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December 15, 2017

Government looks to tweak financing model for skilling in favour of private companies

New Delhi : The government is looking to tweak its current financing model for skilling in favour of private players, who will be encouraged to take up in-house training — as is done globally — and reimbursed the cost from a central fund.

Currently, skills training in India is largely government-driven with only 36% of companies conducting in-house enterprise-based training.

In contrast, as many as 86% firms in Germany, 85% in China, 52% in Russia and 51% in Brazil and Mexico skill workers themselves. A revamp has become urgent as under the current government alone financing, the programme has not produced adequate number of trained youth. Also, the quality of training is often poor and does not match the skilling needs of industry.

A senior government official said that the financing model being considered by the skill development ministry is the “reimbursable industry contribution” (RIC) model, which is successfully running in 62 countries.

“There will be a dedicated training fund generated by either levying taxes or from mandatory corporate social responsibility contribution from each employer, with the government matching industry contribution to create a robust fund exclusively for skills training,” the official added.

Under this model, companies that use dedicated funds for vocational education and training (VET) can be reimbursed the cost based on the training done, which can either be in-house or purchased from accredited vocational training partners.

According to the official, RIC would be applicable to any registered private or public enterprise employing at least 10 people.

“However, employers in consultation with the sector skills council will have to mandatorily submit its requirement of skills and annual training plan for reimbursement in the RIC framework,” the official said, adding that the reimbursements would be linked to incremental improvement from the baseline and not on the absolute training capacity.

Currently, general tax revenues are used to fund public and private training providers. Another variant of financing skill development from general tax revenue is tax deduction of 150% of the expenses incurred on skill development programmes by the enterprises.

The government funds all the pre-employment training in India for every pillar of the VET ecosystem.

This includes the human resources development ministry funding vocational education at the secondary school level and the skill development and entrepreneurship ministry financing training under ITIs.

Prime Minister Narendra Modi’s Skill India Mission aims to make India the human resource capital of the world by imparting skills to 50 crore youth by 2022.

Noting that India will have a surplus manpower of 4-5 crore over the next decade, the Prime Minister at the launch of the Skill India Mission in 2015 emphasized the need to provide this youthful manpower with skills and ability to tackle global challenges, and had warned that the demographic dividend would otherwise become a challenge in itself.

Note: News shared for public awareness with reference from the information provided at online news portals.

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