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Joint Press Release by BCIC and KEA, 13th May 2020

The Government of India in its relief package announced on 13.05.2020 has provided for grant of soft loans to employers, especially in the MSME Sector. The Government has assured that it will stand guarantee to such loans in addition to a moratorium for one year. The soft loan is intended to enable employers pay salaries to their employees for the lock down period which they were unable to pay due to zero sales and nil receipts.

This may not be the right approach as there is no way to ensure the said loan amount will be used only to pay salaries and further there will be risk of repayment of such loans.

A better alternative is available under the ESI Act, under a scheme named ‘Atal Beemit Vyakti Kalyan Yojana’ (ABVKY). This scheme is a welfare measure for employees covered under Section 2(9) of ESI Act, 1948, in the form of cash compensation up to 90 days, once in a lifetime, to be claimed after three months in one or more spells for being rendered unemployed, provided the employee should have completed two years of insurable employment and has contributed not less than seventy-eight (78) days in each of the four consecutive contribution periods immediately preceding to the claim of the relief. The relief shall not exceed twenty-five percent (25%) of the average earning per day.

The workmen could not be provided work by the employers due to the lockdown during COVID-19 situation. This amounts to the workmen being rendered unemployed during that period. Therefore, under the ABVKY Scheme, a cash compensation may be provided to such workmen. This will enable the workmen to receive salary as well as safeguard their employment. Therefore, the Government should utilize the provisions of the above scheme to pay salaries to the employees for the lockdown period.

Karnataka Employers’ Association (KEA), in a letter addressed to the Minister of Labour and Employment, Government of India on 11.04.2020 has already made this request. The extract of the relevant paragraph in the said letter is reproduced below:

Para 4) The ESI Corporation, under a scheme named ‘Atal Beemit Vyakti Kalyan Yojana’ (ABVKY), provides relief to an Insured Person who is rendered unemployed to the extent of 25% of the average per day earning during the previous four contribution periods to be paid up to maximum 90 days of unemployment once in lifetime of the IP. This scheme may kindly be modified to provide 50% relief during the COVID-19 period.