The small scale industries are playing an important role in the GDP of India.

The small scale industries

have nearly 40% share in the total industrial output and 35% share in exports. The definition of small
scale industries have changed from time to time. Earlier they were classified under two categories:

• Using power with less than 50 employees.

• Using no power, but strength of employees is more than 50, less than 100.

However according to the latest definition a industry is said to be a small scale industry if its investment in
fixed assets like plants and equipments either held on ownership terms or on lease or on hire purchase is
less than Rs 10 million. And it is also essential that the unit is not controlled by any other industrial unit.

However the unit in no way can be owned or controlled or ancillary of any other industrial unit.

The traditional small-scale industries clearly differ from their modern counterparts in many respects. The
traditional units are highly labor consuming with their age-old machineries and conventional techniques of
production resulting in poor productivity rate whereas the modern small-scale units are much more
productive with less manpower and more sophisticated equipments.

Khadi and handloom, sericulture, handicrafts, village industries, coir, Bell metal are some of the traditional
small-scale industries in India. The modern small industries offer a wide range of products starting from
simple items like hosiery products, garments, leather products, fishing hook etc to more sophisticated
items like television sets, electronics control system, various engineering products especially as ancillaries
to large industrial undertakings.

Nowadays Indian small-scale industries (SSIs) are mostly modern small-scale industries. Modernization
has widened the list of products offered by this industry. The items manufactured in modern Small-scale
service & Business enterprises in India now include rubber products, plastic products, chemical products,
glass and ceramics, mechanical engineering items, hardware, electrical items, transport equipment,
electronic components and equipments, automobile parts, bicycle parts, instruments, sports goods,
stationery items and clocks and watches.

Since independence the Government of India has nurtured this sector with special care with the following
aims: -

To develop this sector as a major source of employment

To encourage decentralized industrial expansion
To ensure equitable distribution of income.
To mobilize capital investment and entrepreneurship skills

Entrepreneurs in small scale sector are normally not required to obtain a licence either from the Central
Government or the State Government for setting up units in any part of the country. Registration of a
small scale unit is also not compulsory. But,its registration with the State Directorate or Commissioner of
Industries or DIC's makes the unit eligible for availing different types of Government assistance like
financial assistance from the Department of Industries, medium and long term loans from State Financial
Corporations and other commercial banks, machinery on hire-purchase basis from the National Small
Industries Corporation,etc. Registration is also an essential requirement for getting benefits of special
schemes for promotion of SSI viz. Credit guarantee Scheme, Capital subsidy, Reduced custom duty on
selected items, ISO-9000 Certification reimbursement & several other benefits provided by the State
Government.
The Ministry of Micro, Small and Medium Enterprises acts as the nodal agency for growth and
development of SSIs in the country. The ministry formulates and implements policies and programmes in
order to promote small scale industries and enhance their competitiveness. It is assisted by various public
sector enterprises like:-
Small Industry Development Organisation♣ (SIDO) is the apex body for assisting the Government in
formulating and overseeing the implementation of its policies and programmes/projects/schemes.
National Small Industries Corporation Ltd♣ (NSIC) was established by the Government with a view to
promoting, aiding and fostering the growth of SSI in the country, with focus on commercial aspects of
their operation.
The Ministry has established three National♣ Entrepreneurship Development Institutes which are engaged
in development of training modules, undertaking research and training and providing consultancy services
for entrepreneurship development in the SSI sector. These are:-
• National Institute of Small Industry Extension Training (NISIET) at Hyderabad,
• National Institute of Entrepreneurship and Small Business Development (NIESBUD) at NOIDA
• Indian Institute of Entrepreneurship (IIE) at Guwahati
The National Commission for Enterprises in the Unorganised Sector (NCEUS)♣ has been constituted with
the mandate to examine the problems of enterprises in the unorganised sector and suggest measures to
overcome them.
Small♣ Industries Development Bank of India (SIDBI) acts as apex institution for financing SSIs through
various credit schemes.
In a developing country like India, Small Scale Industries play a significant role in economic development
of the country. They are a vital segment of Indian economy in terms of their contribution towards
country's industrial production,exports,employment and creation of an entrepreneurial base.These
industries by and large represent a stage in economic transition from traditional to modern technology.
Small industry plays a very important role in widening the base of entrepreneurship. The development of
small industries offers an easy and effective means of achieving broad based ownership of industry, the
diffusion of enterprise and initiative in the industrial field.
Given their importance,the Government policy framework right from the First plan has highlighted the
need for the development of SSI sector keeping in view its strategic importance in the overall economic
development of India. Accordingly, the policy support from the Government towards Small Scale
Industries has tended to be conducive and favourable to the development of small entrepreneurial class.
Government accords the highest preference to development of SSI by framing and implementing suitable
policies and promotional schemes.

The most important promotional policy of the Government for the SSI's is fiscal incentives in the form of
tax concessions and exemptions of direct or indirect taxes leviable on production or profits.
With effect from financial year 2005-06,SSIs can claim deductions in respect of profits and gains(under
section 80IB of Income tax Act) at the following rates:-
If SSI unit is owned by a company,the deduction available is 30% for first 10 years.If SSI unit is owned
by a co-operative society,the deduction available is 25% for first 10 years.
If any other person owns SSI unit,the deduction to be claimed is 25% for first 10 years.

SSI unit can avail this tax exemption after fulfilling following conditions:
They should♣ not be subsidiary of,or owned or controlled by other industrial undertakings.They should
not be formed as a result of splitting up or reconstruction of any industrial undertaking/business.SSI units
can manufacture any nature or type of goods,which they are permitted to do so.They should have
commenced business between 1st April 1991 and 31st March 2002.They should employ atleast 10 workers
in a manufacturing process carried out with aid of power or atleast 20 workers without aid of power.
This tax exemption from total♣ income is allowed from the assessment year in which the unit begins to
manufacture goods.

Small Scale Industries are subjected to excise duties under the Central Excise Tariff Act,1985(5 of 1986).
The eligibility for excise concessions for SSIs has been based on annual turnover rather than SSI
registration. SSI units having turnover less than Rs.4 crores are only eligible for concessions.

Provisions of Small Scale Industries under Central Excise

Definitions:

An industrial undertaking in which the investment on Fixed Assets in plant and machinery whether held on
ownership or terms on lease or on hire purchase does not exceed Rs 10 million as per Small Scale
Industries Act.

As per Central Excise Act SSI Unit means a unit whose turnover is less than 4 crores (Rs 3 Crores upto
2004-05) in the last Financial Year.

Under Central Excise Act 1944 the Govt. has given various concessions to SSI units to encourage their
growth. SSI units whose turnover was less than Rs. 4 coroes in 2006-07 are eligible for the concessions, if
the units does not avail Cenvat Credit on inputs, turnover upto Rs. 150 lacs (Rs 100 lacs upto 2006.07) is
fully exempt.

If SSI unit avails Cenvat Credit on inputs, it has to pay normal duty on all clearances and no SSI
exemption is available.

According to the definition of Central Excise all industries are eligible for concession irrespective of their
investment or numbers of employees or size of the industry or unregistered under SSI Act. Any industry is
eligible for this concession if its annual turnover is less than 4 crores.

Under section 209(1)(d) of Companies Act 1956 SSI is to be considered to those units whose
(a) aggregate value of machinery and plant installed wherein, as on the last date of the preceding
financial year , does not exceed limit as specified for a small scale industrial undertaking under the
provisions of the Industries (Development and Regulation Act 1952 and
(b) the aggregate value of turnover made by the company from sale or supply of all its products during
the preceding financial year does not exceed ten crores of rupees.

Choice of Exemption:

It is the choice of the SSI unit which type of exemption it will avail and that option must be informed to
the Department:

First Option: Avail full exemption upto 150 lacs and pay normal duty thereafter. Such units can avail
Cenvat credit on inputs after reaching turnover 150 lac in that particular financial year.

Second Option: SSI unit can also pay duty on 100% despatch and avail full Cenvat Credit on inputs.

Other conditions:

1. If any SSI unit having various products either he has to avail Cenvat credit for all products or opt
for exemption. It is not permissible to avail Cenvat credit for some products and avail exemption
for other products.
2. If a manufacturer has more that one factory, he has to avail any one option in respect of all
factories. He cannot opt to avail Cenvat Credit in respect of one factory and avail SSI exemption
for other factory.
3. Exception is only permissible in case of export. If the final product is exported, the SSI unit can
avail Cenvat Credit in respect of inputs used for final product, which is exported.
4. Cenvat Credit is to be reversed if any SSI unit decides to opt for exemption in mid of any fiancial
year. In this situation the unit has to pay an amount equivalent to Cenvat Credit allowed him on
the inputs lying in stock (whether in form of Raw Martial or Work-in- process or Finished Goods)
and if any Cenvat Credit on inputs is balance in RG 23A Part-II, it will be lapsed.
5. If any SSI unit decides to avail and utilize Cenvat Credit in middle of the financial year it is entitled
to avail Cenvat Credit on the closing Stock on inputs (whether in form of Raw Martial or Work-in-
process or Finished Goods) on the date of declaration. In this situation turnover is to be
considered from 1st April of that financial year.

Calculation of Turnover:

While calculating turnover or limit of Rs. 4 crores the following clearances are to be:

A. Excluded:
a) Export other than Nepal and Bhutan (Clearance means for “home consumption” i.e. that is in India
only not any export);
b) Deemed exports to - 100% EOU, SEZ, FTZ, EHTP, ESTP or supplies to UNO;
c) Turnover non-excisable goods;
d) Goods manufactured with other’s brand name cleared on payment of duty.
a) All types of trading turnover;
b) Job work or any process which does not amount to manufacture;
c) Goods returned and cleared after processing including repairing work;
i) No clubbing turnover of the units belonging to the Government, Khadi and Village Commission
etc.

B. Included:
 a) If one Manufacturer has more than one units or factories even in different places, the turnover
of all factories have to be clubbed for calculating the SSI exemption limits.
b) Some times, one manufacturer may use a factory for part of the year and another
manufacturer may use the same factory for rest of the year, in such cases, the turnover of
different manufacturers has to be clubbed for calculating the SSI exemption limits.
c) If more than one manufactures use a particular factory, in such cases, the clearances of
different manufacturers have to be clubbed for calculating the SSI exemption limits.
d) If goods or final products are exempt under any other notification (other that SSI exemption
notification) the value of final product is to be considered for calculating the limit;
e) Captive consumption, if used in manufacture of final product which is exempt under any other
notification;

Generally, the provisions for calculation of turnover and exemption are similar. Major distinction is that if
goods are exempt under a notification other than SSI exemption or job work exemption notification.

Items are not eligible for SSI concession:

a) Goods chargeable at NIL rate of duty or exempted under any other notification;
b) Tea;
c) Extract or essence of tea or coffee;
d) Pan masala;
e) Tobacco products;
f) Sandal wood;
g) Matches;
h) Photographic plates, films and papers;
i) Polyurethane foam and articles of made from Polyurethane;
j) Textile articles;
k) Ceramic tiles;
l) Stainless steel patties/pattas;
m) Copper and copper alloys;
n) Aluminium circles;
o) Tractors, motor vehicles, cars, chasis, motorcycles;
p) Watches (value upto Rs. 500);
q) Arms and ammunition;
r) Travel sets for personal toilet.

Value for calculating limit:

Assessable value as per section 4 i.e. transaction value. When goods are assessed on basis of MRP the
value will be determined under sec 4A.

Branded goods manufactured by small Units are not to be treated as SSI

Brand name or Trade name means any name or mark such as symbol, monogram, lebel, signature or
invented word or writing which is used in relation to the goods for the purpose of indicating, or so as to
indicate a connection in the course of trade. Brand name or mark or trade name may or may not be
registered.

Some large units get their goods manufactured from small unit under their brand name or trade name. In
such cases, the small unit will not be eligible for excise exemption.

But small unit is eligible to SSI exemption if he manufactures different goods under the same brand name.

SSI exemption is not available:

a) If brand name belongs to sister concern of a large unit,

b) If brand name belong to other SSI manufacturer,
c) If brand name belongs to non-manufacturing trader,
d) If manufacturer puts his own mark in addition to brand name of other,
e) If brand name belongs to related person of a large unit,
f) If brand name belongs to another unit of a large unit,
g) If brand name belongs to foreign person or a non-manufacturing trader,
 h) If buyer uses the goods captively i.e not for sale.

Procedural Relaxations for those availing exemption:

a) Exempted small units having turnover below Rs. 150 lacs, they are exempt from provisions of
registering their unit with Excise Authority;
b) For availing SSI exemption the unit has to file declaration to Assistant/Deputy Commissioner;
c) SSI unit availing SSI concession need not submit monthly return. They have to submit a
quarterly return in ER-3 by 20th of the following month;
d) SSI units have to pay duty by 15th of the following month, except in the month of March;
e) SSI units not covered under excise provisions for the purpose of export i.e. they do not have to
prepare ARE-1 form for export;
f) SSI units need not maintain any statutory records. Maintain private records only to establish
that turnover has not crossed the exemption limit is sufficient;
g) SSI units need not maintain invoice under Rule 11 of Central Excise Rules, 2002. They should
mention progressive turnover on the invoices to establish that turnover has not crossed the
exemption limit.
h) Unit availing SSI exemptions are to file an annual declaration to the Assistant/Deputy
Commissioner under Notification 36/2001-C.E. (NT).

If SSI unit pays normal duty without availing SSI concession, the procedural relaxation will not apply.

Central Value Added Tax

-------firstly we have to under stand the Indian tax Central Excise Duty (BED). It is called as basic excise
duty. Every manufacturer is liable to pay the excise duty in various kinds namely Basic Excise Duty,
Special Excise Duty, Additional Excise Duty etc.,

Just think over a product which is reached to a end user, how many manufacturing activities are done. So
to reduce the tax burden of the end user, the Govt. of India introduce the MODVAT scheme which is now
called CENVAT scheme.

Based on this, if any manufacturer purchased a material, which is duty paid, and if it is used for his
further manufacturing activity, he can avail this as credit in his book based on the Central Excise Invoice.
At the time of selling his manufactured goods, he is liable to pay the excise duty. He can adjust the credit
which he has taken into his book and pay the rest. For example:

CENVAT availed at the time purchased various goods Rs.20,000 (EXcise duty alone)
CENVAT payable for his product at the time sales Rs.25,000
He will pay only Rs.5000 through cash deposit in PLA.

---------------------------------------------

Rules and Regulations Governing Small-Scale Industry

Rules and Regulations are the essence of the any business for its steady growth. These are governing
factors to ensure that everything goes well in accordance with the Plan and Policy adopted, the
instructions issued, the principles established. The possibility of errors and omissions could be rectified
and their recurrence may be prevented. The regulation applies on people, object and actions.

Thus, a regulation is a process by which the authorities can check on

• Whether or not the plans are being adhered to

• Whether or not a proper progress is being made towards the objectives,
• Whether the environment is saved from the pollution
• Whether law and order is maintained or not
• Whether the interests of the workers are safeguarded or not
• Whether the small entrepreneurs are getting the raw materials nor not
• Whether there are any deviations for which a corrective action needs to be taken, etc.

The basic objective of the whole process of regulations is to ensure that the results of operations conform
as closely as possible to the established standards of goods, specified procedures and instructions.

The Regulations which are applicable to SSI are of two types: (1) Protective (2) Promotional.
While protective regulations are of the nature of various safeguards to SSI while promotional regulations
are the nature of giving a push to the SSI for their growth.

The Regulations: SSI is regulated and governed by the following regulations:

1. State Industries Act

2. The Factories Act, 1948
3. Shops & Establishment Act, 1948
4. Indian Boiler Act
5. Payment of Wages Act, 1936
6. Minimum Wages Act, 1948
7. Workmen’s Compensation Act, 1923
8. Employees Provident Fund Act, 1952
9. Employees State Insurance Act, 1948
10. Income Tax Ac, 1961
11. Central Sales Tax Act and State Sales Tax Acts
12. Drugs Control Act
13. The Payment of Bonus Act, 1978
14. The Industrial Employment (Standing Orders) Act, 1956
15. Industrial disputes Act, 1947.

The Small Scale entrepreneur has to be well versed in excise, customs procedures and export / import
regulations and procedures. They could seek the advise and assistance from the professionals like –
Inspecting Staff of Government, Labour Consultants, Financial Consultants, etc.

Industrial Development (Regulation) Act.

The IDR Act is an instrument in the hands of the Government for the control and direction of the private
sector industrial investments. The control over the industrial licensing system is exercised through this
IDR Act with the overall national interest. It is a complicated, time consuming and costly exercise to
acquire an industrial license. Sometimes, it takes years before it can be obtained. Due to non availability
of qualified persons to prepare application for industrial license, government could not implement the
procedure to the SSI.

In recent years, various associations of SSI have come forward for their legislative protection. In August
1971, the Small Scale Industries Board had recommended to the Government to set up a committee to
examine the feasibility of enacting suitable legislation for the development of small scale industries.

The Government had recommended forming a Committee headed by Mr. A.R. Bhat to draft legislation for
the small scale sector. The committee had placed the draft legislation s for the approval of Government.
However, the Government has not been able to take any decision on them, because it has reservations on
the desirability of enacting such legislations.

The Government should keep the interests of the community uppermost in mind while extending
legislative protection to the small sector industries.

Factories Act, 1948:

Definition of a Factory: Section 2 (m) defines a factory as any place wherein ten or more persons are
working and in which a manufacturing process is carried on with the aid of motive power supplied by
steam, oil or electricity. Premises in which power is not used come under the term of a factory if twenty or
more persons are working in them.

Employment of Children: The act fixes the minimum age of persons who can enter a factory for work at 14
years. The Act restricted the entry of children below 13 years for employment. The Act further notified
that a qualified surgeon must certify the correctness of his age and that certified copy must be available
with the factory manager at any time for inspection.

Hours of work for children: The Act restricted the hours of work at four and a half hours from 5 hours for
children age of 14 - 17 and prohibited the work at night for such persons.
Hours of work for Adult Male and Female workers: The Act restricts employment of women in factories
between 6 pm to 7 am and has also reduced the daily working hours from 8 hours to 7-1/2 hours. The act
also made it compulsory of half an hour break after completing 5 hours. The worker, who works for more
than 8 hours in a day, is to be paid for the extra hours work at the rate of twice their ordinary rate of
wages.

Cleanliness: The Act provides that every factory shall be kept clean. Accumulation of dirt and refuse shall
be removed from the floor. The benches of work room, staircases and passages are also to be maintained
properly and cleaned every week. All inside walls shall be white-washed every year of painted once in
every 5 years. Due importance is given for cleanliness.

Ventilation and Temperature: The Act provides for adequate ventilation and fresh air circulation in every
factory and maintains the required temperature. Adequate measures shall be taken by the management
to protect the workers from excess temperature.

The State Government may prescribe a standard of adequate ventilation and reasonable temperature for
any factory and suggests ways and means for reducing excess temperatures. Measures also to be taken to
prevent the dust or fumes which ware injurious to the health of the workers which may prevent the
workers inhalation of fresh oxygen.

Artificial Humidification: In factories where humidity is artificially increased or maintained, the State
Government may implement some rules –
• Prescribing standards of humidification
• Regulating methods used for humidification
• Directing that prescribed tests for determining humidity.
• Prescribing certain methods for securing adequate ventilation and cooling of the air in those rooms
where artificial humidity is introduced.
• Water used for humidification and drinking, shall be of municipal approved.

Overcrowding: To prevent overcrowding in any factory, the Act lays down that a minimum of 500 cubit
feet space shall be provided to each work. The Chief Inspector of Factories will communicate each factory
manager the maximum number of workers that may be employed on any premises. However, he has the
authority to exempt any factory or work area from this rule if he is satisfied that it is not necessary to
follow the prescribed rules in the interest of workers employed therein.

Lighting: Management of a factory has to maintain sufficient and suitable lighting, natural or artificial or
both, in all the work areas. All the glasses are to be kept clean on both the inner and outer surface and
effective measures to be taken where shadows may cause eye-strain or create a risk of accidents.

Drinking Water: In every factory, effective arrangement of water at prominent locations shall be provided.
Where more than 253 workers are ordinarily employed, provision of cool drinking water shall be made
during the hot weather.

Latrines and Urinals: Sufficient latrines and urinal facilities shall be provided at the places accessible to
workers at all times while they are duty in the factory. The State Government may prescribe the number
of latrines and urinals to be provided in any factory in proportion to the number of male and female
workers employed therein.

Safety Provisions: All possible safety measures are to be provided at the factory premises. It is the legal
responsibility of the management for maintenance and use of safety guards. It is its duty to supervise the
use of these guards by the workers. In every factory, all dangerous parts of all machines like moving parts
of prime movers, fly wheels, electric generators, motors, Rotary converts, etc. shall be provided with
proper fencing for safety measures.

Dangerous Fumes (smoke) Adequate provisions shall be made in a factory where dangerous smokes that
may occur in any chamber, tank, pipe etc.

Explosive Gases, Dust, etc. Preventive measures are to be taken to avoid possible explosives, gas
leakages, smokes, etc.

Welfare Provisions: Workers shall be provided with suitable welfare facilities like washing facilities, storing
and drying clothes, facilities for sitting, first aid appliances, and other welfare activities which might boost
the worker for satisfactory working conditions.

Penalties for Breach of Provision of the Act: Disobeying the provisions of the Act shall be liable for office
and be punishable with imprisonment for a term not exceeding three months or with a fine upto Rs. 500
or both.

Income Tax Act:

The Government has provided some income tax concessions for small scale industries. Under Section 80
HHA, any profits and gains earned from a new small scale industrial undertakings set up in any rural area
are provided with 20% tax rebate for the first ten assessment years. This concession was extended only
to those units who have set up its business after September 30, 1977.

Another incentive is the investment allowance under section 32A of the Act. Any small scale unit is entitled
to a deduction of 25% of the cost of plant and machinery installed after march 31, 1976.

The Industrial Employment (Standing Orders) Act, 1946.

The Standing Orders in any factory clearly defining the rights and obligations of the employer and the
workers in respect of recruitment, discharge, disciplinary action, holidays, leave, etc are lacking. The
absence of clear cut orders causes confusion between management and workers. During the Labour
Conferences held in 1943, 1944 and 1945, the Government of India passed the Industrial Employment
(Standing Orders) Act in 1946. This act provides for the framing of standing orders in all establishments
employing 100 or more workers.

The Act requires the employers to submit the details about the classification of workers (temporary or
permanent), their working hours, holidays, pay days, wages rates, procedure to be followed while
applying for leave and holidays, termination of employment, notice of discharge, disciplinary actions, etc.

The Act has been put into practice by all the State Governments. In Maharashtra State, it has been made
applicable to establishments in which fifty or more persons are employed.

The Indian Trade Unions Act, 1926:

Trade Unions are formed to protect the interest of workers as against the employers. It was the employer
who bargains with the worker to work for him at low wages. The worker on an individual capacity cannot
bargain for a higher wage. If he does so, he will not be offered the job and he has to go for starvation.
Since his income is very low, he is not able to accumulate any savings. If he refuses the job of whatever
the wage, he will not find it that job as well. It is relatively difficult for a worker to find an alternative
employer who would pay him the wage he demands. His weak bargaining position thus compels him to
accept whatever wages are offered to him. It is possible for the employer to refuse the wage which a
worker demands because he could engage somebody else who is willing to work on a lower wage.

It is therefore, in the interest of protecting the worker and to safe guard his minimum wages for which he
is right, trade unions are formed for the mutual benefit and build employer-employee relations.

Rules of Trade Union: The rules of trade union must contain the following provisions:

• The name of the Trade Union under which it is registered of existed

• The objects for which it has been established
• Purpose for which the general funds will be applicable
• Maintenance of the list of members for inspection by officers and members of the union
• Admission of new ordinary members and honorary members
• The conditions under which the members are entitled to the benefits
• The manner in which the rules shall be amended, altered, and revoked / recalled.
• The manner in which officer bearers of the Union shall be appointed or removed
• The safe custody of the funds of the union, audit of accounts, inspection of account books, etc.
• The manner in which the union will be dissolved.

Rights of Registered Trade Unions:

• Collect membership fees on the premises of the factory without interference from the management
• Put up notices of the meetings of the union and other activities of the union on the premises of the
factory.
• Use the general funds for specific purposes
• Attend the management meeting on behalf of workers.
• Represent the worker in the matter pertains to show cause or labour court.
• Raise funds for political purposes at the option of the members
• Conduct a strike by peaceful methods with permission from all members
• Appoint outsiders as an Executive of the union in certain cases
• Send to the Registrar every year, an audited statement of the receipts and expenditure.

The Payment of Wages Act, 1936

All the workers in a factory are supposed to get wages either weekly or monthly, for the work and the
service he has done. The payment of wages to the workers in a particular form and at regular intervals
without any unauthorized deductions is the objective of this Act.

Scope of the Act: The provision of this Act applies to workers engages in factories as defined in the
Factories Act of 1948 and the persons employed in any railway by contractor or sub-contractor. The Act
may also include any persons employed in any industrial establishments.. The provisions of this Act are
applicable to those persons whose wages are less than Rs. 400 per month.

The date of payment of wages: The wages of every persons employed in any factory, industrial
establishment, or railways, where less than 1000 workers are employed, shall be paid before the expiry of
the seventh day after completion of the wage period, generally a month. The wages for a month, for
example, shall be paid before the seventh day of the next month. If the workers employed in a factory are
more than 1000, the wages shall be paid within 10th day of the next month. The wages of a terminated
person shall be settled his account by the next work day after such termination.

Authorized Deductions: The Act authorizes an employer to make deductions from wages for the specific
purposes only such as fine, absence from duty, damage to or loss of goods or money, where such damage
is due to the negligence or default on the part of the employee, housing accommodation supplied by the
employer and such amenities / services provided by the employer as the State Government may
authorize.

• The fines shall be imposed by the employer with the due approval of the State Government after serving
proper notice to the employee, about the fine.

• Fines shall not be imposed on any employee unless he has been given an opportunity to show cause why
the fine should not be imposed on him.

• No fine shall be imposed on persons below the age of fifteen years.

• A fine imposed on any employee in any wage period shall not exceed an amount of half an anna or three
naye paise in the rupee of the wages payable to him for the period.

• The fine so imposed shall be recovered in installments or after the expiry of sixty days from the day on
which it was imposed.

• The amount of fines so collected from time to time from various employees shall be utilized only for such
purposes as are beneficial to the employees, as prescribed by the authorities.

The Workmen’s Compensation Act, 1923:

With the installation of machineries operated by electrical powers, the number of accidents in factories has
also increased considerably. Many times, workers lost their fingers, sometimes their hands, feet and on
many occasions, their lives while working on machines. This has caused the loss of earnings for their
dependents and they are left to starve.

On such occasions, it is quite natural that the employer purely on humanitarian point of view provides
some compensation to such workers or their dependents. On the economic ground, neither the society nor
the employers were at ready to take the liability of payment of any compensation. However, some
enlightened employer did pay compensation to their employees when they suffered accidents, but a large
majority was not willing to accept this responsibility. The workers could not claim compensation as a
matter of right since he was on the weaker side. Even when the compensations are paid, the amount paid
was not satisfactory and there were difference of opinion between the employer and the employer as
regards the correctness or fairness of the amount paid.

In order to provide some bases for a statutory claim for compensation to be paid to the disabled factory
worker, Workmen’s Compensation Acts have been passed in almost all the countries.

Employer’s Liability for Compensation: When a personal injury is caused to a worker by an accident arising
out of and in the course of his employment, his employer shall be liable to pay compensation in
accordance with the provision of this Act.
When Employer is not Liable: At some times, the employer is not liable if –
1. The injury results in a partial or total disablement of the worker for less than 3 days,
2. If the injury caused to the worker directly after having been under the influence of drinks or drugs
3. If the injury can be directly attributed to the willful disobedience by the work of an order expressly
given
4. To the willful removal or disregard by the worker of any safety guard or other device which he knew to
have been provided for the purpose of security his safety.

Occupational Diseases: If a worker is engaged continuously for not less than six months in any
employment which involves health hazardous in nature, and gets contacts any disease specified in the
Schedule as an occupational diseases, the contacting of such a disease shall be regarded as an injury by
accident and shall be deemed to have arisen out of and in the course of employment. The State
Government may add to the list of schedules and specify the corresponding disease after giving three
months notice in the Gazette.

The injuries for the purpose of this Act have been classified as Death, Permanent total disablement,
Permanent partial disablement and Temporary disablement – partial or total. The Act provides for
compensation for these categories of injuries in the Schedules I to IV. A worker who has given notice of
an accident shall submit himself to a medical examination by the qualified medical practitioner at the cost
of the employer. When a worker who receives half monthly payments under this act due to above injuries,
shall submit himself to such medication examination from time to time till the medical examiner certifies
him to be fit to works. If worker refuses to submit himself to such a medical examination without sufficient
cause, his right to compensation shall be suspended.

The Employees State Insurance Act, 1948:

1. The implementation of Workmen’s Compensation Act experienced that the benefits offered to any
workers in many cases did not reach them due to various reasons:
2. The claim for compensation for injury had to be filed in an ordinary court of law. The lack of finance
made impossible for a worker to file such a suit and fight for it.
3. The employer, through his expert legal advice, proves that the accident did not arise out of and in the
course of employment
4. Or some times that the accident took place due to worker concerned being under the influence of
alcohol or drug at the time of accident
5. Or may be due to his negligence or his disobedience of obeying for the safety rules.
6. In such cases, the workers were generally unwilling to go to court of law and preferred to accept
whatever compensation employers chose to pay out of a sense of pity or charity. The Employees’ State
Insurance Act of 1948 was framed to prevent such victimization of the worker by the employer.

Contribution: Every person who are employed for wages in any factory or establishment, to which this Act
applies, shall be insured. The insured workers whose wages are more than one rupee per day, shall pay
his contribution to the Employees’ State Insurance corporation at the rates specified in the Act.

Benefits under the Act:

The insured persons or their dependants shall be entitled to many benefits:

Sickness Benefits: In case of sickness as certified by a duly appointed medical practitioner, the insured
person shall get the periodical payments.

Maternity benefits: Periodical payments in case of confinement to an insured woman certified to be eligible
for such payment by an authority specified in this Schedule.

Disablement benefits: Periodical payment to an insured persons suffering from disablement as a result of
an injury sustained in the course of his employment.

Dependants’ Benefits: Periodical payments to such dependants of an insured person who dies as a result
of an injury sustained in the course of his employment.

Medical Benefits: Free medical check up and treatment are extended to the insured person and the
Corporation, with the permission of the Government of India, could extend medical benefits to his
dependants.

A person who claims for sickness or disablement benefit must observe that:

1. He shall remain under the medical treatment at dispensary, hospital, clinic or other institution and
observe the instructions of the medical officer in charges of his case.
2. He shall not while under the treatment, do anything which might delay his chances of recovery.
3. He shall not leave the area in which medical treatment provided without prior permission of the medical
officer or such authority.
4. He shall allow himself to be examined by any duly appointed medical officer.

The Act also provides for penalties when a person makes a false statement for the purpose of causing any
increase in the payment or benefit or causing any payment where no payment or benefit is authorized,
etc.

The Industrial Disputes Act, 1947:

The Industrial Disputes, strikes and lock-outs were not very common occurrences in India till 1914. During
the Great War of 1914 – 1918, the strike came to be regarded as a weapon of industrial warfare. During
the war, the cost of living went on rising, but the wages did not keep pace with it. This gave rise to
serious pain among industrial workers and led to a series of strikes, notably in Mumbai Textile Industries..
In addition to low wages, there were many other causes which were partly responsible for the outbreak of
strikes during that period. The more important of these were long hours of work, bad working conditions,
insanitary housing conditions, absence of any provision for compensation for injuries sustained during the
course of employment, absence of the right to form a trade union, ill treatment of workmen, officials, etc.

The important provisions of the Industrial Disputes Act of 1947 are:

• If any industrial dispute exists or is planned or sensed, the appropriate Government may by order in
writing, refer the dispute to a Board for promoting a settlement or refer to the court of Inquiry and to a
Tribunal for Arbitration.
• When either or both of the parties apply to the Government to refer the dispute to a Board, Court or
Tribunal, the person applying should represent majority of each party.
• If a dispute has been referred to a Board or a Tribunal, the Government may prohibit the continuance of
any strike or lock out in connection with such a dispute.
• A settlement arrived at in the course of conciliation proceedings under the Act, or an award declared by
the Government, shall be binding on all the parties to the dispute for 6 months.
• An award declared by the Government shall come into operation for a period of one year.
• Workers employed in public utility industries shall not go on a strike and the employers in such
industries shall not resort to lock outs
- Without giving a fourteen days’ notice and before the period of notice expires, or
- During the pendency of conciliation proceedings.
• Workers employed in any industrial establishment shall not go on strike
- During the pendency of conciliation proceedings
- During the pendency of proceeding before a Labour court, Tribunal or National Tribunal
- During a period in which a settlement or a award is in operation.

The Indian boilers Act, 1923:

1. An owner of a boiler shall not use it or permit to be used

2. Unless it has been registered in accordance with the provisions of this act,
3. In case of a boiler transferred from one State to another, until the transfer has been reported in the
prescribed manner
4. At a pressure higher than the maximum pressure recorded in such certificate
5. Unless the boiler is in charge of a person holding a certificate of competency.

The Indian Electricity Act, 1910:

The act relates to the supply and use of electricity energy. The State Government may, on an application
made in the prescribed form and on payment of prescribed fees, grant a license to supply energy in any
specified area and also lay the electric supply lines.