Rebooting Skilling Program

Government has realized its flagship skilling program- the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) despite having trained 18 lakh people failed on job creation and entrepreneurship. The reasons could be many. Firstly, it tried to create new intermediaries that would train, place and create entrepreneurs rather than building the skilling program around incumbents. The new training & placement intermediaries were expected to equip themselves with industry and trade skills, train their trainers, get certified by the Sector councils and impart skills to prospective candidates. Their remuneration was tied to three revenue streams viz., training, placement and entrepreneurship. In the current scenario, NSDC and SSC are expected to identify skilling programs which more often than not end up as 100-300 short term courses.  Unlike German and other national systems that have been tried to emulate, India’s skilling programs have been seen as system for lower achievers and less academically successful candidates. Indian labour market does not value workers trained for specific occupations. Most positions, from electricians to a carpenter or even for that matter a Bedside Assistant learns on the job. Hence, the students who get trained from skilling centres only qualify for “prevocational” training, a fall back that still leaves industry players to invest in unskilled, and unstable resources.

Our analysis of Skilling centres for Tier 2 districts like Bellary in Karnataka and Anatapuramu in Andhra Pradesh revealed financial viability was a concern. Facility size and associated investments mandated by NSDC, a minimum of 8000 Sq. Ft for an A type city (with more than 4 lakh population) and minimum of 5000 Sq. Ft for a B type city (1-4 lakh population) raised the investment barriers. Different trades require different training approaches. Some trades may need more classroom training while others need more on the field or on shop floor training. Moreover, with contributions per students of many courses was small and required large student populations to make a skilling centres financially viable. Contribution margin per student for Concrete pump operator was just about ₹5280, wheel loader ₹2000, and transit mix operator ₹5210. For breakeven, each centre requires to train at least 95,000 to 120,000 students in ten years, while competing with informal markets, on the job training model of incumbents and formal educational institutes including ITI’s, Polytechnics and other vocational courses. For infrastructure and capital equipment light courses contributions margins were low or far away from real wages. For example, contribution margins for CRM voice was ₹ 1740 and CRM non-voice was ₹ 1700.  Also, contribution margins some courses were much higher than prevailing wages.

Contribution margins for Bedside Assistant ₹ 8900, Pharmacy assistant was ₹23000 and Diabetes educator ₹9068, was much higher than on the job prevailing market wages. Skilling Centre revenue increased whenever they would earn support fee from participating in Mudra and other government supported entrepreneurship schemes. However, majority of the courses could yield at best only skilling revenues as entrepreneurship opportunities are limited or required additional resources to embark on entrepreneurship. Also, financial viability of the training institute required scaling to multiple centres, thus placing additional burden on employment and entrepreneurship. However, by engaging directly in entrepreneurship activities and reducing transaction costs on placement front improved financial viability of skilling partner. On a standalone basis, placement revenues become non-linear whenever the training centre acted as an aggregating agency for an incumbent industry’s training institution. For Bellary and Anatapuramu Centres imparting basic training at a low fee and placing students at Industry training centres of say Bosch or L&T Construction Institute and others made more economic sense. Importantly, scale constraints hindered the emergence of sector and region specific centres focusing on creating relevant skills sets.

Sharad Prasad committee has critiqued the efficacy focusing on supply side skilling and the role of NSDC and SSC. Moving away from supply side to demand side focus and involving incumbents in right sizing and right skilling of resources can be a first step. By adopting this approach it is possible to use skilling programs to drive employment growth also. For many company owners, the biggest challenge in not investment and market, but attracting and retaining talent. For companies running their operations in Tier 2 and 3 Industrial hubs the challenge is more severe.  Industry players know what talent is required and nurture it. Employers want more than short-term training and surely away from anarchic apprenticeship models, but flexible programs that can create problem solvers and not someone with just skills. Guilds form the basis of successful skilling programs. Policy changes are required to support long term internship or fellowship programs so that employers directly hire interested students and train them on the job. Skilling programs in most countries is about enhancing the training and investments by the industry players by active support and nudging by the governments towards automation and newer skills. Consider for example, Enhanced Training Support (ETS) program of Singapore, yet another small country most Indian policy makers are enamoured with. ETS program envisages employers to provide staff with required new training and 95% of the fee is a subsidy by the government. Even Canada’s famous dual-training program has adopted the same model.

Involving incumbents has certainly many advantages. When a company is involved in the design and execution of program, the content is highly relevant, customized to industrial requirement and not generic short term program that adds no value. Moreover, bounded rationality problems and problems of commons is eliminated as the company knows what skills and capabilities are required and goes after investing in them.  Unlike the one size fits all strategy that is currently pursued this approach certainly creates sector specific or even scale specific skill sets.  Management of scheme can be effective by ensuring the cost of monitoring and control is minimized. SSC which are currently burdened with many activities can focus on standard setting and best-practice identification while government can directly fund the programs based on the resources employed and trained by companies. Such an approach has dual benefits, right skill development, but also competitive factors of production for Indian companies. This is unlike the free-reward based supply driven skilling program that India is currently pursuing.

Unlike the apprenticeship program under Ministry of Labour that many companies in industries like IT and others skirt away and even those in manufacturing exploit fully, there is a need to create a less burdensome program for both employers and employees. Two of our clients have attempted 2 years fellowship program where graduates join the company as fresher, they go through an immersion training program for six months and work on shop floor for next 1.5 years. Students get paid to learn and gain skills. They not only work on production problems, but are also involved in R&D projects. These fellowships are long term and the company completely owns the design and delivery of the content. The fellowship provides students an opportunity to hone their skills and emerge as valuable resources.  These fellowships meet both skilling and employment objectives, especially at undergraduate and entry levels where the bulk of prospective employees will be.

Second, designing appropriate PPP models to enable existing infrastructure including ITI and Polytechnics can unfreeze lots of capacity, especially in Tier 2 and 3 cities for trade specific skills. In recent years, thanks to Indian Government’s QIP program and others like Canada India Institutional Cooperation Project (CIIP) infrastructure facilities of these institutions has significantly improved. However, there is sufficient headroom to increase the utilization of the facilities by allowing novel PPP models such as GOCO to emerge.  ITI’s & Polytechnic can treat it similar to long term executive education programs and the private partner can market courses across districts to interested candidates and also close the gaps on industry-academic interactions. Institutes can enter into a revenue sharing formula to earn additional revenue for themselves and their faculty. With this their ability to attract quality faculty resources may be addressed and existing infrastructure can be better utilized. Vocational and engineering colleges can also be targeted for advancing skill development across states. Government may take leaf out of its investment models promulgated for affordable housing. Many of the PPP models proposed for Housing and Urban affairs can be modified to involve private sector in skill development.

Monitoring and control of such demand based schemes needs involvement of local industry associations and industry bodies along with Commerce and Industry departments of state governments. Using right IT tools to reach and authentication and associated framework can enable more decentralized management and targeted skilling and employment. Tirupur Industrial Association (TIA) or Rajkot Management Association (RMA) would certainly have more visibility of the programs being run and community pressures could act as deterrent and reduce the risk of misuse. National Industry bodies such as NASSCOM or can also use gamification principle such as Badges and Leader boards to motivate employees adopt and execute these programs in earnest.  Badges and awards can also be for employer hiring the most women trainees, employee with highest hiring rate, etc. DIC and other infrastructure of the state governments such as IADB, and SSIDC could also be used to independently collect and report the efficacy of skilling program.  SSC play a significant role in standard setting thus reducing areas of conflict of interest. Government can use DBT mechanisms supported by Aadhaar and other mechanisms to control leakages.  The said scheme can be extended to various startups recognized by various state government schemes and other bodies supporting innovation and employability. By shifting the focus of the skilling program from supply side to demand side increases economic additionality and sustainability of the scheme. With exposure to demand driven skilling and learning while earning economic spill overs that accrue at firm, industry and employment level increase because of improved allocation, access and availability of capital. The reform push of the government must build mechanisms for non-state stakeholders to drive skill upgradation and employment for people who do not have them today. That is the way forward to reach skill development and employment generation goals.

Dr TR Madan Mohan, Aishwarya Nair and Sai Vinoth

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