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Achieving the skills target

The National Council for Vocational Education & Training should have a say on minimum wages if skills have to be made aspirational

The Cabinet Committee on Economic Affairs on October 10 approved the merger of the existing regulatory institutions in the skills space – National Council for Vocational Training (NCVT) and the National Skill Development Agency (NSDA) into the National Council for Vocational Education and Training (NCVET). However, the question is – when the two earlier regulators have failed, what will the new regulator do differently to succeed?

Mandate of NCVET

NCVET will regulate the functioning of entities engaged in vocational education and training, both long-and short-term and establish minimum standards for the functioning of such entities. Its primary functions will include:

  • Recognition and regulation of awarding bodies, assessment bodies and skill related information providers
  • Approval of qualifications developed by awarding bodies and Sector Skill Councils
  • Indirect regulation of vocational training institutes through awarding bodies and assessment agencies
  • Research and information dissemination
  • Grievance redressal

The Need

As per the official release, this institutional reform will lead to improvement in quality and market relevance of skill development programmes, lending credibility to vocational education and training, encouraging greater private investment and employer participation in the skills space. This, in turn, will help achieve the agenda of making India the skill capital of the world. Before we go into the merits and demerits of this new move, let us study some of the key challenges facing the skills ecosystem

Critical issues of skill ecosystem

Demand side

  • The biggest issue — lack of employer participation. More specifically, private sector employers who create most of the new jobs in the economy. The main reason — low productivity of skill certified employee. Skills are the means but not the end. Employers are looking for productivity in their specific job context and this requires custom training on top of generic role-based training. The current system does not provide for custom training. There is a need for skill training courses to incorporate a custom component.
  • Fair wages and skill premium are essential to make skills aspirational. The demographics is working against the youth of India. The intersection of supply and demand, as per economic theory, is price. In labour markets, this price is compensation. Our employers are spoilt for choice due to excess supply. The compensation has remained stagnant for over a decade — net of inflation — in manufacturing (Economic and Political Weekly July 2014). The skill premium (gap between semi-skilled wages and unskilled wages) is very low. Unless this issue is addressed, skills will never be an aspiration. This requires raising minimum wages and the skill premium to be mandated, for which legislative action is needed.
  • Redefine assessment to measure productivity instead of skills. Allow employers to define productivity and its assessment.
  • Skilling takes place only in the first job and can never be fully imparted in the training. So a long-term programme without on-the-job training is useless. That’s what happened in engineering and diploma colleges.

Supply side

  • Develop robust pre-assessment and counselling systems to ensure that training is aligned with the trainee’s aptitude. Everybody cannot be trained for any role.
  • Allow PPP to flourish so that fresh investment can happen. Do not over-standardise the delivery and business models of training partners and kill entrepreneurship.
  • Why are the leading skill partners struggling for profitability? Why is there no investment interest? The answer is low training fee of Rs 30 to 50 per hour. On top of this, the actual payout is far lower because the payment is restricted to assessment pass outs only. This reduces the revenue to 70-80% of the rate announced while the costs are for 100%.
  • The training partner is the only person doing all the work in the skill system — he mobilises, counsels, trains, places, does post-placement tracking. All the other players, including National Skill Development Corporation, Sector Skill Councils, National Skill Development Agency, monitor or supervise him. But the impression is that the training partner is a cheat and needs hectic monitoring.

Government side

  • The last nail in the training partner sustainability coffin is the payment system of the government, which treats the training partner as a cheat trying to beat the system.
  • Payment is delayed without rationale and without penalty to the government. Deductions are made without justification. Payment authorities seek endless documentation. Any minor non-compliance delays the entire payment instead of part payment. The payment system must be automated and made online. It must be privatised like the third-party administrator in the health insurance payment system.
  • As per the MSME Act, delayed payment will attract hefty interest. But there is no interest clause for delayed payment.


Training operations issues

  • Government norms are unattainable because it sets both input and output norms, which cannot be met at the training fee rates offered.
  • Government is responsible for job creation. But training partner is penalised for not placing the candidate.
  • Government is unable to provide real-time and accurate job creation information. The NSSO data is very outdated and others are often unreliable. How are the training partners supposed to plan?
  • The main task of government monitoring is to weed out the black sheep and penalise them. Failure of this crucial role leads to unintended consequences wherein the genuine training partners are penalised. How does this happen? The government keeps adding control mechanisms because of fraudsters among the training partners. The genuine ones try to comply with the norms and become unviable while the fraud ones thrive by beating the system in connivance with the authorities. Unless there is a realisation that the training partner is first investing his money before asking for the money from the government and, therefore, must be treated with respect, the skill ecosystem will not flourish. Solution — Overregulate the poor performers and under regulate the genuine players.


Improving NCVET

The scope of the regulator is not aligned with the stated objectives, which are encouraging greater private investment and employer participation in the skills space.

  • Government is policymaker, payer, monitoring agency and the regulator — all rolled into one. It is the biggest stakeholder and must be regulated first. Scope should include regulating all the government policies, including the excessive monitoring systems on pricing, payment systems including interest for delayed payments.
  • Regulator must create an advisory body consisting of all stakeholders.
  • Employer participation has to be encouraged and so the regulator should have nominees of employers on this advisory board.
  • Regulator’s role must include issuing guidelines to employers on providing hiring preference to skill certified youth.
  • Training partner bodies like Alliance of Skill Training Partners must be represented in this advisory board because the ground realities are known only to the training partners.
  • Current thought-process that the regulator should have an arm’s length distance from training partners is outdated. For example, the New Code on Wages legislation pending in Parliament provides for a wage determination advisory body, which has representation from all stakeholders including conflicting stakeholders like employer and labour unions. This is the right approach.
  • If skills have to be made aspirational, then the regulator should have a say on minimum wages determination.

Significant improvement in the above will result in the skill industry becoming an attractive destination for investment.


(The author is Chairman, TMI Group, and Member, National Board of MSME, Ministry of MSME)

Name of publication: Telangana Today
Date published on: 26/10/2018
published in: Hyderabad
Tags: Skill Development

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