Factory payday here, note ban could trigger bigger monetary chaos
The factory payday, reserved for the seventh day of a month, could trigger a bigger monetary chaos because most of the workers get paid in cash and don’t have bank accounts.Updated: Dec 07, 2016, 00:58 IST
The factory payday, reserved for the seventh day of a month, could trigger a bigger monetary chaos because most of the workers get paid in cash and don’t have bank accounts.
The cash crunch in the country — a result of the demonetisation drive — aggravated after the government and private companies disbursed salaries to their employees last month-end and early December.
Banks and ATMs are already running short of cash, dispensing below the limit set by the government. The factory payday on Wednesday could become a double whammy, given the situation.
“We are getting calls from many places where factories and construction companies have not paid their workers. We fear non-payment can lead to a volatile situation,” said Tapan Sen, general secretary with the Centre of Indian Trade Unions, which is affiliated to the CPI(M).
India has 560 million people working in factories. Of these, a mere 10% are in the organised sector, where salaries are transferred electronically into bank accounts.
For the rest, it is the decades-old system of getting cash in hand after signing a register. With the government cancelling 500- and 1,000-rupee notes, and printing of new bills being slow, there is just not enough cash to give out on Wednesday.
The labour ministry has spoken to trade unions to avoid violence. “We have requested them to reach out to workers and create awareness about digitisation,” labour minister Bandaru Dattatreya said.
The idea of digitisation may be lost on a vast number of workers.
Tirupur in Tamil Nadu has half a million people working at its garment and hosiery units. Only about a fifth has bank accounts. There are 800,000 people working in the Peenya Industrial Estate on the outskirts of Bangalore.
According to Srinivas Asranna, a member of the council that manages the estate, most of the workers are paid in cash.
Dattatreya met finance minister Arun Jaitley last week to seek more mobile ATMs and banking correspondents at factories, labourer colonies, and construction sites.
Banking correspondents are individuals that work on behalf of banks in areas with no branches.
“Banks have said they are ready, but nothing is in place and many workers may not get paid on time,” said CH Venkatachalam, general secretary of the All India Bank Employees’ Association.
Several employers may resort to paying in the old, cancelled notes.
“Those carrying unaccounted cash may try to make salary payments in old notes to get rid of their black money,” said an industry analyst who refused to be named.
They may want to pay a month’s salary in advance to make it attractive to the workers.