Indian state imposes new ‘welfare tax’ under landmark law to help gig workers

The fund will be used by the state government to run social security schemes for an estimated 400,000 platform-based gig workers in Rajasthan.

Debarshi Dasgupta

Debarshi Dasgupta

The Straits Times


The landmark legislation establishes a welfare board and a dedicated social security fund for gig workers in Rajasthan state. PHOTO: REUTERS

July 31, 2023

NEW DELHI – Ms Ganga Mandal began driving for ride-hailing services such as Uber and Ola in 2017, zipping around Jaipur, a city famed for its red and pink sandstone buildings.

With her monthly take-home earnings of around 35,000 rupees (S$570), the 35-year-old single mother in the capital of the north-western Indian state of Rajasthan looked after her two teenage daughters and even supported her ailing mother.

But the rising cost of fuel, along with “inexplicable” and random deductions by transport aggregators, have slashed her monthly earnings to barely 10,000 rupees in the past few months, making driving “no longer viable”.

She has since rented out her two cars, but rising healthcare and living expenses have forced her to even mortgage her house. “I alone know how I have managed my household expenses in the last few months… I probably have just a thousand rupees in my account,” she said.

On July 24, the state government of Rajasthan passed a landmark legislation to help gig workers such as Ms Mandal cope better in times of distress.

Titled the Rajasthan Platform Based Gig Workers (Registration and Welfare) Act 2023, it establishes a welfare board and a dedicated social security fund for gig workers in the state, a majority of whom work for ride-hailing and food delivery services.

Apart from state grants, the fund will be financed through a new tax imposed on each transaction made on platform service providers such as Uber that rely on gig workers. The quantum of this “welfare fee” has not been specified yet.

The fund will be used by the state government to run social security schemes for an estimated 400,000 platform-based gig workers in Rajasthan.

This is the first such law in India dedicated to the welfare of gig workers and is an attempt by the Congress party, which governs Rajasthan, to cosy up to such workers ahead of elections in the state in December.

Earlier this month, Karnataka, a southern state also governed by the Congress, announced free accident and life insurance cover worth 400,000 rupees for gig workers. The state government will pay the annual premium for this cover.

There are around eight million gig workers in the country and their numbers are expected to swell to more than 23 million by 2030, making them a sizeable constituency for political parties in India.

Gig workers in the country have been holding sustained protests since the pandemic over unfair working conditions and falling take-home earnings despite putting in longer hours.

Mr Nikhil Dey, one of the several volunteers who campaigned for the Act and helped draft its Bill, said the gig economy model with its “minute piece-rate contract” had further diminished workers’ rights.

“The need for such an Act was felt by gig workers because they now have no one to talk to, no one to negotiate with. They have found themselves talking to a machine and are basically at the mercy of an algorithm,” he added.

According to the new rules, a welfare board, comprising representatives from the government, platform service providers and gig workers’ organisations, has been tasked to oversee social security schemes formulated by the state and monitor the implementation of the Act to ensure gig workers have access to its benefits.

Welcoming Rajasthan’s move, Mr Shaik Salauddin, national general secretary of the Indian Federation of App-based Transport Workers, said the central government, which is led by the Bharatiya Janata Party, should go ahead and implement the Code on Social Security that it had proposed in 2020.

The code consolidated various federal labour laws and expanded the definition of an employee to provide social security benefits to gig workers. However, it is yet to come into force as the rules for its implementation have not been finalised.

“Thousands are joining this field, but many are also leaving it as they can’t work as gig workers for a long term because of a lack of social security,” he added.

The new Act in Rajasthan also envisages fines for violators. Any aggregator that fails to comply with its provisions will have to cough up to 500,000 rupees for the first contravention and up to five million rupees for every subsequent violation.

Platform service providers in India, some of which already provide accident and health insurance for their workers, have not reacted publicly to the new Act. Uber and Zomato, a food delivery app, did not respond to a request for comment from The Straits Times.

A key measure included in the Act is the creation of a “Central Transaction Information and Management System”, which will be managed by the board and track all payments made on platforms. Each payment made to platform-based gig workers and the welfare fee deducted will be recorded on this system and made available to them.

Mr Dey said this system offers a “far more rational” way for individual workers to track the welfare fee paid on their behalf and ensure they receive its intended benefits.

“What this does is that it gives much, much greater transparency, which doesn’t exist anywhere in the world, when it comes to my transactions on the platform as a gig worker. That’s a very, very big breakthrough globally,” he added.

Concerns remain, however, on the implementation of this Act, including the possibility of platforms passing on the cost of the welfare fee to their customers.

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