the others such as export simply do not make sense, as export growth has been increasing in this sector.


Salt Production (Lakh Tons)***

Labour Welfare*

CESS Realization**








Rs 348




Rs 330




Rs 424





** Various Annual Reports from Salt Department (http://saltcomindia.gov.in/salt-ar-2015a.pdf)

***http://pib.nic.in/newsite/PrintRelease.aspx?relid=103387 and Annual Reports from Salt Department

Ineffective welfare reach to workers

Even this token amount that has been collected from the industry has not reached workers effectively. First and foremost, social security for unorganised workers in these sectors is not defined as specifically as it is for organised sector workers. Various laws such as ESI Act, PF Act, Gratuity Act define social security entitlements for workers in organised sector from their employers. However, in the case of unorganised sector workers, these are conspicuously absent in the Acts.

Consider the Salt Cess Act. Labour Welfare takes up just a single line in the act with no information about what the worker is entitled to. The Annual Report of Department of Industrial Policy and Promotions, which oversees Salt Department, notes that the kinds of social security that have been provided include health and eye check up camps, education assistance and skill upgradation. According to their report, ‘In the financial year 2014-15, 23 health camps and 9 sports meets have been organized. As per scheme approved by the Ministry of Commerce and Industry for grant of rewards, during 2015-16, to 1255 meritorious school children of salt laborers Rs.16.73 lakh was sanctioned keeping provision of 50% awards to female children’s during the year 2015-16. During 2015-16, 9 General Health cum Eye camps and 3 Sports Meets were organized for the welfare of salt workers and their families.’ The very basic social security for workers such as pension, medicare, bonus etc are not even in the ambit of these CESS provisions. It must be noted that even such meager provision can be a solace for workers as was documented recently in Hindu.

Even where, the CESS collection has been more effectively implemented, as in the case of Construction Workers, the Welfare Departments primarily function to deny the workers their legal rights, rather than to enable them to enjoy the fruits of their labour. The Building And Other Construction Workers Welfare Cess Act (1996) was enacted to provide social security for construction workers. The Act mandates that State Governments set up Labour Welfare Boards and levy a CESS of 1% to 2% on construction that costs more than 10 lakh rupees (Tamil Nadu collects only 0.3% as CESS). The amount collected is disbursed in various welfare activities including marriage assistance, maternity assistance, pension, education allowance, housing assistance, and medical assistance.

According to unions working with construction workers, the CESS is low and they have demanded that at least 3% be levied as CESS. But what is astounding is that only 22% of the CESS collected by the States have been disbursed to workers. Out of over 28,000 crore rupees collected by the States, only 7,000 crore rupees have been disbursed by the Governments. A workers’ fund of over 20,000 crore rupees is lying with the State!

Even where the welfare funds have been disbursed more effectively, as in Tamil Nadu (where over 40% has been disbursed), the process has been made cumbersome. It has been changed to deny any role for the unions, and suffers from undue delays which only demotivate workers from accessing their own entitlements. Union representatives who have intervened in this process say that lakhs of applications have been pending for years now and the functioning of the departments in different districts is quite arbitrary and ad-hoc. They also allege that applications are rejected on flimsy grounds, and where earlier, the Department would send postcards announcing the status of application, now, it is the burden of the worker to keep following up with the Department which only increases the cost of availing such services and keeps them away. And the processes have not changed to accommodate the increasing migrant working force found in construction sector.

Withdrawal signifies intention of state-capital nexus

For the capital, even a single rupee spent for the welfare of the worker is a profit to be realised. So its not surprising that articles invoking Gandhi’s name for abolition of CESS have appeared. With GST, the call for abolition of such CESS is only gathering momentum. Instead of looking at the issues of implementation and improving the reach of benefits to workers, the State is hell bent on dismantling the CESS that was supposed to protect the workers. Moreover, the federalist framework is being dismantled to deny the ability of individual states to provide better wages and better social security to workers (Delhi for instance has extended the housing and medical assistance to construction workers from CESS, and has also increased minimum wage substantially). The Centre increasingly concentrates the decision making in its hands, as we are seeing with GST and with labour reforms.

The intention of the State to support Capital is never surprising, but what should be discussed among the unions is the unwitting agents who implement these orders. By this, we mean the public sector workers, who work in Labour Departments and Labour Welfare Departments, who are willing to subjugate their own working class*. In a twist of irony, with the repeal of Salt Cess Act, the Salt Department was shut down and the public sector workers in Kolkata protested against this move. Nowhere to be seen were the salt workers, whom the bureaucrats had failed to build alliance with over the entire course of the Department’s existence.

The attitude of the public sector workers has been to see the workers as those who are not entitled to the funds but who were just seeking free doles. This attitude is often reflected in general perception of workers. There is little attempt to understand the issues of these workers, who, by virtue of being in the unorganised sector, have no means to prove their employment. The public sector workers very well know that the state is trying to dismantle their own protection as it privatises everything under the sun. Their persistent attitude in denying the same rights to another section of working class can only alienate them from the rest of the working class. One way forward is for the the unions of public sector workers to reach out to the workers to whom they are serving and discuss the benefits, issues and options in detail.

Joint Action Committee’s demands

Several Central Trade Unions and independent trade unions have formed a Joint Action Committee to counter the repeal of CESS for unorganised workers and to work on issues of implementation of social security for unorganised sector workers. They have conducted seminars and held appeals to MPs. They have placed the following demands:

1. The Trade Unions of Tamil Nadu are shocked to know that as per the Memorandum of Union Finance Ministry, cesses have been abolished in salt, mica, coal, limestone, cinema, dolomite, iron ore, etc and hence the welfare schemes for workers in these sectors would be affected. These decisions made without consultation and consent of Trade Unions must be taken back and it was resolved to demand adequate funds for welfare of these workers.

2. It was resolved that in the context of GST Bill in the Parliament, Building and other Construction workers welfare cess and Beedi workers welfare cess must be protected and given exemptions and Welfare Levies collected from Constructions and for Auto workers’ welfare under TN Manual Workers’ Act must be protected.

3.It was resolved to demand 3% allocation in TN Budget and collection of Levy in all sectors and collection of workers’ contribution for Welfare Boards constituted under TN Manual worker’ Act , Representation of Central TUs and Independent sectoral Unions in Tripartite Welfare Boards, Registration without VAO involvement and provision of smart card, ESI medical benefit, Pension Rs 3000, Increase in quantum of Benefits, Grievance redress Mechanism and appellate authority, Monsoon allowance, Housing, Bank loan etc.

4. It was resolved to get the above resolutions implemented through Working class unity and awareness and organise protests in Delhi at the National level and in Tamil Nadu.

* The attitude of the public sector bureaucracy is beautifully captured in the British film, ‘I, Daniel Blake’, a moving drama about a worker who goes through the humiliating process of seeking welfare from the State while he is unemployed due to his health.

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