Skilled workforce for MSMEs

Right to Apprenticeship

Several government programs and Ministries of the Government of India have been focusing on improving the skilled manpower base in India. While the previous UPA government in India had set an ambitious target to create 500 Million skilled workforce by 2022 the current NDA government has taken a step forward by creating a separate ministry to ensure that this key priority gets due attention as desired.

While there are several reasons attributed to the need of having skilled manpower the main is the issue of social harmony and national security. Social harmony stems from the fact that India has a large and growing youth population and in the absence of any mechanism to channelize their energy the potential demographic dividend will witness massive social unrest in future.

If one examines the present schemes of the government directly or through the partners in the ecosystem, it is evident that all these are largely supply side driven. The approximate students passing out from 11,964 Industrial Training Institutes or ITIs (Government run and private) are more than 1 Million. The sheer number of students who are passing out from these institutes across country is so huge that industries in India can’t absorb all of them. However, if one checks with industry their concern is the non-availability of skilled manpower in the market; and this problem becomes more acute when we speak with micro, small and medium enterprises (MSME).

So, where have we gone wrong? Clearly there is a need to evaluate these vocational training schools and optimize them to improve the quality of skilling being imparted. But before that it is important to articulate which are the major issues in the current system; first and foremost it is the lack of synchronization with industry’s current requirement; second, quality of delivery; third, un-regulated mushrooming of these colleges. While first two are quite obvious and self-explanatory it is the third that needs more explanation.

Un-regulated mushrooming of engineering colleges, polytechnics and ITIs created availability of seats for students after passing High Schools. To recover cost these institutions started lowering the entry qualifications so that they could admit many more students. This led to a decline in the caliber of the students getting admission in polytechnics and ITIs. There was an unchecked growth of engineering colleges cropping up without adequate infrastructure and quality faculty. As a result ecosystem started getting engineering graduates who at the price points were not employable and could not be absorbed by the industry. This issue is real and given the students paid substantial fees to the engineering colleges came under significant financial stress. This also had an adverse social impact as some of these engineers who otherwise could have been excellent plumbers, masons, electricians, mechanics, machine operator or manufacturing line -supervisors were now without jobs and given the investments made were seeking employment befitting someone with an engineering degree.

On the other hand, the industry has been facing acute shortage of plumbers, electricians, masons and people with similar skills. This shortage has resulted in increasing the cost of these services. In any metro one visit rendered by these people can cost from $5-$10 which means their daily income is $15-$25.  This means $400- $600 per month. On the other hand the graduate engineers are struggling to get a job at $200 per month!!! So this imbalance needs to be corrected.

Another issue is the Industry’s continuous complaint of not getting workforce which can be readily deployed. This has led to the creation of thousands of Vocational Training Institutes (VTIs) who positioned themselves as finishing schools or a bridge between ITIs/ Polytechnics/Engineering colleges and the industry. No doubt these efforts have helped in improving the employability of people who pass out of engineering/ITI or Polytechnics but this has come at a cost. Presence of such finishing schools is duplication of scarce resources in quick fixing something where large investments have already been made.  Perhaps, it would have been wiser to stop investments in institutions that have been churning out unemployable resources or focusing on improving their quality rather than adding another layer of finishing schools. To be precise the need of VTI is only there if there is demand for it by the industry and students are willing to pay for it.  There seems no reason for government to finance these especially when Government’s existing facilities are failing or not being utilized. This becomes significant when there are examples of profitable VTIs which are privately run.

In this scenario the chances that an MSME would be able to get even an affordable semi-skilled worker is remote and this reflects in the firm’s competitiveness. However, solutions are possible by integrating multiple elements available in the ecosystem and modifying few to make an impact.

The first and foremost problem that should be addressed is to change the attitude towards the skill development from being supply driven to demand driven.  If this principal is recognized in spirit then there would be livelihood at the end of skilling instead of a certificate which means nothing.

The second problem of not finding ‘job ready workers’ can only be solved by giving ownership of this effort to the industry which amounts to say that rather than spending public money on thousands of ITIs / Polytechnics/Engineering colleges and producing unskilled/unemployable workers, Government can give responsibility to train these people on payment basis to industry itself.  One way to achieve this is to make it mandatory for organizations which have more than 100 workers to have a small percentage of workers with work experience of less than 3 years. And Government can pay 75% of the salary of the first year employee and 50% and 25% for respectively second year or third year employee. This would be a substantial incentive for the industry to hire fresh unskilled or semi-skilled workers and train them. Fortunately, India has the Apprenticeship Act-1961 and it has been continuously modified over the years. Perhaps modification for this effect could be a game changer.

After this three year period employee could write a common test to get the ITI diploma and either pursue future technical studies or pursue employment. This could be financed through closing some of the non performing Government funded ITIs and VTIs and the saving made could be deployed to fund the on the job training in the industry.  It is also to be noted that ITI/VTI could be supported by virtual university and books should be available on payment basis. Greater transparency and accountability can be established by using ‘Aadhar Cards’ and Internet based implementation monitoring tools.

Such measures would help linking the Industry with its skilling requirements as student would be learning what the industry needs. Furthermore, the real role for government would shift towards improving the demand for the skilled workers. This demand can only increase if concrete steps are taken to improve ease of doing business in India and re-designing incentives to boost manufacturing in India. Creation of industry led skilling programs will help India address a social issue of finding meaningful employment for its youth at the same time will also ensure improvement of competitiveness of its industry and MSMEs.

2 thoughts on “Skilled workforce for MSMEs

  1. Great article Amar ! Very important and pertinent insights drawn from your rich experience of working with the MSME Ministry and stakeholders !

    As I have been reading up on the Apprenticeship Act recently, I just wanted to add that the Apprentices Act of 1961 has been recently amended through The Apprentices (Amendment) Bill, 2014 was introduced in Lok Sabha on August 7, 2014 and notified in December 2014.

    There are some significant amendments:

    The Act sets the minimum age for being engaged as an apprentice at 14 years. The Bill adds that the minimum age for apprenticeship in designated trades related to hazardous industries shall be 18 years.

    The Bill permits multiple employers to come together, either themselves or through an approved agency (vs. only themselves as per the Act), to provide apprenticeship training (vs. practical training as per the Act) to apprentices under them.

    The Act specifies that every trade apprentice should appear for a proficiency test conducted by the National Council for Vocational Training (NCVT), on completion of his training. On passing the test, NCVT shall grant him a certificate of proficiency. The Bill adds that such tests may be conducted and certificates may be granted by other authorised agencies as well.

    Under the Apprenticeship Training Scheme ( ATS):

    The minimum rate of stipend per month payable to trade apprentices is as follows:
    Stipend (Year wise)
    First Year 70% of minimum wage of semiskilled workers notified by the respective State or Union territory.
    Second Year 80% of minimum wage of semiskilled workers notified by the respective State or Union territory.
    Third & Fourth Year 90% of minimum wage of semiskilled workers notified by the respective State or Union territory.

    The rates of stipend for Graduate, Technician & Technician (Vocational) apprentices are Rs. 4984 p.m., Rs. 3542
    p.m. and Rs. 2758 p.m. respectively. (with effect from 19th December, 2014)
    Expenditure on Stipend for the categories of Graduate, Technician & Technician (Vocational) apprentices is shared
    equally between the employer and the Central Government.

    Very interestingly some states like Goa are devising schemes to further subsidise 30%, 20% and 10% in Years 1, 2 and 3 so that the Apprentices can meet the minimum wages !!

    So you are absolutely right ….the Apprenticeship model is one of the most underutilised/unutilised interventions ; the poor implementation and performance of the ATS is testimony to that.

    The Modi Govt needs to be complimented on this particular amendment and more States need to wake up to this opportunity!

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