Ensuring Welfare Through MEAL CARDS IN INDIApahleindia.org/pdf/publication/Meal_Cards_in_India.pdf · 2019. 9. 6. · Ensuring Welfare Through MEAL CARDS IN INDIA iv│ Acknowledgement

Ensuring Welfare Through

MEAL CARDS IN INDIANirupama Soundararajan Arindam Goswami Sumedha, and Shukla

Pahle India Foundation (PIF) is an FCRA certified,

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Ensuring Welfare Through

MEAL CARDS IN INDIA

Authors: Nirupama Soundararajan, Arindam Goswami and Sumedha Shukla

For further information about this report, please contact:

Nirupama SoundararajanSenior Fellow & Head of [email protected]

Arindam Goswami [email protected]

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@pahleindia

+91 11 41551498, 26519889

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Classical economists defined land, labour, and capital, as the original factors of production. Over years, input factors such as management and entrepreneurship also play a critical role in creating profits for an organisation. However, no matter how theories develop and businesses evolve, the individual or labour, will continue to remain core to the success of organisations, and this is why labour welfare is an important concept.

Welfare includes anything that is done for the comfort and improvement of employees and is provided over and above the wages. In India, the first recognition of labour welfare came as part of the Factories Act (1948), which made allowances for health and hygiene, food, leisure, and insurance, to name a few, to establish a minimum standard of living for employees.

Of all welfare measures, employers have come to realise that those on health and hygiene translate directly into a healthy workforce, reduced absenteeism, and even greater retention and labour force participation.

Creating a healthy workforce primarily means access to good and nutritious food. The Factories Act, the model Shops and Establishment Act, and many other statutory regulations, including the new Draft Labour Code in India mandate employers to provide “adequate standard” of canteen facilities for their employees, if they employ more than a hundred employees.

This is indeed commendable, but it comes at a significant cost, and one that cannot be borne by MSMEs. Pahle India Foundation, through this survey based study of 250 urban respondents and many structured interviews, recommends the use of meal cards as an alternative to canteens.

Policymakers, and therefore employers, treat meal cards as a means to provide tax incentives, rather than what it truly is, a welfare measure. Countries such as Brazil that have used meals cards, the Brazilian Worker Food Programme, as a means to improve nourishment conditions of the employees saw a rise in worker productivity by almost 2.5 per cent. The programme itself constitutes 1 per cent of Brazilian GDP.

This study makes a number of recommendations of which four stand out. First, there is an immediate need to raise the current meal allowance from INR 50 per meal to anywhere between INR 150 to INR 200. The revised figure has been arrived at based on three separate methodologies including indexing the permissible allowance to CPI-IW index. Two, central and state governments must consider offering meal cards to their employees in the spirit of digital India. Three, the government should also use meal cards as an alternative to public distribution system, through which end use of cash subsidies can be controlled and monitored. Four, the meal card must find mention in the new Labour Code. This is essential.

We hope you find this report useful, and as always, we will be grateful for any feedback.

Ram Gopal Agarwala

Foreword

Ensuring Welfare ThroughMEAL CARDS IN INDIA

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AcknowledgementThis report is the result of numerous interviews and multiple one on one discussions. Without the help of many

organisations and people, this report would not have been possible.

We would like to thank Subrata Bandyopadhyay, Syed Saquib and their team at BRIEF for implementing the

online surveys and in collating the results.

We would like to thank officials from the meal voucher and meal card industry for sharing detailed information

about their experiences in the Indian market. The authors would also like to thank Ms. Padmaja Nair, Head of

HR (C&B) at Micro Focus, Bangalore, Ms. Meenakshi A. and Ms. Agitha PN From Finastra Software Solutions

India Pvt. Ltd., Bangalore and Mr. Naveen P from Social Alpha, Bangalore for meeting with us and sharing

their insights about company policies on meals and employee preferences. The authors would also like to

thank the various industry experts, interviewees and survey participants for the meetings and for sharing their

experiences on procurement, distribution, and usage of meal card.

Last but not least, we would like to thank Anil Kumar from Pahle India Foundation for helping us in formatting

the report, and Naveen Jaiswal and his team at Genesis Printers for layout, designing, and printing the final

report.

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Executive Summary .................................................................................................................... 1

Chapter 1: The Importance of Labour Welfare ........................................................................... 5

1.1 Background 5

1.2 Defining Labour Welfare 7

1.2.1 Intra-Mural Activities 7

1.2.2 Extra-Mural Activities 8

1.3 Agencies for Labour Welfare in India 9

1.3.1 The Role of Employers 9

1.3.2 The Role of Central and State Governments 9

1.3.3 The Role of Trade Unions and Labour Welfare Agencies 9

1.3.4 The Role of Social Service Agencies 10

1.4 Labour Welfare and Taxation 10

1.5 Scope and Objective of the Study 11

Chapter 2: International Experience ......................................................................................... 13

2.1 Brazil 13

2.2 Czech Republic 14

2.3 Turkey 14

2.4 Belgium 14

Chapter 3: Nutrition and Welfare ............................................................................................. 16

3.1 Health as a Component of Labour Welfare 16

3.2 Food as a Component of Health 16

3.3 A New Construct for Welfare in India 18

3.4 The Role of Nutrition 19

Chapter 4: The Evolution of Meal Cards in India ...................................................................... 23

4.1 An Overview to the Meal Voucher/Cards Programme 23

4.2 The Meal Card Market in India 25

4.3 How Meal Cards Work 26

4.4 Regulatory Guidelines to Meal Cards in India 26

Contents


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4.5 Statutory Requirements for Canteens in India 28

4.6 Tax Treatment of Meal Cards Over the Years 30

4.6.1 First Steps 30

4.6.2 The Era of Fringe Benefit Taxes 30

4.6.3 As Things Stand Today 31

4.7 Benefits of Meal Cards 31

4.7.1 To the Economy 31

4.7.2 To Vendors 32

4.7.3 To Small and Medium Enterprises (SMEs) 34

4.8 Government Canteens/Tiffin Rooms and Meal Cards 35

Chapter 5: An Analysis of Meal Card Usage ............................................................................. 36

5.1 Survey Design 36

5.2 Profile of Respondents 36

5.3 Spend on Food and Groceries 38

5.4 Meal Card Usage 40

5.5 Welfare or Tax Benefit 44

Chapter 6: Recalculating the Meal Card Allowance ................................................................. 45

6.1 Allowances as a Percentage of Median Salaries 45

6.2 Allowances Benchmarked Again CPI 46

6.3 Market Opinion on Meal Card Allowances 46

6.4 The New Meal Card Allowance 48

Chapter 7: Recommendations .................................................................................................. 49

Annexure 1: Definition of Meal Voucher .................................................................................. 51

Annexure 2: The Evolution of Tax Law on Meal Provisions for Employees in India ................. 53

Annexure 3: Calculation of Median Salaries ............................................................................. 54

Bibliography ............................................................................................................................. 55

Contents

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List of Tables Table 1.1: Intra-Mural and Extra-Mural Activities 8

Table 3.1: What Constitutes a Balanced Meal? 17

Table 4.1: Turnover of Prepaid Payment Instruments in Terms of Volume and Value (2015-16 to 2017-18) 25

Table 4.2: Per Transaction Value Calculation for Different Digital Payment Modes 33

Table 4.3: Growth in PoS 33

Table 4.4: Monthly Growth of PoS between 2016 and 2017 34

Table 5.1: Meal Card Usage 43

Table 6.1: Meal Voucher Allowances as a Percentage of Median Salaries 45

Table 6.2: Revised Meal Allowance Calculation 46

Table 6.3: All-India Annual Average of CPI-IW 47

Table 6.4: A Comparison of New Meal Card Allowances per Meal 48

List of FiguresFigure 1.1: Labour Welfare Measures 11

Figure 3.1: What are the employee welfare benefits that your company offers? 18

Figure 3.2: Which of the following welfare benefits would you insist upon before joining a company? 19

Figure 3.3: Do you bring meals to work? 20

Figure 3.4: Why would you choose to eat outside or at office canteen/cafeteria instead of

bringing food from home? 20

Figure 3.5: If no, where do you have meal/s (breakfast/lunch/dinner) from, during office hours? 21

Figure 3.6: On what basis do you choose where to eat? 21

Figure 3.7: On what basis do you choose where to eat (age wise)? 22


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List of Figures

Figure 3.8: On what basis do you choose where to eat (income wise)? 22

Figure 4.1: Meal Card Value Chain in India 27

Figure 5.1: Age of Employees 36

Figure 5.2: Income of Employees 37

Figure 5.3: Household Profile 37

Figure 5.4: Average Hours Spent in Office in a Day 38

Figure 5.5: Average Spend on Eating-Out / Ordering-In per Month 38

Figure 5.6: Average Spend on Eating-Out / Ordering-In per Month – Age Wise 39

Figure 5.7: Average Spend on Eating-Out / Ordering-In per Month – Income Wise 39

Figure 5.8: Average Spend on Food and Staples In a Week 40

Figure 5.9: Average Spend on Food and Staples per Week – Age Wise 41

Figure 5.10: Average Spend on Food and Staples per Week – Income Wise 41

Figure 5.11: Amount Loaded onto Meal Card Every Month 42

Figure 5.12: How long does the amount on the meal card lasts? 43

Figure 5.13: Purpose of a Meal Card 44

Figure 5.14: Meal Card or the Equivalent as Tax-Free Cash 44

Figure 6.1: Average Cost of One Full Meal at Office Cafeteria/Canteen 47

Figure 6.2: What should the amount per meal be? 48

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AAR Authority for Advance Rulings

AITUC All India Trade Union Congress

ATM Automated Teller Machine

CAGR Compound Annual Growth Rate

CPI-IW Consumer Price Index – Industrial Workers

DG Directorate General

DoPT Department of Personnel and Training

EC European Commission

EPF Employees’ Provident Fund

FAO Food and Agriculture Organization (of the United Nations)

FAQ Frequently Asked Questions

FBT Fringe Benefit Tax

GDP Gross Domestic Product

GST Goods and Services Tax

HR Human Resource

IFPRI International Food Policy Research Institute

ILO International Labour Organisation

INR Indian Rupee

INTUC Indian National Trade Union Congress

IT Income Tax

IT/ITES Information Technology Enabled Services

IW Industrial Workers

KYC Know Your Customer

List of Abbreviations


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LIC Life Insurance Company of India

LTA Leave Travel Allowance

NHANES National Health and Nutrition Examination Survey

OECD Organisation for Economic Co-operation and Development

OTP One Time Pin

PAT Programa de Alimentacao do Trabalhador

PDS Public Distribution Schemes

PML Prevention of Money Laundering

PoS Point of Sale

PPI Prepaid Payment Instrument

RBI Reserve Bank of India

RBL Ratnakar Bank Limited

RCF Rashtriya Chemicals & Fertilizers

RMMS Rashtriya Mill Mazdoor Sangh

SAIL Steel Authority of India Limited

SVIA Social Vouchers International Association

USA United States of America

USD United States Dollar

List of Abbreviations

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Executive SummaryBackgroundThe development of an economy is determined by its production and consumption capacity. The production process has five major inputs - land, labour, capital, management or organisation, and entrepreneurship. The quality and productivity of labour determines the efficiency of the overall production process. Welfare includes anything that is done for the comfort and improvement of employees and is provided over and above the wages. The social concept of welfare implies the welfare of an individual, his family, and his community. Labour welfare is a positive concept in the sense that it establishes a minimum standard of living by focussing on multiple components such as health, food, clothing, housing, medical assistance and insurance. In the Indian context, the first recognition of labour welfare came as part of the Factories Act (1948).

In a globally competitive environment, for retaining a stable labour force, it becomes essential for the management to seek the cooperation of the labour force by providing welfare services and facilities. Thus labour welfare became a benefit provided by the company in order to make themselves an attractive place of employment. Any concept of welfare has an inherent component of health attached to it. In fact, the physical manifestation of welfare policies at an individual and macroeconomic level is seen in the improvement of overall health outcomes. It is well-established that poor health may have a direct impact by withdrawal from the labour force. Food is an important component of human health. In India, one of the primary causes

of worker absenteeism has been identified as sickness and low vitality amongst workers. Against such a backdrop, efforts to improve worker nutrition becomes even more important, and therefore meal cards become an ideal instrument through which worker nutrition can be improved.

It is necessary to revisit the role that meal cards play for employees and for employers. For this purpose, this study is based on extensive interviews conducted with multiple stakeholders including human resources heads of companies, small and medium enterprises, food retailers, and a primary survey of 250 respondents, of which 185 were meal card users and 65 were non meal card users. The sample and interviews are urban samples. By design, the age of respondents was focussed on the age group of people between 26 and 40.

A New Construct for WelfareTwo decades ago, welfare typically meant cash in-centives, allowances for entertainment and holidays. However, this trend seems to be changing. Survey results indicate that welfare today includes health check-ups, paternity leaves, life insurance, meal cards, and canteens and no longer leave travel allow-ances and cash. Ironically, nutrition is not necessarily a priority for employees, even though health is.

The meal card’s popularity has increased for many reasons. Double income earning households who cannot as yet afford a cook, long commute times, need for convenient options, and the growth in eating options available have all made meal cards popular. First and foremost, the trend of carrying food


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to work has changed. As many as 165 respondents stated that they do not bring food to work. When asked why, 67 per cent of the respondents stated that it was more convenient not to and around 30 per cent stated that there was more variety to choose from if they did not bring food. Besides, options such as canteens and eateries have been made available to the employees.

Typically, two parameters dictate the choice of eateries for those who do not bring food from home. These are variety (32 per cent) and taste (30 per cent). Unfortunately, nutrition is not a priority for selection, with only 12 per cent of the employees mentioning it as a parameter that they will consider when choosing their eatery.

Meal Cards in IndiaThe meal card industry in India has grown to a large extent in the last two decades. Although there is no concrete data specifically on the use of meal cards users in India, the current estimate of the consumer base for meal cards in India is close to 1.75 million. In 2018, the approximate overall use of the meal cards in India was estimated to be INR 40-50 billion. Among the merchants accepting meal cards are restaurants, bakeries, meal canteens, fast food centres, food stores, online food aggregators, street vendors and retail stores and super markets.

In comparison, the prepaid payment instruments (PPI) cards market has shown a sombre growth of CAGR 7 per cent between 2015-16 and 2017-18 compared to 43 per cent for m-wallets. As a share of the total PPI market, the PPI card market share has come down from 52 per cent in 2015-16 to 22 per cent in 2017-18. As of January 2019, this share has fallen to 16 per cent. Meal cards, fuel cards, gift cards, pre-paid travel cards, and other general purpose cards are all part of PPI card market.

The meal card system is based on very simple principles. Organisations get into contract with the meal card issuing companies who in turn issue meal card topped with a notional value, to these client organisations for distributing these cards among their employees. Meal cards in India are typically rupee-denominated, reloadable and magnetic stripe PIN-based prepaid card that are accepted at merchant outlets, affiliated with the meal card company, for food and non-alcoholic beverages. For vendors without a bank PoS terminal, meal card companies provide them with PoS terminals. Currently, the meal card industry is regulated by the Reserve Bank of India.

Statutory Requirements for Canteens in IndiaThe Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016 has emphasised in provisioning for messing and canteen services as a part welfare provisions as has The Factories Act, 1948. The Mines Act, 1952 has also provisioned for suitable messing and fooding facilities. Most importantly, the draft Labour Code on Occupational Safety, Health and Working Conditions, 2018 specially emphasises on the standards of fooding and messing area as an important aspect of welfare. Chapter VI: Welfare Provision, clause 24, sub clause 2, sub-sub clause v of the draft Labour Code on Occupational Safety, Health and Working Conditions, 2018 states that, “adequate standard of canteen or canteens and medical examination of workers thereof in an establishment employing one hundred or more workers including contract labour ordinarily employed.” However, with increasing constraints in office spaces most establishments are moving towards common eating areas and lunch places where multiple vendors cater to the needs of the


workers. This arrangement has proved to be both economical and hassle free.

In India the meal voucher system was formally implemented around 1997. These were non-transferable thereby reducing the scope of misuse. Initially, the tax benefit was pegged at INR 35 per meal. However, this was revised and by the Central Board of Direct Taxes under the Department of Revenue, Ministry of Finance (Government of India) vide circular 15/2001 [ENo.275/19212001-IT(B)] during the financial year of 2001-02. Between 2005 and 2009, the Government of India introduced the fringe benefit tax (FBT) which prescribed no particular limit for meal vouchers. In fact, the Income Tax Act during the FBT regime had specific provisions for tax exemption on ‘electronic meal card.’ After the FBT was scrapped in 2009, a provision for electronic meal card prescribed limits of INR 100 per day which became a de facto standard for meal limits. As per the Income Tax Act, the value of INR 50 per meal is not considered as wages but as a social and dedicated benefit. Anything in excess of this limit is permissible, but is taxable and will be considered as wages.

The Benefits of Meal CardsMeal cards have been considered as a means of providing benefits only to employees, and that too only a tax benefit. However, meal cards offer a variety of benefits to all stakeholders. Meal cards act as a means of converting cash transactions into digital transactions thereby directly helping in revenue collection.

Meal cards often act as a first step towards digital inclusion of vendors. However, the biggest challenge has always been in convincing a business to invest in a point of sales (PoS). Meals cards are an excellent way of creating the market for

the traders and act as market makers for digital transactions.

One of the biggest challenges for small and medium enterprises (SMEs) is cost of labour compliance. Manufacturing firms that have more than 100 employees will soon be expected to provide canteen facilities, as per the new Draft Labour Code. An easier alternative presents itself in the form of meal cards, where employees will have the choice of eateries. While labour subsidies are being considered for SMEs, the option of allowing them to choose between providing a canteen or providing meal cards must also be considered.

Incorporating meal cards in government canteens will lower costs for the government in terms of infrastructure, upkeep and man power. This would be in line with the Digital India initiative, by following the model followed by many private sector and public sector enterprises. The central government must lead the way in adopting meal cards as a means of offering welfare to employees.

Key Survey ResultsMost employees spend atleast 8-12 hours a day at work. The average spend of the employees on eating out is between INR 4000-6000 in a month. 33 per cent of those between ages 42-50 are more likely to spend more than INR 6000 per month on eating out. With age the propensity to spend more on good food seems to increase. Those with annual incomes above INR 7 lacs tend to spend more on eating out. Those with annual income above INR 7 lacs also spend INR 8000 per month or more on food and staples. This category of people would classify as your average middle class workforce who are clearly health conscious and also willing to pay for good food in terms of groceries and in terms of where they choose to eat.



55 per cent of the respondents stated that their companies load less than INR 2,500 per month and 39 per cent stated that they get an allowance of INR 3,000 per month. A minute 7 per cent of the respondents stated that their companies transfer more than the “tax exempt” amount. This practice captures the welfare advantages of meal cards and their true potential, rather than as a mere tax saving instrument.

Only 18 per cent of the respondents view meal cards as a mere tax saving instrument. The remaining view it as a means of ensuring employee welfare by offering good quality nutritious meals. Only 19 per cent stated that they would prefer to have tax free cash in hand instead of the meal card. The majority chose the meal card over tax free cash.

Recalculating the Meal Card AllowanceThe initial meal voucher allowance was set in 1998 at INR 35 per day. Since then, it has been revised once in 2001 to INR 50 per meal (INR 100 per day, INR 3000 per month). There has been no revision since, even though salaries per se have been revised as have dearness allowances based on inflation. It has been ten years since the previous revision. A revision is long overdue.

There are three ways in which the new allowance limit can be calculated. The first way is to compare the allowances to the respective pay commissions. The second way is to benchmark the allowance as per the Consumer Price Index (CPI). The third is to look at the responses from the survey. The numbers converge between INR 150 and INR 200 per meal.

Recommendations• Increase the tax benefit of INR 50 per meal to

between INR 150 to INR 200 per meal.

• The tax benefit value of the meal card should be revised frequently, and benchmarked against CPI-IW Food Group Inflation.

• Meal cards are meant for the welfare of the employees and therefore should not be perceived merely as a tax benefit provided to them.

• As a social benefit initiative with a direct impact on health and nutrition, the responsibility of fixing suitable allowances could be brought under the Ministry of Health and Public Welfare.

• The industry as a whole should consider developing app based meal card models which will further the use of meal cards through digital modes.

• The meal card industry should make best efforts to educate vendors to maintain cash registers that can segregate food and non-food items at the time of billing.

• The meal card should be made part of the Labour Welfare Code wherein the responsibility of employer in establishments with more than 100 workers must be to either provide access to canteen services or offer meal cards.

• The government should consider the use of meal cards in social welfare schemes like public distribution schemes (PDS).

• The government must also lead the way by offering meal cards to its employees that can be used in government canteens and tiffin rooms.

• Employers must proactively ensure that vendors are chosen on the basis of the quality of their food and its nutritional content rather than on the basis of those that are the most price competitive.

• The government must consider providing tax incentives to companies that provide meal cards as a means of providing welfare for their low income employees.


1. The Importance of Labour Welfare1.1 BackgroundThe development of an economy is determined by its production and consumption capacity. The production process has five major inputs i.e. land, labour, capital, management or organisation, and entrepreneurship. An increment in the productivity of either one of these factors has a positive impact on production and hence, growth. However, the more ‘active’ of these factors, is labour. Efforts to augment labour productivity have garnered attention in the industrial psychology sphere for a long time. In simple terms, the quality and productivity of labour determines the efficiency of the overall production process. The quality of a workforce is a function of its welfare and education. While the latter can be augmented with training and programmes for skill development, the former is a critical necessity for any form of productive output.

Welfare includes anything that is done for the comfort and improvement of employees and is provided over and above the wages. Welfare helps in keeping employees motivated and their morale up in order to improve retention rates. Welfare measures need not be monetary only but can come in many forms. The social concept of welfare implies the welfare of an individual, his family, and his community. It is an amalgamation of these three aspects which work together and individually supplement one another. Labour welfare is a positive concept in the sense that it establishes

a minimum standard of living by focussing on multiple components such as health, food, clothing, housing, medical assistance and insurance.

In the Indian context, the first recognition of labour welfare came as part of the Factories Act (1948). The Act has provisions regarding safety guards, health and cleanliness, drinking water, washing and latrine facilities, lunch rooms and restrooms, sitting arrangements, first aid and dispensary facilities in all factories employing more than 500 workmen, and canteens for any organisation employing more than 250 workers. There was also a provision for crèche facility where more than 50 women workers are employed. Additionally, there are provisions for spittoons, holidays with wages at the rate of one day for every 20 days worked, cap on weekly work hours, payment for overtime work, rest time or break for half an hour after maximum five hours of work, and weekly holidays.

In a pivotal move, the Planning Commission, in 1951, observed that, “In order to get the best out of a worker in the matter of production, working conditions are required to be improved to a large extent. The workers should at least have the means and facilities to keep themselves in a state of health and efficiency.” There are several ways of defining labour welfare. It is a very broad term with one main idea promoting the wellbeing of workers in a variety of ways. The concept has an inherent ambiguity arising from the variation in region, industry, degree of industrialisation and general



socio-economic development prevailing at a point in time. However, the common theme across sectors is the robustness of labour legislations to ensure provisioning of social insurance through multiple channels of economy and industry.

The need for labour welfare measures was recognised during the colonial period in 1931 when the Royal Commission on Labour in India (Whitley Commission) declared that labour welfare measures were of great importance to workers since they were unable to secure their welfare by themselves. The Commission argued that labour welfare measures were a wise investment because these would bring about a profitable return in the form of greater labour productivity and efficiency. The Commission concluded that the provision of canteens improved the physique of workers; the provision of entertainment reduced the incidence of vices; medical aid, maternity, and child welfare services improved the health of the workers and their families which would in turn bring down the rates of general, maternal, and infant mortality; and educational services increase the efficiency and productivity of workers. Since independence, an important objective of the social and economic policies of the Government of India has been focussed on labour welfare in order to increase productivity and ensure a reasonable level of social security.

In this manner, the concept of labour welfare was conceived as a “right” that the worker was expected to be given for his/her contribution to an economy’s growth. It was based on the idea that provisioning of basic human decencies was essential for enabling a worker to perform all his/her work-related tasks efficiently. This was initiated in Britain with the enactment of the Factories Act in 1881. The Act contained

provisions of employment of child labour, maximum working hours for children and weekly holiday. It also included provisions of safety and inspection of factories (Misra, 1974). The aim of this Act was to ensure the provisioning of basic social rights to food, water, health and sanitation for workers employed across industries both within and outside their establishment. Later on, this Act was amended several times gradually expanding its scope to cover broader welfare measures within its ambit. Over time, the aim of labour welfare expanded from merely enabling a worker to do their job and encompassed a wider set of initiatives designed to promote a happier and healthier workforce and improve retention rates in the face of globalisation and increasing job opportunities. In a globally competitive environment, for retaining a stable labour force, it becomes essential for management to seek the cooperation of the labour force by providing welfare services and facilities. Thus began a journey where labour welfare was no longer merely a right of the worker, but a benefit provided by the company in order to make itself an attractive place of employment.

The philosophy underlying labour welfare activities is based on the assumption that the success of industrial development depends upon harmonious relations and cooperation between labourer and management (the employer). The constituent elements of labour welfare include working hours, working conditions, safety, industrial health insurance, workmen’s compensation, provident funds, gratuity, pensions, protection against indebtedness, industrial housing, rest rooms, canteens, crèches, wash places, toilet facilities, lunches, cinemas, theatres, music, reading rooms, holiday rooms, workers’ education, cooperative stores, excursions, playgrounds, and scholarships


and other forms of assistance for the education of employees’ children (John, 2004). It deals with the provision of opportunities which enable the worker and his/her family to lead a good life, socially and personally, as well as help him/her to adjust to changes in his/her work life, family life, and social life.

1.2 Defining Labour WelfareThe Oxford Dictionary defines labour welfare as “efforts to make life worth living for workmen.” According to the International Labour Organisation, workers’ welfare should be understood as meaning such services, facilities and amenities which may be established in, or in vicinity of, an undertaking to enable the persons employed there to perform their work in healthy congenial surrounding and provides all voluntary acts by employer aimed at improvement and betterment of workers social moral and social economic and intellectual conditions. (Sharma, 1997, p. 294)

The Encyclopaedia of Social Sciences has defined labour welfare work as, “The voluntary efforts of the employers to establish, within the existing industrial system, working and sometimes living and cultural conditions of the employees beyond what is required by law, the custom of the country and the conditions of the market.”

The Committee on Labour Welfare set up by the Government of India in 1969 gave a normative definition for welfare services as “services, facilities, and amenities such as adequate canteens, rest and recreation facilities, sanitary and medical facilities, arrangements for travel - to and from place of work, and for the accommodation of workers employed at a distance from their homes; and such other services, amenities and facilities, including social security

measures which contribute to the conditions under which workers are employed.”

The International Labour Organisation (ILO) report defines labour welfare as, “...such services, facilities and amenities as may be established in or in the vicinity of undertakings to enable the persons employed in them to perform their work in healthy, congenial surroundings and provided with amenities conducive to good health and high morale.” The ILO has divided labour welfare measures into two broad categories, viz., intra-mural and extra-mural. While the former is important for providing a healthy work environment, the latter is important for motivating the worker and providing them social security. The main elements of labour welfare identified are (Ravindra, 2014) as follows:

• To provide the workers better life and health

• To relieve the workers from industrial fatigue

• To improve the intellectual and cultural conditions of living of the employees

• To make the workers happy, efficient and contented

The Committee of Experts on Welfare Facilities for Industrial Workers convened by ILO in 1963 included intra-mural and extra-mural activities (Joseph et al., 2009) under the term ‘labour welfare.’

1.2.1 Intra-Mural Activities The labour welfare measures or activities or schemes that are provided within the premises of the industry are called intra-mural activities. These include medical facilities, compensation for accidents, provision of safety measures such as fencing and covering of machines, good lay-out of the machinery and plant, sufficient lighting, first aid appliances, fire extinguishers, activities relating to



improving conditions of employment, recruitment and discipline and provision of provident fund, pension and gratuity, maternity benefits along with latrines, urinals, rest shelters, arrangements for prevention of fatigue, health services including occupational safety, administrative arrangements within a plant to look after welfare, uniforms and protective clothing and shift allowances.

1.2.2 Extra-Mural Activities

The labour welfare activities that are provided outside the premises of the industry are termed as extra-mural activities or measures. These cover

housing accommodation, indoor and outdoor recreation facilities, amusement and sports, educational facilities for adults and children, provision of libraries and reading rooms, social insurance measures including cultural activities, holiday, homes and leave travel facility, workers cooperatives including consumer cooperative stores, fair price shops and cooperatives, thrift and credit societies, vocational training for dependents of workers, other programmes for the welfare of women, youth and children and transport to and from the place of work.

Welfare and Amenities within the Precincts of the Establishment:(Intra-Mural)

Welfare and Amenities Outside the Establishment:(Extra-Mural)

• Latrines and urinals

• Washing and bathing facilities

• Créche

• Rest Shelters and canteens

• Arrangements for drinking water

• Health services, including occupational safety

• Arrangement for prevention of fatigue

• Uniforms and protective clothing

• Overtime allowance

• Canteen

• Maternity benefit

• Social insurance measures (including gratuity, pension, provident fund and rehabilitation)

• Benevolent funds

• Medical facilities (including programmes for physical fitness and efficiency, family planning and child welfare)

• Education facilities

• Housing facilities

• Recreational facilities (including sports, cultural activities, library, reading rooms)

• Holiday homes and leave travel facilities

• Workers’ co-operation, including consumers’ cooperative stores, fair price shops, and co-operative credit and thrift societies

• Vocational training for dependents of workers

• Other programmes for the welfare of women, youth and children

• Transport to and from the place of work.

Source: Compiled by Author

Table 1.1: Intra-Mural and Extra-Mural Activities


1.3 Agencies for Labour Welfare in IndiaThere are multiple agencies responsible for ensuring labour welfare in India.

1.3.1 The Role of Employers

Employers provide welfare facilities either individually or collectively through associations. The facilities provided are both voluntary and statutory in nature. Statutory provisions relating to welfare of workers have been promulgated by the Government of India in different enactments. On the other hand, voluntary welfare includes all those activities which employers undertake for their employees on a charitable basis. It is a philanthropic approach on the part of the employer to provide various welfare facilities to the workers over and above the statutory measures. However, irrespective of the voluntary or statutory nature of provisions, the motive of an employer is fundamentally economical. Happier employees are expected to be more productive augmenting their contribution towards the firm’s growth.

1.3.2 The Role of Central and State Governments

Over the years, a number of Statutory Acts have been passed by the central government for the welfare of the workers and employees. There is also an implementation and administration of industrial and labour laws. Examples include, the Factories Act, 1948; Mines Act, 1952; The Motor Transport Workers Act, 1961; Dock Workers (Safety, Health and Welfare) Act, 1986; The Merchant Act, 1961; Plantation Labour Act, 1951; The Merchant Shipping Act, 1958; Coal Mines Labour Welfare Fund Act, 1974 and Mica Mines Labour Welfare Fund Act 1946 and so on. The provisions contained in these Acts provide the minimum standards of health, safety and welfare of workers. Employers

are supposed to adhere to these provisions. The workers of different industries have been provided welfare facilities under different statutes. All state governments run various health centres, education centres etc. and have the powers to implement the provisions of various laws and appoint appropriate authorities. They keep a strict vigil on the employers as well. Therefore, the government’s role is primarily that of a regulator. They are responsible for ensuring that a minimum standard of the workplace is maintained which allows for a minimum standard of living. In this manner, the government approaches labour welfare with a humanistic motive to allow for a healthier society.

1.3.3 The Role of Trade Unions and Labour Welfare Agencies

Labour unions are responsible for mobilisation of labour across and within industries. The creation of a labour union is aimed at promoting a community effect amongst workers enabling them to be more informed of their rights and responsibilities. Often, when the management fails to respond to changing workers’ needs, labour unions play a proactive role in combining workers’ voices to make a case for change. There are a variety of trade unions running in India and they offer educational, sports, cultural and legal facilities to their members. Indian National Trade Union Congress (INTUC), All India Trade Union Congress (AITUC), Textile Labour Association (Majoor Mahajan Sangh) started by Mahatma Gandhi, Mill Mazdoor Union (Indore), Rashtriya Mill Mazdoor Sangh (RMMS), Transport and Dock Workers Union, Bhartiya Mazdoor Sangh and Center of Indian Trade Unions are some of the important trade unions in the country. The concept of labour union came into being to work for a civic motive. The idea is to improve the overall accountability of both the employee and the employer to ensure smoother functioning of the overall economy.



1.3.4 The Role of Social Service Agencies

In India, there are many social service agencies which play a vital role in the organisation of welfare. The welfare work done by Mumbai Social Service League, Bharat Sevashram Sangh, Seva Sadan Society, and Ramakrishna Mission, are noteable. The United Nations Organisation has also organised many labour welfare initiatives in India. The United Nations International Children’s Emergency Fund was set up in India with the aim of distributing milk to mothers and children and for the establishment of maternity house and welfare centres.

Given these definitions, three crucial patterns emerge. One, the primary responsibility of providing labour welfare measures falls with the employer. While a number of institutions including the government can regulate the field, at the end of the day, given the nuances within each industry, assigning a major portion of the responsibility to the employer is most efficient. For the employer, investing in labour welfare, not only improves efficiency but also diminishes the occurrence of agency problems rampant in an industrial organisational framework. With the shift in the outlook towards labour welfare to mean benefits and not just rights, an investment in the same allows for employees with higher morale.

Two, workers’ welfare generally includes items which are over and above the statutory provisions and/or necessary requirements by industry customs. They include items beyond what is expected as a result of a contract of service from the employees. In the beginning, humanitarianism and social awareness motivated labour welfare activities. Over time, one could identify a set of three distinct motives for worker welfare activities. There is a humanistic motive because they allow workers to have ‘richer’

lives. There is an economic motive as they augment the efficiency of a worker and there is a civic motive because it develops a sense of accountability on the part of both the worker and organisation allowing for mutual respect and dignity.

Three, welfare services constitute an evolving spectrum of services which need to be revised to match human needs constantly. However, certain basic necessities obviously remain constant in the exercise.

1.4 Labour Welfare and TaxationThe idea of tax savings has been embedded in the concept of labour/employee welfare from the time of its inception. From a direct tax perspective, ‘benefits to employees’ is a trade-off for the employer to satiate the needs of the employees, while simultaneously complying with the needs of the exchequer by way of taxes. In India, the provisions of Income Tax Act relating to employee benefits can be found in Sections 15 to 17 of the Income Tax Act, 1961 and Rule 3 of the Income Tax Rules, 1962.

While the link to taxation increases the accountability of employee welfare benefit provision, there are also two kinds of challenges while looking at it from a tax perspective.

1. General consensus among tax specialists is that while there is no paucity of the number of allowances given by employers to employees, the employees in most cases spend amounts much greater than the allowance for the purpose in question. The allowance paid by the employer to the employee is fully deductible as expenditure in computing the income of the employer. The same statute


limits the deduction in the hands of recipient-employee by prescribing very low exemption levels. Either the law should do away with exemption or provide exemption by comparing the actual expenditure incurred with the allowance received. In that case, the employee tax exemption would be more reasonable and closer to the actual expenditure incurred by the employee (Subramani, 2018).

2. A perspective on labour welfare limited to seeing it as a tax deduction is problematic given the kind of positive externalities associated with investment in employee welfare. Strong welfare measures are expected to improve the overall satisfaction of employees by allowing for a healthier, more comfortable living for them and their family. A healthier, happier and more satisfied

employee would generally be more productive. This contributes to better growth within the organisation and hence higher growth for the economy. Therefore, keeping in the bigger picture, it is important that these forward linkages of investing in employee welfare are considered.

1.5 Scope and Objective of the StudyMeal voucher/card is one kind of extra-mural service provided by employers to their employees in India. An earlier discussion paper by Pahle India Foundation on “Meal Voucher System in India and its Fiscal Impact” (Ahuja, 2016) recommended a revision of the prescribed amount of INR 50 per meal so that it is atleast inflation adjusted. The paper also states that the share of meal vouchers to

Figure 1.1 Labour Welfare Measures (Generic)

■ Drinking Water

■ Creche Service

■ Occupational Safety Measures

■ Overtime Payment

■ Gratuity / Pension / PF

■ Maternity Benefits

■ Health and Medical Facilities

■ Recreation Facilities

■ Workers’ Cooperatives

■ Transport to and from place of work

■ Toilets

■ Washing / Bathing Facilities

■ Uniforms / Protective Clothing

■ Canteen / Affordable Balaned Meal

■ Benevolent Fund

■ Paternity Benefits

■ Education Facilities

■ Leave Travel Facilities

■ Vocational Training



salaries have been steadily decreasing on account of increasing salaries but not the meal voucher amount.

This study expounds on the previous study to look at not just the basic merits revising the limits under meal vouchers, but also by looking at meal vouchers, which have now moved to their electronic form of meal cards, as a means of rendering employee welfare and a critical component of ensuring a healthy workforce, and not merely as a tax incentive.

While all arguments in favour of inflation indexing the current limit of INR 50 per meal are still relevant, it is necessary to revisit the role that meal cards play for employees and for employers. For this purpose, this study is based on extensive interviews conducted with multiple stakeholders including human resources heads of companies, small and medium enterprises, food retailers, and a primary survey of 250 employees. This study also draws extensively from international experiences and also makes recommendations for the consideration of policymakers.


_______________________________________________________

1 See http://www.portaltributario.com.br/guia/pat.html2 See Nutritional variables and work-related accidents: A case-control study, http://www.researchgate.net/profile/Maria_Angelica_Medeiros/publication/256448304_Nutritional_variables_and_work-related_accidents_A_case-

control_study/links/54d0cffc0cf298d6566905c3.pdf

2. International ExperienceMeal vouchers and meal cards are used in more than 40 countries including 19 European Member States, such as, France, Spain, Italy, Germany, and Finland. Meal card were also introduced in some former socialist countries such as Poland, the Czech Republic, Slovakia, Hungary and Romania. Meal cards are actively used in Turkey and are very popular among Latin American countries such as Venezuela, Mexico, Uruguay and Brazil.

2.1 BrazilPrograma de Alimentacao do Trabalhador (PAT)1

The government had an important part to play in a successful implementation of meal voucher scheme. For example, the Brazilian Worker Food Programme called the Programa de Alimentação do Trabalhador (PAT), an initiative of the Government of Brazil, established the programme of “alimentation” at work for all the employees. This programme came into existence in July, 1976 with an aim to improve the nourishment conditions of the employees so as to increase their productivity and improve their quality of life. The scheme was very successful in the country and inspired two modalities of alimentation programme:

• The Meal Voucher Programme – used by workers to buy meals at eateries

• The Food Voucher Programme – used to buy groceries.

Both employers and employees participate in this programme. The employee’s contribution cannot exceed 20 per cent of the face value of the voucher. For companies and organisations with limited budgets, meal vouchers were distributed to lower-wage employees first. Meal vouchers were not taxed. Both large and small companies offered vouchers. The meal voucher programme in Brazil reached nearly 9 million workers which is around 30 per cent of Brazil’s 30 million work force in the formal sector.

Based on the assumption that for every extra 1 kilo calorie (kcal) of food, productivity increases by 2.27 per cent (FAO; 2004), between 1975 and 2007, the programme has resulted in the decrease of work-related accidents by more than one third even though the active population more than doubled in Brazil.2 The number of workplace accidents fell from 1.9 million in 1977 to 395,000 in 2006.

Productivity in Brazil rose by 2.5 per cent a year between 1991 and 1998 on the back of improved workers’ health because of the success of PAT. This productivity increase is comparable to that of the United States of America (USA).



Furthermore, PAT constitutes 1 per cent of Brazil’s gross domestic product (GDP) and has also helped create employment opportunities. Research studies have shown that under the meal voucher scheme, for every 30 users, one job is generated. Therefore, the implementation of the Worker Food Programme generated 280,000 jobs in the country.

2.2 Czech RepublicThe meal vouchers system was launched in 1992 following the amendments of the Labour Code under which it is regulated. For employees, the meal voucher is not subject to personal income tax or social and health insurance contributions.

The country had a population of 10.6 million, of which 4.7 million were of working age as of 2010. Of these, approximately 30 per cent of the total workforce (1,300,000 employees) used meal vouchers in Czech Republic. 70 per cent of meal voucher holders in the Czech Republic said they would decrease their frequency of lunch visits to restaurants if the system was removed. In fact, beneficiaries of meal vouchers in Czech Republic eat lunch 53 per cent more often at restaurants than non-beneficiaries. The social benefits of the Meal and Food Voucher System generated USD 16.3 million (€ 12.3 million) of revenue for the country in 2008.3

2.3 TurkeyThe meal voucher system was established in Turkey in 1995 with the amendment of the Income Tax Act, granting tax benefit on the daily meal allowance

provided by employers to their employees. The employer covers the meal voucher value of 100 Turkish Lira that is not subject to social charges. Around 1,100,000 employees use meal vouchers or card on a daily basis in Turkey.

A study led by the University of Economy of Istanbul in 2010 also shows that the fiscal shortfall emanating from the lunch voucher system is paid off by the tax benefits it generates. Indeed, considering a total turnover of €262.4 million of the meal voucher system in 2006, the total shortfall was estimated at €135.14 million. However, tax revenues due to lunch voucher system for the year 2006 were calculated to be €152.46 million. Thus, the meal voucher system for the year 2006 in fact contributed €17.28 million in public revenue. This meant that for every €42.40 spent in the meal voucher system there was a contribution of €2.98 to public revenue.4

2.4 BelgiumThe meal vouchers system was launched in Belgium in 1969. The employer contributes an amount of €6.91 per day that is not subject to social charges. The amount of €1.09 is contributed by the employee and with no social contributions and income tax charges to be paid on it. Around 1,600,000 employees use meal vouchers on a daily basis in Belgium and all of them purchase their daily meal with meal card, an objective that was achieved by the end of 2015.

_______________________________________________________

3 Estimation des incidences des systèmes de titres restaurant en République tchèque sur le budget de l’Etat, Ecole Supérieure d’Economie de Prague, Institut d’évaluation des biens, 2009 (Estimated impacts of restaurant vouchers systems in the CzechRepublic on the state budget. Higher School of Economics in Prague. Property Evaluation Institute, 2009).

4 Louven, M., 2006. Vale-transporte: mudança, prejudicar trabalhador, Lunch Ticket System and Public Revenue: Review, Istanbul Ekonomi.


According to a study5 in 2013, in case meal vouchers are spent in addition to daily expenses and exclusively on the purchase of the food products, the added value for the national economy amounts to €1.217 billion and it leads to the creation of 29,484 jobs in the restaurant and food distribution and production sectors.

In many OECD countries where voucher schemes have been adopted for years (France, Brazil, Belgium, Turkey, Czech Republic, etc.), macro-economic studies show evidence of the positive budget impact of the voucher scheme.6

_______________________________________________________

5 See http://www.viabelgium.be/wp-content/uploads/2014/05/impact-macro-economique-des-cheques-repas-idea-consult.pdf 6 See https://is.cuni.cz/webapps/zzp/download/130131221



3. Nutrition and Welfare3.1 Health as a Component of Labour WelfareAny concept of welfare has an inherent component of health attached to it. In fact, the physical manifestation of welfare policies at an individual and macroeconomic level is seen in the improvement of overall health outcomes. Even in the concept of labour welfare, health is a primary concern. This is because, any attempt to augment a worker’s satisfaction or efficiency would require them to be healthy to begin with. Any increase in productivity is possible only when a person is free of disease (Chavkin & Wise, 2002).

It is well-established that poor health may have a direct impact by withdrawal from the labour force due to disability, early retirement, and unemployment, especially among workers aged 50 years and above. Poor health is also a significant barrier to gaining and re-gaining access to the labour market. Increasing healthy life-span spent in work could contribute to addressing the age-related expenditure problem. Average experience and productivity levels could rise and longer working lives could compensate for age-related increases in health care utilisation. At the same time, healthy retirement can stimulate demand, especially for services which are an increasingly important sector of the Indian economy. This means that a healthy workforce contributes to future societal productivity and growth. Therefore, a worker’s health is crucial for a company and the economy as a whole.

3.2 Food as a Component of HealthFood is an important component of human health. Humans need a wide range of nutrients to lead a healthy and active life. For providing these nutrients, good nutrition or proper intake of food in relation to the body’s dietary needs is essential. An adequate, well balanced diet combined with regular physical activity is a cornerstone of good health. Poor nutrition can lead to reduced immunity, increased susceptibility to disease, impaired physical and mental development, and reduced productivity. A healthy diet consumed throughout life helps in preventing malnutrition in all its forms as well as a wide range of non-communicable diseases (NCDs). However, while rapid urbanisation/globalisation has increased the consumption of processed foods, changing lifestyles have led to a shift in dietary patterns.

‘Food at Work’ was recognised as a monad of social justice in the 1944 Declaration of Philadelphia, (International Labour Organisation, 1944). It has been shown that the loss in economic GDP due to work related health problems can be as high as 4-6 per cent of GDP in most economies (World Health Organization, 2017). In India, one of the primary causes of worker absenteeism has been identified as sickness and low vitality amongst workers (Basariya, 2015). Against such a backdrop, efforts to improve worker nutrition becomes even more important. One of the most important determinants of the health of an individual is their food consumption. Therefore, it is important to ensure


Table 3.1: What Constitutes a Balanced Meal?

Type of Lifestyle Sedentary Moderate Heavy

Male Female Male Female Male Female

Nut

rient

s

Fats

No. of Portions 5 5 8 7 12 9

Gram 5 5 5 5 5 5

Total (in gram) 25 25 40 35 60 45

Suga

r


Gram 5 5 5 5 5 5

Total (in gram) 25 20 40 25 55 45

Milk

and

Milk

Pr

oduc

ts


Gram 100 100 100 100 100 100

Total (in gram) 300 300 300 300 300 300

Puls

es

(Veg

etar

ian) No. of Portions 2 2 3 2.5 3 3

Gram 30 30 30 30 30 30

Total (in gram) 60 60 90 75 90 90

Puls

es (N

on

Vege

taria

n) No. of Portions 1 1 1 1 1 1

Gram 30 30 30 30 30 30

Total (in gram) 30 30 30 30 30 30

Vege

tabl

es No. of Portions 3 2 3 2 3 3

Gram 100 100 100 100 100 100

Total (in gram) 300 200 300 200 300 300

Frui

ts


Gram 100 100 100 100 100 100

Total (in gram) 100 100 100 100 100 100

Cere

als

No. of Portions 12 8 14 10 21 14

Gram 30 30 30 30 30 30

Total (in gram) 360 240 420 300 630 420



Figure 3.1: What are the employee welfare benefits that your company offers? (Multipal Responses, N:250)

20

offered, of which EPF is statutorily mandated. As our survey indicates, welfare today includes health check-ups, paternity leaves, life insurance, meal cards, and canteens. When we asked the employees what were their preferences for welfare, the response clearly supports the shift in preference for social welfare benefits. Employees are least concerned about LTA (42 per cent), as they also seem to be about subsidised canteens (43 per cent). However, 76 per cent are keen to avail the employer benefit of health check-ups and nearly 60 per cent would want a meal card. The most popular demand is for health insurance at 98 per cent. Figure 3.1 What are the employee welfare benefits that your company offers? (Multiple Choice) N:250

Figure 3.2 Which of the following welfare benefits would you insist upon before joining a company? (Multiple Choice) N:250

91% 93%

28% 37%

22%

75%

87% 82%

74%

59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

HealthInsurance

EPF NPS Life Insurance LTA Health Check-up

MaternityBenefit

PaternityBenefit

Meal Card SubsidisedCanteen/Cafeteria

Total

that it is not merely a filling meal that is provided but a nutritious one. Besides this, it is also essential to ensure that the money provisioned for food is adequate and spent on the same.

Meal voucher has proved to be a sustainable and easily implementable solution to these concerns in India and abroad. Meal vouchers are a form of ‘food-currency’ accepted by a pre-determined set of suppliers which are responsible for providing healthy food options to consumers or workers. These vouchers are provided by employers as an alternative option against subsidised company canteens and enable the employees to choose a meal of their choice, within a fixed value, from an eatery of their choice.

3.3 A New Construct for Welfare in IndiaWelfare has been viewed in different ways by employees and employers alike. Two decades ago, welfare typically meant cash incentives,

allowances for entertainment and holidays. However, this trend seems to be changing. Changes in lifestyle, eating habits, and the environment at large have made old and new generations alike more health conscious. The demand for welfare has shifted from entertainment and holidays to social welfare measures and employers seem to have obliged too (Figure 3.1). As recent as a decade ago, the leave travel allowance (LTA), health insurance, and Employees’ Provident Fund (EPF) were the most common employee benefits offered, of which EPF is statutorily mandated. As our survey indicates, welfare today includes health check-ups, paternity leaves, life insurance, meal cards, and canteens.

When we asked the employees what were their preferences for welfare, the response clearly supports the shift in preference for social welfare benefits. Employees are least concerned about LTA (42 per cent), as they also seem to be about subsidised canteens (43 per cent). However, 76 per


cent are keen to avail the employer benefit of health check-ups and nearly 60 per cent would want a meal card. The most popular demand is for health insurance at 98 per cent.

3.4 The Role of NutritionEven while the concept of welfare has shifted to social benefits, nutrition is not necessarily a priority for employees, even though health is. The meal card’s popularity has increased for many reasons. Double income earning households who cannot as yet afford a cook, long commute times, need for convenient options, and the growth in eating options available have all made meal cards popular. First and foremost, the trend of carrying food to work has changed. Over 60 per cent of the respondents stated that they do not bring food to work. Of those who do, 65 per cent

of them are those who do not possess a meal card (Figure 3.3).

When the 165 respondents who do not bring food to work were asked why, 67 per cent of the respondents stated that it was more convenient not to and around 30 per cent stated that there was more variety to choose from if they did not bring food (Figure 3.4). Besides options such as canteens and eateries have been made available to the employees (Figure 3.5).

Two parameters dictate the choice of eateries for those who do not bring food from home. These are variety (32 per cent) and taste (30 per cent). Nutrition is not a priority for selection, with only 12 per cent of the employees mentioning it as a parameter that they will consider when choosing their eatery (Figure 3.6).

21

98% 94%

53% 56%

42%

76% 72% 76%

59%

43%

0%

20%

40%

60%

80%

100%

120%

HealthInsurance

EPF NPS Life Insurance LTA Health Check-up

MaternityBenefit

PaternityBenefit

Meal Card SubsidisedCanteen/Cafeteria

Total

Figure 3.2: Which of the following welfare benefits would you insist upon before joining a company? (Multipal Responses, N:250)



Figure 3.3: Do you bring meals to work? (Multipal Responses, N=250)

22

3.4 The Role of Nutrition Even while the concept of welfare has shifted to social benefits, nutrition is not necessarily a priority for employees, even though health is. The meal card‟s popularity has increased for many reasons. Double income earning households who cannot as yet afford a cook, long commute times, need for convenient options, and the growth in eating options available have all made meal cards popular. First and foremost, the trend of carrying food to work has changed. Over 60 per cent of the respondents stated that they do not bring food to work. Of those who do, 65 per cent of them are those who do not possess meal cards (Figure 3.3). Figure 3.3 Do you bring meals to work? (N=250)

When the 165 respondents who do not bring food to work were asked why, 67 per cent of the respondents stated that it was more convenient not to and around 30 per cent stated that there was more variety to choose from if they did not bring food (Figure 3.4). Besides options such as canteens and eateries have been made available to the employees (Figure 3.5).

23%

77%

65%

35% 34%

66%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Yes No

Meal Card Users Meal Card Non Users Grand Total

23

Figure 3.4 Why would you choose to eat outside or at office canteen/cafeteria instead of bringing food from home? (multiple responses)N=165

Figure 3.5 If no, where do you have meal/s (breakfast/lunch/dinner) from, during office hours? (Multiple)N=165

Three parameters dictate the choice of eateries for those who do not bring food from home. These are variety (32 per cent) and taste (30 per cent). Nutrition is not a priority for selection, with only 12 per cent of the employees mentioning it as a parameter that they will consider when choosing their eatery (Figure 3.6).

67%

6%

27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Convenience Cost Effectiveness Variety

Total

32%

50% 47%

0%

10%

20%

30%

40%

50%

60%

Office Cafeteria Subsidised Office Canteen Other Eateries

Total

Figure 3.4: Why would you choose to eat outside or at office canteen/cafeteria instead of bringing food from home? (Multiple Responses, N=165)


24

Figure 3.6 On what basis do you choose where to eat?

Figure 3.7 On what basis do you choose where to eat? * Vs Age

15%

7%

11%

31%

36%

2%

28%

8%

15%

26%

22% 18%

7%

12%

30% 32%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Convenience Cost Good Service Nutrition Taste Variety


18%

29%

53%

1%

26%

1%

16%

30%

26%

11% 13%

10%

28%

39%

22%

33%

44%

18%

7%

12%

30%

32%

0

0.1

0.2

0.3

0.4

0.5

0.6


18-25 26-33 34-41 42-50 Grand Total

Figure 3.6: On what basis do you choose where to eat? (N=250)

Figure 3.5: If no, where do you have meal/s (breakfast/lunch/dinner) from, during office hours? (Multipal Responses, N=165)

23

Figure 3.4 Why would you choose to eat outside or at office canteen/cafeteria instead of bringing food from home? (multiple responses)N=165

Figure 3.5 If no, where do you have meal/s (breakfast/lunch/dinner) from, during office hours? (Multiple)N=165

Three parameters dictate the choice of eateries for those who do not bring food from home. These are variety (32 per cent) and taste (30 per cent). Nutrition is not a priority for selection, with only 12 per cent of the employees mentioning it as a parameter that they will consider when choosing their eatery (Figure 3.6).

67%

6%

27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Convenience Cost Effectiveness Variety

Total

32%

50% 47%

0%

10%

20%

30%

40%

50%

60%

Office Cafeteria Subsidised Office Canteen Other Eateries

Total



Figure 3.7: On what basis do you choose where to eat (age wise)? (N=250)

24

Figure 3.6 On what basis do you choose where to eat?

Figure 3.7 On what basis do you choose where to eat? * Vs Age

15%

7%

11%

31%

36%

2%

28%

8%

15%

26%

22% 18%

7%

12%

30% 32%

0%

5%

10%

15%

20%

25%

30%

35%

40%



18%

29%

53%

1%

26%

1%

16%

30%

26%

11% 13%

10%

28%

39%

22%

33%

44%

18%

7%

12%

30%

32%

0

0.1

0.2

0.3

0.4

0.5

0.6


18-25 26-33 34-41 42-50 Grand Total

25

Figure 3.8 On what basis do you choose where to eat? * Vs Income

10%

15%

40%

35%

2%

30%

2% 3%

34%

30%

22%

1%

23% 26%

29%

6%

19%

9%

28%

39%

18%

7%

12%

30% 32%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


3-5 lakhs 5-7 lakhs 7-10 lakhs 10 lakhs and above Grand Total

Figure 3.8: On what basis do you choose where to eat (income wise)? (N=250)


4. The Evolution of Meal Cards in India4.1 An Overview to the Meal Voucher/Cards ProgrammeThe origin of meal voucher programme can be traced to the early 1950s when they were adopted in England just after the Second World War. Meal voucher (and by extension meal cards)7 are used by employees to acquire meals and food products, specifically accepted only by food suppliers, such as restaurants, food stores, canteens, which have an agreement for acceptance of such vouchers and cards with the issuer. Meal vouchers were introduced as meal coupons in India close to six decades back. Over the years meal cards have gradually replaced employer run office canteens and subsidised food outlets. Presently, over 40 million people in more than 40 countries benefit from this service on a daily basis. Over the years, meal vouchers and meal cards have become an integral part of the modern day work compensation given to employees. They are treated as an important preventive health measure for both government and companies, particularly small and medium enterprises (SMEs).

International, inter-governmental and national institutions (e.g. World Health Organisation, Organisation for Economic Co-operation and Development, Food and Agriculture Organisation,

World Food Programme) have each defined meal vouchers (and/or meal card). A fundamental similarity has been every country’s reliance on voucher programmes over the last 50 years, to facilitate the implementation of social policies in order to meet the needs of companies and of public authorities. The various definitions of meal vouchers can be found in Annexure 1.

The meal cards system guarantees total transparency in the use and circulation of the dedicated funds. It provides public authorities with a solution to increase transparency in a specific sector of the economy (i.e. better tracking of business activities and usages) without adding administrative burdens (for instance in managing social data). Meal cards can be tracked, enabling relevant authorities to have access to complete data and to monitor the use of these cards throughout the process that include distribution, use by the end recipient, and reimbursement of services providers. It is also important to note that meal cards have to be used within the country only. This way any money allocated towards meal cards will increase effective consumption in India.

Meal cards are defined by basic technical and legal characteristics, including, but not limited to the following features:

_______________________________________________________

7 As per the Master Direction DPSS.CO.PD.No.1164/02.14.006/2017-18 released on 29th December 2017, the RBI mandated all banks and non-banking entities issuing PPI in form of pre-paid meal instruments, to be issued as semi closed PPIs, in electronic form. The process had to be had to be mandatorily completed by 28th February 2018, post which no paper based voucher would be entertained.



• Meal cards constitute a social benefit granting dedicated purchasing power to its beneficiary that drives consumption.

• Meal cards have a specific purpose; they carry a right to receive a supply of limited and predefined goods (food products).

• Meal cards can be used in designated eateries and food outlets for purchasing food and food items that contributes to demand and additional revenue to them.

• Meal cards are only used in a limited network of dedicated acceptors, with whom the issuer has entered into an agreement.

• Through their specific tax treatment, meal cards can only be used (and redeemed) for specific consumption.

• It is a simple tool that ensures the transparency of the overall system with guaranteed allocation of the funds and end-use.

• Meal cards are not fungible i.e. they cannot be exchanged for currency. They must be used for their total value to purchase food and food prod-ucts only. It is legally or contractually forbidden to refund money on the value of the voucher.

The meal cards system has proved to be beneficial to all its stakeholders, to the employers who avoid the cost and hassle of managing a canteen, to the employees who benefit from the flexibility and freedom of choice of meal; the participating outlets which provide the meals also earn profits due to the increase in their number of clients and turnover. Meal cards’ value addition reside in extending and improving the supply chain for meal services to employees. The government benefits in two ways from this system. First, by collecting

additional direct and indirect taxes both from the meal cards issuing companies and the participating outlets. Second, from the transformation of informal economy into formal economy in the restaurants sector and job creation. The implementation of the system of meal card leads to an increase in the activity of caterers and food distribution companies and in therefore increasing the economic activity, thus creating jobs. According to a study in Brazil related to use of meal vouchers, for every thirty users of meal vouchers one job is created. The meal cards create a virtuous circle of economic and social benefits for all the stakeholders. The meal cards system is rapidly being adopted by all the stakeholders because of its cost effectiveness and easy implementation, with the additional attraction of giving employees the freedom to choose where and what kind of meal they want to eat.

In an interview Ms. Nathalie Renaudin, President of the Social Vouchers International Association (SVIA) spoke of the benefits of social vouchers, which include meal vouchers, and their impact on job creation, combatting black money, and on general economic growth.8 As meal cards are targeted spends, international experience suggests that they have had a positive impact on boosting local economies and creating local jobs. In France, meal vouchers have resulted in creating 1,64,000 jobs directly and indirectly. For Romania, this number is 1,04,000. In India, we have no direct way of assessing the number of jobs created through this ecosystem, but drawing from the experience of France, one job is created for every 30 users of meal vouchers. Even if the numbers are different for India, there is clearly a strong potential for job creation that this sector offers.

_______________________________________________________

8 As published in https://www.euractiv.com/section/economy-jobs/interview/social-voucher-solutions-create-jobs-and-combat-black-economy/


4.2 The Meal Card Market in IndiaThe meal card industry in India has grown to a large extent in the last two decades. Although there is no concrete data specifically on the use of meal cards users in India, the current estimate of the consumer base for meal cards in India is close to 1.75 million end users. In 2018, the approximate overall use of the meal cards in India was estimated to be INR 40-50 billion. Among the merchants accepting meal cards are restaurants, bakeries, meal canteens, fast food centres, food stores, online food aggregators, street vendors, and retail stores and super markets.

With the advent of financial technology (FinTech) in India, there has been a considerable rise in the use

of prepaid payment instruments (PPIs). The value of the PPI industry as of 2017-18 is INR 1416.34 billion against INR 487.58 billion in 2015-16 (Table 4.1). The CAGR of 43 per cent has been achieved on the back of growth in m-wallets which have grown at a CAGR of 74 per cent for the same period from INR 205.84 billion in 2015-16 to INR 1086.75 billion in 2017-18.

In comparison, the PPI cards market has shown more sombre growth of CAGR 7 per cent between 2015-16 and 2017-18. As a share of the total PPI market, the PPI card market share has come down from 52 per cent in 2015-16 to 22 per cent in 2017-18. As of January 2019, this share has fallen to 16 per cent. Meal cards, fuel cards, gift cards, pre-paid travel cards, and other general purpose cards are all part of PPI card market.

Table 4.1: Turnover of Prepaid Payment Instruments in Terms of Volume and Value (2015-16 to 2017-18)

Volume (in millions) Value (in INR Bn)

2015-16 2016-17 2017-18 Jan-19 2015-16 2016-17 2017-18 Jan-19

m-Wallets 603.98 1,629.98 3,025.98 397.63 205.84 532.42 1,086.75 160.87

Y-o-Y Growth 170% 86% 159% 104%

CAGR 71% 74%

PPI Cards 143.47 333.11 432.63 46.57 253.77 277.52 310.41 30.44

Y-o-Y Growth 132% 30% 9% 12%

CAGR 44% 7%

PPI Cards As % of Total PPI

24% 20% 14% 12% 52% 33% 22% 16%

PPI (Total) 748.02 1,963.66 3,459.05 444.20 487.58 838.01 1,416.34 191.31

Y-o-Y Growth 163% 76% 72% 69%

CAGR 67% 43%

Source: Compiled from Payment System Indicators, RBI



Currently, the meal card players have been classified into two broad groups i.e. banking entities issuing meal cards and non-banking entities issuing meal cards. While most banks issue various kinds of prepaid cards, Axis Bank, ICICI Bank, HDFC Bank Ltd., and, Ratnakar Bank Limited (RBL) are the leading banking companies offering meal cards services in India. Among the non-banking entities Sodexo SVC India Private Limited and Edenred (India) Private Limited are the leading players in India and hold more than 70 per cent of the total meal card market in the country. Recently, PayTM too has started offering meal card through e-wallets.

4.3 How Meal Cards WorkThe meal card system is based on very simple principles. Organisations get into contract with the meal card issuing companies, who in turn issue meal card topped with a notional value to these client organisations for distributing these cards among their employees. Meal cards in India are typically rupee-denominated, reloadable and magnetic stripe PIN-based prepaid card that are accepted at merchant outlets, affiliated with the meal card company, for food and non-alcoholic beverages. A meal card is a prepaid instrument authorised by the Reserve Bank of India (RBI) and can be used the same way like a credit or debit card on a point-of-sales (PoS) terminal provided by a commercial bank. For vendors without a bank PoS terminal, meal card companies provide them with PoS terminals. When an employee uses the meal card at any of the affiliated merchant outlet, value equivalent to the price of the food item is deducted from the preloaded amount in the card. This notional value is then transferred to the merchant’s account. The value is subsequently redeemed by the card issuing company to the affiliated merchants,

through formal banking channels post deduction of charges of the meal card issuing company. Typically, the time lag for this is around a fortnight and the charges of the meal card issuing company is 2.5 to 3 per cent depending on the vendor. In this dynamic system, the meal card issuing company coordinates the overall functioning of the system, thereby ensuring the security and reliability of each activity such as administration, production, affiliation of service providers, and communication with companies.

For example, under this system, when an employee is given the benefit of meal card, say worth INR 100, the employer transfers the equivalent amount to the company issuing the meal card and in return gets the card loaded with an equivalent notional amount which are acceptable at affiliated food outlets to purchase meals, the value of the meal being the value reflected on the card (in this case up to INR 100). The affiliated eatery or store in turn transfers the notional amount to the issuing company which then reimburses the outlet to the value reflected on the food outlet’s account post deduction of charges, within a specified period of time.

4.4 Regulatory Guidelines on Meal Cards in IndiaCurrently, the meal card industry is regulated by the RBI through exercise of the power conferred to it under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007. Any company incorporated in India and registered under the Companies Act, 1956 / Companies Act, 2013 can issue and operate PPIs after receiving authorisation from RBI. Meal cards are categorised as semi closed PPI as per RBI directives. The RBI vide Master Direction DPSS.CO.PD.No.


1164/02.14.006/2017-18 states that, “Banks and non-bank entities issuing PPIs in the form of prepaid meal instruments, shall ensure that these are issued only as semi-closed PPIs, are in electronic form and reloadable. No cash withdrawal or funds transfer shall be permitted from such instruments. Such PPIs need not be issued as a separate category of PPI. No prepaid meal instruments in paper voucher form shall be issued after February 28, 2018.” It further

states that, “There shall be no remittance without compliance to KYC requirements. PPI issuers, including their agents, shall not create new PPIs each time for facilitating cash-based remittances to other PPIs / bank accounts. PPIs created for previous remittance by the same person shall be used.” This proved to be an effective measure to push the current government’s Digital India initiatives which aims in migration from paper vouchers to electronic

31

Figure 4.1 Meal Card Value Chain in India

LEGEND

1 Order vouchers and pays in advance 2 Issues and delivers the vouchers 3 Distributes the vouchers 4 Pay for services or products with the vouchers 5 Presentation of vouchers for remittance 6 Reimbursement

Reserve Bank of India (Regulator)

Pre-Paid Instruments issuing Meal Card (Issuer)

Companies

(Client and Financer)

Vendor accepting Meal Card (Affiliates)

Employees (Beneficiaries)

Central Government

Tax

Exemption

2

1

6

5

4 3

Issuing company establishes a network of affiliated restaurants, shops, eatery, cafeteria etc.

Figure 4.1: Meal Card Value Chain in India

LEGEND

1. Order vouchers and pays in advance, 2. Issues and delivers the vouchers, 3. Distributes the vouchers,

4. Pay for services or products with the vouchers, 5. Presentation of vouchers for remittance, 6. Reimbursement



mode in order to promote a less cash ecosystem. As per RBI mandate, meal cards can be classifies into two categories i.e.

i. Minimum Detail PPI: PPIs up to INR 10,000/- where minimum details of the PPI holder are obtained

ii. Know Your Customer (KYC) compliant PPI: PPIs up to INR 1,00,000/- where KYC of the PPI holder is obtained

A detailed lists of do’s and don’ts regarding PPIs can be found in the FAQ of Prepaid Payment Instruments on the RBI website.

4.5 Statutory Requirements for Canteens in IndiaThe Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016 has emphasised in provisioning for messing and canteen services as a part welfare provisions. “Welfare Provisions” in Chapter V of the Bill suggests that,

“The State Government shall require the employer to provide and maintain in the shop or establishment, wherein not less than one hundred workers are employed or ordinarily employed to maintain a canteen for the use of its workers:

Provided that a group of shops and establishments, so decide to provide a common canteen, then the same shall be permitted by the Chief Facilitator by an order, subject to such conditions as may be specified in the order.”

Messing and dining facilities have been also provisioned under “Welfare” section of The Factories Act, 1948. It states that,

“46. Canteens:

(1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers.

(2) Without prejudice to the generality of the foregoing power, such rules may provide for-

(a) the date by which such canteen shall be provided;

(b) the standards in respect of construction, accommodation, furniture and other equipment of the canteen;

(c) the foodstuffs to be served therein and the charges which may be made therefor;

(d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen;

1*[(dd) the items of expenditure in the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer;]

(e) the delegation to the Chief Inspector, subject to such conditions as may be prescribed, of the power to make rules under clause (c).

47. Shelters, rest rooms and lunch rooms:

(1) In every factory wherein more than one hundred and fifty workers are ordinarily employed, adequate and suitable shelters or rest rooms and a suitable lunch room, with provision for drinking water, where workers can eat meals brought by them, shall be provided and maintained for the use of the workers:


Provided that any canteen maintained in accordance with the provisions of section 46 shall be regarded as part of the requirements of this sub-section:

Provided further that where a lunch room exists no worker shall eat any food in the work room.

(2) The shelters or rest rooms or lunch rooms to be provided under sub-section (1) shall be sufficiently lighted and ventilated and shall be maintained in a cool and clean condition.

1. Ins. by Act 94 of 1976, s. 22 (w.e.f. 26-10-1976) 60C

(3) The State Government may--

(a) prescribe the standards in respect of construction, accommodation, furniture and other equipment of shelters, rest rooms and lunch rooms to be provided under this section;

(b) by notification in the Official Gazette, exempt any factory or class or description of factories from the requirements of this section.”

Furthermore, the Act defines, ordinary rate of wage as “...the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of food grains and other articles, as the worker is for the time being entitled to, but does not include a bonus and wages for overtime work.”

However, a recent order of the Kerala bench of Authority for Advance Rulings (AAR) suggested that,

“Recovery of food expenses from the employees for canteen services provided by company would come under the definition of ‘outward supply’ as defined in the Section 2(83) of the Act, 2017, and therefore, taxable as a supply of service under GST…”9 This

move enhanced compliance burden of companies forcing them to explore alternative options.

The Mines Act, 1952 has also provisioned for suitable messing and fooding facilities. In the same Act, under the ‘Power of Central Government to make rules’ of the Act, it states that:

“(o) For requiring the provision and maintenance in mines, wherein more than fifty persons are ordinarily employed, of adequate and suitable shelters for taking food with provisions for drinking water.

(p) For requiring the provision and maintenance in any mines specified in this behalf by the Chief Inspector or Inspector wherein more than two hundred and fifty persons are ordinarily employed of a canteen or canteen for the use of such persons.”

The Mines Act, 1952 too defines ‘ordinary rate of wages’ as “...the basic wages plus any dearness allowance and underground allowance and compensation in case including such compensation, if any accruing through the free issue of food grains and edible oils as persons employed in a mine, may for the time being, be entitled to, but does not include a bonus (other than a bonus given as an incentive for production) or any compensation accruing through the provision of amenities such as free housing, free supply of coal, medical and educational facilities, sickness allowance, supply of kerosene oil baskets, tools and uniforms.”

Most importantly, the draft Labour Code on Occupational Safety, Health and Working Conditions, 2018 which has been drafted by the Ministry of Labour and Employment by

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9 https://economictimes.indiatimes.com/news/economy/policy/canteen-services-to-employees-will-attract-gst-aar/articleshow/63718170.cms



amalgamating, simplifying, and rationalising twelve separate statutory acts pertaining to safety and health standards, health and working conditions, welfare provisions for the employees specially emphasises on the standards of fooding and messing area as an important aspect of welfare. Chapter VI: Welfare Provision, clause 24, sub clause 2, sub-sub clause v of the draft Labour Code on Occupational Safety, Health and Working Conditions, 2018 states that, “adequate standard of canteen or canteens and medical examination of workers thereof in an establishment employing one hundred or more workers including contract labour ordinarily employed.” This shows that the government believes that in order to push productivity of labour/employee productivity it is imperative that the quality of food intake by labour/employees be improved and adequately provided for.

The above statutory acts, regulations, laws and by laws suggests that the Governement of India has been trying to improve the quality of messing and food intake among labours and employees and consider this as an important aspect of labour welfare. However, with increasing constraints in office spaces most establishments are moving towards common eating areas and lunch places where multiple vendors cater to the needs of the workers. This arrangement has proved to be both economical and hassle free than setting up individual canteens or providing for in house meals at subsidised rate. The food provided by the contracted vendors may or may not be cheap depending on the brand, expertise, type of food chain, but mostly tend to be under nutritious. Moreover, with increasing labour movement across the country it is becoming difficult to manage varying preference in food habits of different people coming from various parts of the country. A

viable option would be to rather compensate the employees with an additional amount to procure food from a place of their choice. Moreover, if employers could be fully or partially incentivised (in form of tax break or any other financial benefit) to undertake this, this would serve the dual purpose of Government’s “Food for All” drive as well as a “Healthy India” initiative.

4.6 Tax Treatment of Meal Cards Over the Years4.6.1 First Steps

In India the meal voucher system was formally implemented around 1997. These were non-transferable thereby reducing the scope of misuse. From the beginning, employer’s contribution, up to a specified amount per employee, was not subject to income tax or other social security contributions. Initially, the tax benefit was calculated on a per-meal, per day basis and was pegged at INR 35 per meal. In other words, irrespective of the actual value of the meal voucher provided by the employer, the tax benefit applicable to the employer is only to the extent of INR 35 per meal. However, this was revised and by the Central Board of Direct Taxes under the Department of Revenue, Ministry of Finance (Government of India) vide circular 15/2001 [ENo.275/19212001-IT(B)] during the financial year of 2001-2002.

4.6.2 The Era of Fringe Benefit Taxes

Between 2005 and 2009, the Government of India introduced the fringe benefit tax (FBT) which prescribed no particular limit for meal vouchers. In fact, the IT Act during the FBT regime had specific provisions for tax exemption on ‘electronic meal card’. After the FBT was scrapped in 2009, a provision for electronic meal card prescribed


limits of INR 100 per day which became a de facto standard for meal limits. At present, companies enjoy a tax benefit both for the meal vouchers (now meal cards) and the expenditure on food provisions to the limits of INR 50 per meal.

4.6.3 As Things Stand Today

Currently, the meal card allowances Income Tax (IT) rules relating to the valuation of perquisites paid to employees. The current perquisite valuation rule (Para (iii) of Sub Rule 7 of Rule 3 of the Income Tax Rules) governing provision of food and food coupons is as follows:

“The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:

Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof in either case does not exceed INR 50 per meal or tea or snacks provided in working hours or free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation”.

The highlights of the aforementioned rule and their practical implementation are as follows:

• The value of food and non-alcoholic beverages or meal cards provided by the employer is not subject to income tax to the extent of INR 50 per meal as it is not considered as wages but as a social and dedicated benefit. If the value of food and non-alcoholic beverages or meal cards

exceed INR 50 per meal, the value in excess of INR 50 is taxable and will be considered as wages.

• “Meal” can be understood in reference to breakfast, lunch, and dinner. Rule 3(7) (iii) does not specify the maximum number of meals which can be consumed each day for availing the INR 50 per meal tax exemption. One or two meals per day during working hours could be considered as reasonable.

• If we assume that employees can consume 2 meals each day during working hours, INR 50 per meal tax-free benefit translates into INR 100 through a meal card per working day.

4.7 Benefits of Meal CardsMeal cards have been considered as a means of providing benefits only to employees, and is perceived as a tax benefit. However, meal cards offer a variety of benefits to all stakeholders. The most obvious are the advantages to both employees and the employers. Ahuja (2016) details the positive impact that meals cards have on employee’s health and well-being, thereby directly contributing to a healthier workforce and a decrease in absenteeism. For employees, it is an ideal way of ensuring that their tax free money is spent well, rather than just providing cash in their hands.

4.7.1 To the Economy

Meal cards can contribute significantly to the exchequer. It acts as a means of converting cash transactions into digital transactions thereby directly helping in revenue collection. The increase in revenue happens through both an increase in indirect tax collection and through an increase in direct tax collection.



Industry feedback pegs meal cards at INR 40-50 billion as of 2017-18. This is roughly 12-16 per cent of the PPI card market. The size of the sector is also synonymous to the total meal card allowances offered to employees. In other words, this could be considered as the amount of tax foregone by the government exchequer. However, this also means, that the government collects GST from this allowance, when the card is used at cafeterias, canteens, and other eateries. Furthermore, greater usage of the card will ensure growth in business for both the meal card issuer and for the vendor. This will lead to an increase in corporate direct tax collection.

4.7.2 To VendorsDigital inclusion is an important priority for the country. For India to become truly digitally included, both consumers and vendors must be digitally included. The drive to digitally include consumers has been consistent and the impact is visible. Shocks, such as Goods and Services Tax and demonetisation, have also played their role in driving people and businesses to adopt digital. This also provides an opportunity for vendors to adopt other digital platforms, such us, electronic billing and inventory management. Meal cards often act as a first step towards digital inclusion of vendors. The next stage would be to integrate digital systems with mobile phones.

Notwithstanding all initiatives, the use of cash has not significantly dropped. Payment System Indicators data provided by RBI suggests that of the total of 11945.65 million debit card transactions that happened in 2017, only 28 per cent were done on point of sale (PoS) machines, the remaining were ATM transactions. This trend has not seemed to change as of January 2019. When one considers per transaction value between ATM withdrawals and PoS transactions, the ratio is hugely skewed towards ATMs (Table 4.2). There is a small but

noticeable shift from ATM cash withdrawals to m-wallets even as debit card PoS transactions and PPI cards remain more or less the same.

A common reason for this is the lack of PoS terminals across India. Even though the incumbent government has provided many tax incentives, PoS penetration is low, especially in rural India. A noticeable jump in PoS penetration took place in 2016-17 (Table 4.3). Demonetisation was a significant push factor in businesses procuring PoS machines since the most significant growth was seen post November 2016, after which there was a month on month growth of nearly 15 per cent till the financial year end (Table 4.4).

Even though the growth rate of PoS adoption has been consistent since then, neither the volumes of transactions nor the value have gone up significantly. The temptation to withdraw cash still seems high. In this context, meal cards, or any PPI card is of significance. First, RBI data for PoS machines is only for those that are bank provided. There exists a network outside of banks that also provide PoS machines and this is a significant number.

However, the biggest challenge has always been in convincing a business to invest in a PoS. Demonetisation was an economic shock that incentivised small businesses to adopt PoS machines, but a more long term solution would be for traders to see the business sense in doing so. A common complaint of traders is that they do not have a market that probably uses cards and therefore it would not make sense to keep a machine. Meals cards are an excellent way of creating the market for the traders.

Meal cards issuers act as market makers for digital transactions. For their card to be truly successful they not only need subscribers, but also a network in the vicinity of subscribers where the card can


Table 4.2: Per Transaction Value Calculation for Different Digital Payment Modes

Sl. No. Transactions 2017-18 Jan-19

Debit Cards ATM Transactions

1 Value in INR Bn 28987.61 2661.24

2 Volume in Billion 8.60 0.88

3 Per Transaction Amount (in INR) 3369.77 3022.49

Debit Cards PoS Transactions

4 Value in INR Bn 4600.70 506.84



PPI Card Transactions

7 Value in INR Bn 310.41 30.44



m-Wallet Transactions

10 Value in INR Bn 1086.75 160.87



Source: Payment System Indicators, RBI


Table 4.3: Growth in PoS

PoS Terminals 2012-13 2013- 14 2014- 15 2015- 16 2016- 17 2017- 18 Jan-19

Volume 854290 1065984 1126735 1385668 2529141 3083067 3653010

Year on Year Growth 25% 6% 23% 83% 22%

be used. Traders are assured of a market and are open to card transactions. Infact early adopters tend to capture more of the new meal card market share than late adopters. This is usually only the first step. For more efficient billing, meal cards also provide their own software for food and non-

food segregation. This also ensures digitisation of operations of traders. Going digital helps traders to maintain their books better which ultimately would mean a huge improvement in their credit worthiness and therefore better access to credit when needed.



4.7.3 To Small and Medium Enterprises (SMEs)

One of the biggest challenges for SMEs is cost of labour compliance. A high cost of labour compliance has resulted in many SMEs in not increasing their number of employees, and even if they do, they are hired as contractual workforce and not as full time employees. An ILO study undertaken in 2014 found, “Avoidance by choice” was commonly observed avoidance behaviour in all three states i.e. Maharashtra, Tamil Nadu and Odisha as justification for non-compliance to different labour laws and business regulations….The typical reasons were, “It is legally required, but not enforced”, “Unnecessarily complicated/do not see the benefits”, “Too costly”, and “Takes too much time.”

In similar light, manufacturing firms that have more than 100 employees will soon be expected to provide canteen facilities, as per the new Draft Labour Code on Occupation, Safety, Health and Working Conditions, 2018. Even for larger

manufacturing firms, this is not always a feasible solution, much less for SMEs. The costs of land, infrastructure expenses, and the cost of ensuring fresh and healthy meals at canteens presents a formidable challenge. The aforementioned Draft Code under Chapter VI, Clause 24 (2)(v), mandates the setting up of, “…adequate standards of canteen or canteens…..in an establishment employing one hundred or more workers including contract labour ordinarily employed.” The term “adequate standard of canteen or canteens” is open to interpretation, which means that standards of canteens are mostly subjective.

A compromise is often achieved by offering mediocre meals that are rarely wholesome or nutritious, but are “cheap.” This defeats the fundamental reason behind why canteen facilities are offered. An easier alternative presents itself in the form of meal cards, where employees will have the choice of eateries. It also presents the employers an opportunity to focus on empanelling vendors

Table 4.4: Monthly Growth of PoS between 2016 and 2017

PoS Terminals Volume Month on Month Growth

Jul-16 1443899

Aug-16 1461972 1%

Sep-16 1480309 1%

Oct-16 1512068 2%

Nov-16 1590714 5%

Dec-16 1767733 11%

Jan-17 2015847 14%

Feb-17 2224977 10%

Mar-17 2529141 14%

Apr-17 2614584 3%



who provide wholesome food instead of “junk food.” While labour subsidies are being considered for SMEs, the option of allowing them to choose between providing a canteen or providing meal cards must also be considered. However, for this to truly work, an immediate review of the current allowance of INR 50 per meal must be undertaken. Subsequent chapters build a strong case to increase this allowance to atleast INR 100 per meal, which means, INR 72,000 per year, from the current allowance of INR 36,000 per year.

4.8 Government Canteens/Tiffin Rooms and Meal CardsThere are a number of central and state government canteens that offer subsidised food to government employees. Under the aegis of the Department of Personnel and Training (DoPT), the Administrative Instructions on Departmental Canteens in Government Offices and Industrial Establishments, Third Edition, 2008, also known as Green Book, lays down instructions on the setting up and running of government canteens. The foreword of the Green Book begins by stating that, “As a measure of staff welfare, Departmental Canteens/Tiffin Rooms have been set up in Central Government Offices/Establishments to make available hygienically prepared beverages, snacks and meals to the employees during the working hours at reasonable rates.” Since 2008 however, there have been no subsequent versions of the Green Book. During

this time however, the DoPT has issued several circulars on ensuring that not only good quality foodis served but also that the menu should include nutritious choices. Recently, DoPT also issued a circular for upgrading these canteens.

The general upkeep and maintenance of these canteens contributes to the expenses of centre and state governments. The revenue generated from these canteens does not always cover the cost of running them. The intent of offering welfare through healthy and nutritious food continues to remain as should a priority. However, the government may think of using meal cards instead, atleast on a pilot basis. Many public sector undertakings have infact adopted the same, especially in semi urban and rural postings where setting up of canteens may not be feasible. For government canteens to incorporate meal cards would be in line with the Digital India initiative, and in line with the incumbent government’s focus on moving to a less cash society. By following the model followed by many private sector and public sector enterprises, who offer canteens in the form of food courts, these companies have provided a better variety of food options. It will also allow for greater competition amongst vendors that will enco urage better pricing. This will also mean lower costs for the government in terms of infrastructure, upkeep and man power. The central government must lead the way in adopting meal cards as a means of offering welfare to employees.



5. An Analysis of Meal Card Usage 5.1 Survey DesignIn order to understand different stakeholders’ perceptions on the meal card and how the meal card is used, it was necessary to undertake some primary research. As part of the primary research, detailed interviews were conducted with human resource (HR) heads of different types of companies, with SMEs, with different vendors who accept meal cards, and with some meal card providers. In order to capture employee usage pattern a primary survey was conducted of 250 respondents, of which 185 were meal card users and 65 were non meal card users.

The sample and interviews are urban samples. However, the interviews with HR heads did present perspectives on the advantages and

usage of meal cards in semi-urban areas and townships.

5.2 Profile of RespondentsBy design, the age of respondents was focussed on the age group of people between 26-40 (Figure 5.1) years, to target those individuals who have been working for a few years. Respondents have an annual income between INR 5-10 lacs (Figure 5.2), which would make them middle income employees. Only 10 per cent of the sample were living by themselves (Figure 5.3), most live with their families or with flatmates. This was important to note to observe if meal cards are being shared with family members for buying groceries. Most employees spend atleast 8-12 hours a day at work (Figure 5.4).

46

5%

52%

38%

5% 11%

69%

20%

7%

56%

33%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

18-25 26-33 34-41 42-50


Figure 5.1: Age of Employees


47

Figure 5.2 Income of Employees

Figure 5.3 Household Profile

3%

18%

47%

32%

22%

48%

15% 15%

8%

26%

39%

28%

0%

10%

20%

30%

40%

50%

60%

3-5 lakhs 5-7 lakhs 7-10 lakhs 10 lakhs and above


17%

30%

4%

17%

23%

9%

23%

28%

17%

11%

8%

14%

18%

29%

7%

16%

19%

10%

0%

5%

10%

15%

20%

25%

30%

35%

Flatmates Parents Parents, Partnerand Children

Partner Partner andChildren

Single Occupant.


47

Figure 5.2 Income of Employees

Figure 5.3 Household Profile

3%

18%

47%

32%

22%

48%

15% 15%

8%

26%

39%

28%

0%

10%

20%

30%

40%

50%

60%

3-5 lakhs 5-7 lakhs 7-10 lakhs 10 lakhs and above


17%

30%

4%

17%

23%

9%

23%

28%

17%

11%

8%

14%

18%

29%

7%

16%

19%

10%

0%

5%

10%

15%

20%

25%

30%

35%

Flatmates Parents Parents, Partnerand Children

Partner Partner andChildren

Single Occupant


Figure 5.2: Income of Employees

Figure 5.3: Household Profile



48

Figure 5.4 Average Hours Spent in Office in a Day

5.2.2 Spend on Food and Groceries The meal card, internationally, has been an effective tool to ensure that employees (and their families) have access to good nutritious meals. The average spend of the employees on eating out is between INR 4000-6000 in a month (Figure 5.5). Interestingly, there seems to be a clear spending pattern of spending. While 33 per cent of those between ages 42-50 are more likely to spend more than INR 6000 per month on eating out, 80 per cent of those between ages 26-41 will spend between INR 4000-6000 per month. With age the propensity to spend more on good food seems to increase (Figure 5.6). There is also a clear positive relationship between income levels and eating out (Figure 5.7). Those with annual incomes above INR 7 lacs tend to spend more on eating out. Figure 5.5 On an average how much do you spend on eating out/ordering in in a month? (In INR)

12%

83%

4%

97%

3% 9%

87%

4% 0%

20%

40%

60%

80%

100%

120%

Less than 8 8-12 More than 12


1%

16% 16%

48%

20%

2%

37% 40%

18%

3% 1%

21% 22%

40%

16%

0%

10%

20%

30%

40%

50%

60%

Less than 1000 1000-2000 2001-4000 4001-6000 Above-6000


48

Figure 5.4 Average Hours Spent in Office in a Day

5.2.2 Spend on Food and Groceries The meal card, internationally, has been an effective tool to ensure that employees (and their families) have access to good nutritious meals. The average spend of the employees on eating out is between INR 4000-6000 in a month (Figure 5.5). Interestingly, there seems to be a clear spending pattern of spending. While 33 per cent of those between ages 42-50 are more likely to spend more than INR 6000 per month on eating out, 80 per cent of those between ages 26-41 will spend between INR 4000-6000 per month. With age the propensity to spend more on good food seems to increase (Figure 5.6). There is also a clear positive relationship between income levels and eating out (Figure 5.7). Those with annual incomes above INR 7 lacs tend to spend more on eating out. Figure 5.5 On an average how much do you spend on eating out/ordering in in a month? (In INR)

12%

83%

4%

97%

3% 9%

87%

4% 0%

20%

40%

60%

80%

100%

120%

Less than 8 8-12 More than 12


1%

16% 16%

48%

20%

2%

37% 40%

18%

3% 1%

21% 22%

40%

16%

0%

10%

20%

30%

40%

50%

60%

Less than 1000 1000-2000 2001-4000 4001-6000 Above-6000


Figure 5.4: Average Hours Spent in Office in a Day

Figure 5.5: Average Spend on Eating-Out / Ordering-In Per Month (in INR)

5.3 Spend on Food and GroceriesThe meal card, internationally, has been an effective tool to ensure that employees (and their families) have access to good nutritious meals. The average spend of the employees on eating out is between INR 4000-6000 a month (Figure 5.5). Interestingly, there

seems to be a clear pattern of spending. While 33 per cent of those between ages 42-50 are more likely to spend more than INR 6000 per month on eating out, 80 per cent of those between ages 26-41 will spend between INR 4000-6000 per month. With age the propensity to spend more on good food seems to increase (Figure 5.6). There is also a clear positive relationship between income levels and eating out


Figure 5.6 On an average how much do you spend on eating out/ordering in in a month? (In INR) Vs Age

Figure 5.7 On an average how much do you spend on eating out/ordering in in a month? (In INR) Vs Income

41%

18%

35%

6%

1%

14%

29%

42%

14%

1%

29%

13%

39%

18%

22%

44%

33%

1%

21% 22%

40%

16%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Less than 1000 1000-2000 2001-4000 4001-6000 Above-6000

18-25 26-33 34-41 42-50 Grand Total

15%

60%

25%

2%

33% 36%

17%

13% 12% 13%

58%

16%

1%

25%

10%

42%

22%

1%

21% 22%

40%

16%

0%

10%

20%

30%

40%

50%

60%

70%

Less than 1000 1000-2000 2001-4000 4001-6000 Above-6000


49

Figure 5.6 On an average how much do you spend on eating out/ordering in in a month? (In INR) Vs Age

Figure 5.7 On an average how much do you spend on eating out/ordering in in a month? (In INR) Vs Income

41%

18%

35%

6%

1%

14%

29%

42%

14%

1%

29%

13%

39%

18%

22%

44%

33%

1%

21% 22%

40%

16%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Less than 1000 1000-2000 2001-4000 4001-6000 Above-6000

18-25 26-33 34-41 42-50 Grand Total

15%

60%

25%

2%

33% 36%

17%

13% 12% 13%

58%

16%

1%

25%

10%

42%

22%

1%

21% 22%

40%

16%

0%

10%

20%

30%

40%

50%

60%

70%

Less than 1000 1000-2000 2001-4000 4001-6000 Above-6000


Figure 5.6: Average Spend on Eating-Out / Ordering-In Per Month – Age Wise (in INR)

Figure 5.7: Average Spend on Eating-Out / Ordering-In Per Month – Income Wise (in INR)



50

They also spend as much as INR 2000 per week (Figure 5.8) on food and staples, which would translate into INR 8000 per month. Interestingly, it is the 26-33 age group that spends the most on groceries in a week; 20 per cent spend more than INR 2000 per week (Figure 5.9). The majority of the age groups spends between INR 1000 -2000 per week. Similarly those whose annual income is between INR 7-10 lacs are the ones who are spending the most on groceries (Figure 5.10). This category of people would classify as your average middle class workforce who are clearly health conscience and also willing to pay for good food in terms of groceries and in terms of where they chose to eat. In India however, this sentiment has not been realised by government, employee, or employer. This is largely because meal cards have been positioned as a tax saving instrument rather than as a welfare instrument. For the intrinsic and full benefits of the meal card are to be realised, it must not be viewed merely as a tax saving instrument, but as a means for employers to ensure that their employees have access to clean and nutritious food. Figure 5.8 On an average how much do you spend on food and staples in a week? (In INR)

37%

46%

17%

12%

34%

40%

14%

3%

36%

44%

16%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Less than 500 500-1000 1000-2000 Above-2000


Figure 5.8: Average Spend on Food and Staples in a Week (in INR)

(Figure 5.7). Those with annual incomes above INR 7 lacs tend to spend more on eating out.

They also spend as much as INR 2000 per week (Figure 5.8) on food and staples, which would translate into INR 8000 per month. Interestingly, it is the 26-33 age group that spends the most on groceries in a week; 20 per cent spend more than INR 2000 per week (Figure 5.9). The majority of the age groups spend between INR 1000 -2000 per week. Similarly those whose annual income is between INR 7-10 lacs are the ones who are spending the most on groceries (Figure 5.10). This category of people would classify as your average middle class workforce who are clearly health conscience and also willing to pay for good food in terms of groceries and in terms of where they chose to eat.

In India however, this sentiment has not been realised by the government, employee, or employer.

This is largely because meal cards have been positioned as a tax saving instrument rather than as a welfare instrument. For the intrinsic and full benefits of the meal card to be realised, it must not be viewed merely as a tax saving instrument, but as a means for employers to ensure that their employees have access to clean and nutritious food.

5.4 Meal Card UsageThere are two norms that dictate allowances for meal cards. The first is the RBI Master Direction on Issuance and Operation of Prepaid Payment Instruments (RBI, October 2017) which sets down rules for loading and reloading of PPIs, including meal cards. This circular classifies meal cards as semi-closed system PPIs. “These PPIs are used for purchase of goods and services, including financial services, remittance facilities, etc., at a group of clearly identified merchant locations


51

Figure 5.9 On an average how much do you spend on food and staples in a week? (In INR) Vs Age

Figure 5.10 On an average how much do you spend on food and staples in a week? (In INR) Vs Income

5.2.3 Meal Card Usage There are two norms that dictate allowances for meal cards. The first is the RBI Master Direction on Issuance and Operation of Prepaid Payment Instruments (RBI, October 2017) which sets down rules for loading and reloading of PPIs, including

41%

53%

6% 6%

35% 39%

20%

35%

51%

14%

44%

56%

3%

36%

44%

16%

0%

10%

20%

30%

40%

50%

60%

Less than 500 500-1000 1000-2000 Above-2000

18-25 26-33 34-41 42-50 Grand Total

20%

55%

25%

6%

50%

42%

2%

24%

44%

32% 35%

52%

13%

3%

36%

44%

16%

0%

10%

20%

30%

40%

50%

60%

Less than 500 500-1000 1000-2000 Above-2000


51

Figure 5.9 On an average how much do you spend on food and staples in a week? (In INR) Vs Age

Figure 5.10 On an average how much do you spend on food and staples in a week? (In INR) Vs Income

5.2.3 Meal Card Usage There are two norms that dictate allowances for meal cards. The first is the RBI Master Direction on Issuance and Operation of Prepaid Payment Instruments (RBI, October 2017) which sets down rules for loading and reloading of PPIs, including

41%

53%

6% 6%

35% 39%

20%

35%

51%

14%

44%

56%

3%

36%

44%

16%

0%

10%

20%

30%

40%

50%

60%

Less than 500 500-1000 1000-2000 Above-2000

18-25 26-33 34-41 42-50 Grand Total

20%

55%

25%

6%

50%

42%

2%

24%

44%

32% 35%

52%

13%

3%

36%

44%

16%

0%

10%

20%

30%

40%

50%

60%

Less than 500 500-1000 1000-2000 Above-2000


Figure 5.9: Average Spend on Food and Staples per Week – Age Wise (in INR)

Figure 5.10: Average Spend on Food and Staples per Week – Income Wise (in INR)



53

Figure 5.11 What amount is loaded onto your meal card every month?

Meal cards are mostly used to buy meals at the cafeteria and to buy groceries (Table 5.1). Ideally meal cards are meant only to buy food items. In the past, this has not been easy to enforce due to the size of networks and lack of digital inclusion. Furthermore, up until February 2018, meal PPIs were in the form of vouchers and not cards. With the uptake of digital adoption, tracking these transactions has become easy. The industry has also innovated to ensure that all the vendors in their network have software installed that can automatically segregate the bills into food and non-food, so that the card is used appropriately. This has also become easier with GST. Respondents also stated that their meal cards last for atleast a month (Figure 5.12). Table 5.1 Where do you use your meals card? ( 1 as highest rank) Rank-

1 Rank-

2 Rank-

3 Rank-

4 Rank-

5 Number

Meals at office cafeteria 41 10 9 117 177

Snacks at office cafeteria 29 11 38 78

Meals at other eateries 1 31 19 32 80 163

Snacks at other eateries 7 43 46 8 104

Food and Staples 37 25 73 6 141

Non-Food Items (e.g. toothpaste, soap etc.)

70 65 10 34 179

55% 39%

4% 3%

Less than 2500

2500-3000

3001-3500

Above -3500

Figure 5.11: Amount Loaded onto Meal Card Every Month

/ establishments which have a specific contract with the issuer (or contract through a payment aggregator / payment gateway) to accept the PPIs as payment instruments. These instruments do not permit cash withdrawal, irrespective of whether they are issued by banks or non-banks.”

In line with these Master Directions, PPIs are allowed to load a maximum of INR 50,000 in a month, subject to an overall limit. PPIs are allowed two over all limits based on how much detail they collect from their customers. If they only collect “minimum details”10, then the total outstanding amount for such PPI cannot exceed INR 10,000 at any point of time. The RBI has also added that these PPIs will be expected to convert into a fully KYC compliant semi-closed PPI, which can have an outstanding amount of INR 1 lac at any point of time. Most meal cards will fall under this category of full KYC compliant PPIs.

However, meal card allowances are usually dictated through tax exemptions given for an individual by the Department of Revenue (MoF, GoI). The maximum amount permitted under the meal card allowance for claiming a tax exemption is INR 36,000 per year, which is INR 3,000 per month. This is also reflected in the survey, in which, 55 per cent of the respondents stated that their companies load less than INR 2,500 per month and 39 per cent stated that they get an allowance of INR 3,000 per month (Figure 5.11). This difference in allowances is based on either calculating on the basis of thirty days per month or on the basis of twenty two working days. What is interesting is that a minute 7 per cent of the respondents stated that their companies transfer more than the “tax exempt” amount. This practice captures the welfare advantages of meal cards and their true potential, rather than as a mere tax saving instrument. Treating the meal card as a welfare instrument will

_______________________________________________________

10 “The minimum details shall include mobile number verified with One Time Pin (OTP) and self-declaration of name and unique identification number of any of the ‘officially valid document’ defined under Rule 2(d) of the PML Rules 2005, as amended from time to time.” RBI Master Directions on PPIs, 9.1 (i) (b)


ensure a more targeted and better delivered welfare measure for low income households.

Meal cards are mostly used to buy meals at the cafeteria and to buy groceries (Table 5.1). Ideally meal cards are meant only to buy food items. In the past, this has not been easy to enforce due to the size of networks and lack of digital inclusion. Furthermore, up until February 2018, meal PPIs

were in the form of vouchers and not cards. With the uptake of digital adoption, tracking these transactions have become easy. With innovation, the industry is now ensuring that all the vendors in their network have software installed that can automatically segregate the bills into food and non-food, so that the card is used appropriately. This has also become easier with GST. Respondents also

Table 5.1: Meal Card Usage (1 as Highest Rank)

Rank-1 Rank-2 Rank-3 Rank-4 Rank-5 Number

Meals at office cafeteria 41 10 9 117 177

Snacks at office cafeteria 29 11 38 78

Meals at other eateries 1 31 19 32 80 163

Snacks at other eateries 7 43 46 8 104

Food and Staples 37 25 73 6 141

Non-Food Items (e.g. toothpaste, soap etc.)

70 65 10 34 179

54

Figure 5.12 How Long Does the Amount on the Meal Card Last

5.2.4 Welfare or Tax Benefit Even though governments may perceive meal cards as mere tax saving instruments, this notion may have evolved over the years. A mere 18 per cent of the respondents also view meal cards as a mere tax saving instrument (Figure 5.13). The remaining view it as a means of ensuring employee welfare by offering good quality nutritious meals. Infact, only 19 per cent stated that they would prefer to have tax free cash in hand instead of the meal card. The majority chose the meal card over tax free cash (Figure 5.14). Clearly employees do not view the meal card as a mere tax saving. Figure 5.13 Purpose of a Meal Card

19%

70%

4% 5%

1%

More than a month One month One-time use Three weeks Two weeks

Figure 5.12: How long does the amount on the meal card lasts?



stated that their meal cards last for atleast a month (Figure 5.12).

5.5 Welfare or Tax BenefitEven though governments may perceive meal cards as mere tax saving instruments, this notion may have evolved over the years. Only 18 per cent of the respondents also view meal cards as a mere

tax saving instrument (Figure 5.13). The remaining view it as a means of ensuring employee welfare by offering good quality nutritious meals. Infact, only 19 per cent stated that they would prefer to have tax free cash in hand instead of the meal card. The majority chose the meal card over tax free cash (Figure 5.14). Clearly employees do not view the meal card as a mere tax saving instrument.

55

Figure 5.14 Meal Card or the Equivalent as Tax-Free Cash

9%

23%

18%

49%

To ensure welfare of worker and his family To provide nutritious mealTo provide tax benefit To provide varied meal choices

81%

19%

Meal card Tax-free cash

55

Figure 5.14 Meal Card or the Equivalent as Tax-Free Cash

9%

23%

18%

49%

To ensure welfare of worker and his family To provide nutritious mealTo provide tax benefit To provide varied meal choices

81%

19%

Meal card Tax-free cash

Figure 5.13: Purpose of a Meal Card

Figure 5.14: Meal Card or the Equivalent as Tax-Free Cash


6. Recalculating the Meal Card AllowanceThe initial meal voucher allowance was set in 1998 at INR 35 per day. Since then, it has been revised once in 2001 to INR 50 per meal (INR 100 per day, INR 3000 per month). There has been no revision since, even though salaries per se have been revised as have dearness allowances based on inflation. It has been eighteen years since the previous revision. A revision is long overdue.

There are three ways in which the new allowance limit can be calculated. The first way is to compare the allowances to the respective pay commissions. The second way is to benchmark the allowance as per the Consumer Price Index (CPI). The third is to look at the responses from the survey.

6.1 Allowances as a Percentage of Median SalariesFor 1998, when the first meal voucher allowance was set at INR 35, the median salaries are calculated on the basis of the 1996 5th Pay Commission. Similar median salary calculations have been computed for 1998 (on the 6th Pay Commission of 1996), and for 2019 (on 7th Pay Commission of 2014)11. In the first instance, in 1998, the meal voucher allowance for the low band was 37 per cent (Table 6.1). Since then, the percentages have slipped downwards to 24 per

Source: Calculated based on 5th, 6th and 7th Pay Commission Reports

Table 6.1: Meal Voucher Allowances as a Percentage of Median Salaries

YearCorresponding

Pay Commission

Median Salary

(Low Band)

Median Salary (Median Band)

Median Salary (High Band)

Annual Eligibility

(considering INR 3000/month)

% of MC in Salary

(Low Band)

% of MC in Salary (Median

Band)

% of MC in Salary (High

Band)

1998 5th 34,500 1,19,850 3,60,000 12,600 37% 11% 4%

2009 6th 1,52,400 6,26,400 10,80,000 36,000 24% 6% 3%

2019 7th 2,83,200 15,76,200 30,00,000 36,000 13% 2% 1%

_______________________________________________________

11 Refer to Appendix 3 for detailed calculation on how median salaries have been computed.



Source: Calculated based on 5th, 6th and 7th Pay Commission Reports

Table 6.2: Revised Meal Allowance Calculation

Low Band Median Band High Band

7th Pay commission Salary (in INR) 2,83,200 15,76,200 30,00,000

Percentage allocation as per 5th Pay Commission 37% 11% 4%

Monetary Allocation Per Year (in INR) 1,04,784 1,73,382 1,20,000

Monetary Allocation Per Day (in INR) 291 482 333

Monetary Allocation Per Meal (in INR) 146 241 167

cent and 13 per cent with subsequent revisions in pay commission mainly because the one increase in the meal allowance was not in tandem with the increase in the salaries.

If the initial meal allowance percentages to salaries were maintained, then the new meal allowances will increase to INR 145 for the low band, INR 241 for the median band, and INR 167 for the high band of salaries as per the 7th Pay Commission (Table 6.2).

6.2 Allowances Benchmarked Again CPIThe CPI Industrial Workers (IW) series is a commonly considered series for benchmarking increases in food prices for industrial workers. This is also an ideal index to benchmark the meal allowances to (Table 6.3).

As discussed, after the introduction of meal allowances in 1998, the first and only revision occurred in 2001. In 2001, the meal allowance was set to INR 50 per meal. Based on the CPI-IW, food group inflation for 2018, is 310. This means that with revisions in salaries, the meal allowance, had it

been benchmarked against CPI-IW, would currently stand at INR 155 per meal.

While an immediate revision in meal allowances is necessary, it is also necessary to put in place a proper institutional framework to ensure that the meal card allowance is reviewed periodically, say once in three years, and is benchmarked to the commonly accepted CPI-IW Food Group.

6.3 Market Opinion on Meal Card AllowancesSurvey respondents were asked what the cost of one meal was in their cafeterias and canteens (Figure 6.1). Over 50 per cent of respondents stated that they pay over INR 75 for a meal. Interestingly, for all non-meal card users, meal costs seems to be above INR 75. Only 23 per cent of meal card users seem to draw the benefit of subsidised meals. Based on the average costs of meals and responses to what a per meal allowance should be (Figure 6.2), the majority of the respondents thought the allowance should be increased to INR 76-100. A sizeable number (36 per cent) believes it should be above INR 100.


Source: CPI-IW Annual Report, 2017

Table 6.3: All-India Annual Average of CPI-IW on Base 2001=100

Groups/ Sub-groups

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Food Sub-Groups

Cereals & Products 131 148 165 183 186 197 230 249 252 263 278 281

Pulses & Products 143 159 218 234 221 241 254 275 383 435 301 267

Oils & Fats 165 193 171 184 219 264 269 254 270 283 280 284

Meat, Fish & Eggs 144 162 185 212 237 264 306 338 363 385 396 410

Milk & Products 124 139 155 178 204 228 247 273 290 303 320 327

Condiments & Spices 145 146 175 212 234 209 293 282 326 308 324 315

Vegetables & Fruits 135 144 170 185 202 230 273 299 293 316 323 327

Other Food 119 131 161 182 194 218 240 252 260 283 299 300

FOOD GROUP 134 149 169 190 204 223 254 271 288 304 308 310

GENERAL INDEX 131 142 157 176 192 209 232 247 261 274 281 295

59

revisions in salaries, the meal allowance, had it been benchmarked against CPI-IW, would currently stand at INR 155 per meal. While an immediate revision in meal allowances is necessary, it is also necessary to put in place a proper institutional framework to ensure that the meal card allowance is reviewed periodically, say once in three years, and is benchmarked to the commonly accepted CPI-IW Food Group. 6.3 Market Opinion on Meal Card Allowances Survey respondents were asked what the cost of one meal was in their cafeterias and canteens (Figure 6.1). Over 50 per cent of respondents stated that they pay over INR 75 for a meal. Interestingly, for all non-meal card users, meal costs seems to be above INR 75. Only 23 per cent of meal card users seem to draw the benefit of subsidised meals. Based on the average costs of meals and respondents were also asked what they thought the revised per meal allowance should be (Figure 6.2). The majority of the respondents thought the allowance should be increased to INR 76-100. A sizeable number (36 per cent) believe it should be above INR 100. Figure 6.1 Average Cost of One Full Meal at Office Cafeteria/Canteen

23%

36%

20%

12% 9%

48%

8%

45%

17%

26% 27%

11%

18%

0%

10%

20%

30%

40%

50%

60%

31-50 51-75 76-100 101-125 126 and Above


Figure 6.1: Average Cost of One Full Meal at Office Cafeteria/Canteen



60

Figure 6.2 What Should the Amount Per Meal Be?

6.4 The New Meal Card Allowances Three methods were used to compute a revised meal card allowance. The numbers converge between INR 150 and INR 200. Table 6.4 A Comparison of New Meal Card Allowances As a % of Medium Salaries Benchmarked to CPI-IW Survey Results INR 146-INR 241 INR 155 INR 100 or above

9%

55%

25%

11%

51-75 76-100 101-125 126 and Above

Figure 6.2: What should the amount per meal be?

Table 6.4: A Comparison of New Meal Card Allowances per Meal

As a % of Median Salaries

Benchmarked to CPI-IW Survey Results

INR 146-INR 241 INR 155 INR 100 or above

6.4 The New Meal Card AllowanceThree methods were used to compute a revised meal card allowance. The numbers converge between INR 150 and INR 200 per meal.


7. Recommendations• Increase the tax benefit of INR 50 per meal to

between INR 150 and INR 200 per meal for

meal card to enable employees to access better

quality, wholesome and nutritious meals.

• The tax benefit value of the meal card should

be revised frequently, at least every three years

and benchmarked against CPI-IW Food Group

inflation.

• Meal cards are meant for the welfare of

the employees and therefore should not be

perceived merely as a tax benefit provided to

them. Hence , as a social benefit initiative with

a direct impact on health and nutrition, the

responsibility of fixing suitable allowances could

be brought under the Ministry of Health and

Public Welfare, for them to recommend the fair

value of exemption to be provided each year.

• Only certain market leaders have developed

mobile based applications. The industry as a

whole should consider developing app based

meal card models which will further the use

of meal cards through digital modes. This

will provide fresh impetus to the Digital India

initiative. Furthermore, data suggests that

mobile based transactions are more popular

than card based transactions.

• The meal card industry should make best efforts

to educate vendors to maintain cash registers

that can segregate food and non-food items

at the time of billing. This way, the meal card

will be used only for the purchase of food

items. While leading players in the market has

always put these checks and balances in place

due to a better knowledge of the market, new

players should also develop similar checks and

balances.

• The meal card should be made part of the

Labour Welfare Code wherein employers in

establishments with more than 100 workers

who are required to provide access to canteen

services should also be allowed to offer

meal cards instead, as it will be more cost

effective for a large number of establishments.

In such cases not more than 20 per cent of

the meal cost should be recovered from the

employee, which is in line with international

best practices. Meal cards are an excellent

alternative to canteens and will help MSMEs in

lowering their cost of labour compliance.

• The government should consider the use of

meal cards in social welfare schemes like public

distribution schemes (PDS) and in the place of

subsidised canteens to reduce pilferages and

ensure transparency and cost effectiveness in

the entire process.

• The government must also lead the way by

offering meal cards to its employees that can

be used in government canteens and tiffin

rooms. This will be in line with Digital India and

moving towards a less cash economy.



• Employers must proactively ensure that vendors

are chosen on the basis of the quality of their

food and its nutritional content rather than

on the basis of those that are the most price

competitive.

• Currently companies are not provided any

incentive for opting to include meal cards as

part of the compensation plan that they offer.

The meal card is a means of providing welfare

and not just tax breaks. The government

must consider providing tax incentives to

companies that provide meal cards as a means

of providing welfare for their low income

employees. This would automatically mean a

larger disposable income in the hands of low

income families for food alone, which means

higher disposable income for education and

health emergencies.


Annexure 1:Definition of Meal VoucherThe Social Voucher International Association (SVIA)

has an embedded definition of meal vouchers/

cards as part of their definition of Social Vouchers,

which states, “…whether paper or digital, are

social benefits attributed to workers collectively

by their employers, public or private, carrying

a right to access specific goods or services that

improve their working conditions and facilitate their

work-life balance (such as access to food, culture,

transportation, childcare, holidays…). Such goods or

services are accessible within a dedicated network

of merchants and providers which is built through

a contract-based relation with each merchant/

provider by companies issuing social vouchers and

ensuring their proper efficiency, notably by avoiding

their conversion into cash. Social vouchers, usually

supported by a public policy and sustained by a

national tax and/or social framework, enhance a

virtuous social and economic model while stimulating

local and national economy to meet a dedicated

social purpose. Public Authorities can also adapt

social vouchers to distribute welfare to their citizens

as an alternative to allowances in cash or in kind.”

As per the Directorate General (DG) of Taxation

and Customs Union of the European Commission,

“Voucher shall mean an instrument carrying a

right to receive a supply of goods or services, or to

receive a price discount or rebate with regard to a

supply of goods or services and where there is a

corresponding obligation to fulfil this right”.

The DG Employment of the European Commission

bases its analysis on the following definition:

“Vouchers are subsidies granting limited

purchasing power to an individual to choose

among a restricted set of services. Vouchers

are an interesting example as this instrument

combines the two objectives pursued by quasi-

markets in the social field. By increasing the

possibilities for beneficiaries to choose between

different providers, they contribute to enhancing

competition on the market. By reducing the price

paid by the user, they make the service at issue

more affordable”.

As per the DG Humanitarian Aid and Civil Protection

of the European Commission, “Vouchers provide

access to pre-defined commodities or services.

They can be exchanged in designated shops or in

fairs and markets. These are described respectively

as value-based, commodity based or service-

based vouchers. Combined vouchers also exist.

Commodity vouchers have been used to provide

access to food, NFIs, seeds and livestock for

example. If the vouchers are not tied to a set of pre-

defined commodities or services, then they will be

treated as cash payments”.

As per the International Trade Union Confederation,

“Vouchers are a social benefit, regulated by national

law, first adopted formally in the 1950s in the

United Kingdom with the stated goal of feeding

workers. Employers usually contribute 50 to 100 per

cent of the face value of the voucher”.

_______________________________________________________

20European Commission (2012a), A Draft Proposal for a Council Directive Amending Directive 2006/112/EC on the Common System of Value Added Tax, as regards the Treatment of Vouchers

21First biennial report on social services of general interest, European Commission, 2008

22DG ECHO funding guidelines. The use of cash and vouchers in humanitarian crises, European Commission, March 2013



The European Parliament has defined vouchers in

order to exclude them explicitly from the Payment

Services Directive that is currently being revised.

It reads, “...an instrument valid only in a single

Member State and regulated by a specific social or

tax framework, provided on request of an enterprise

or a public entity, carrying right for an individual to

receive goods or services from suppliers having a

commercial agreement with the issuer and which

cannot be exchanged for money”.


Annexure 2:

Source: http://www.incometaxindia.gov.in/Pages/rules/income-tax-rules-1962.aspx

The Evolution of Tax Law on Meal Provisions for Employees in India

Phase Year Description Taxability on Employee Taxability on Employer

Phase I 1997-2001

Meal valuation for employees on meals inside

and outside office on working days

Tax Free up to INR 35 per dayFully deductible as an expense.

However, no fiscal advantage for the company

Phase II 2001-2005 First valuation of perquisites Tax free up to INR 50 per mealFully deductible as an expense.


Phase III 2005-2009 Fringe Benefit Tax

Tax free with no limits defined. In 2009 a provision for electronic meal card prescribed limits of INR

100/day and that became a de facto standard for meal limit

Fully deductible expense and exemption from paying FBT.


Phase IV 2009- PresentSecond valuation of

perquisitesTax free up to INR 50 per meal

Fully deductible as an expense. However, no fiscal advantage for

the company



Annexure 3:Calculation of Median Salaries (in INR)

Median Calculation

7th CPC 6th CPC 5th CPC

Min Max Median Min Max Median Min Max Median

Pay Band 1 18000 29200 23600 5200 20200 12700 2550 3200 2875

Pay Band 2 35400 53100 44250 9300 34800 22050

Pay Band 3 56100 78800 67450 15600 39100 27350 9000 10975 9987.5

Pay Band 4 118500 144200 131350 37400 67000 52200

HAG 182200 182200 N/A 67000 79000 73000

HAG+ 205400 205400 N/A 75500 80000 77750

APEX 225000 225000 N/A 80000 80000 N/A

Cabinet Secretary 250000 250000 N/A 90000 90000 N/A 26000 26000 N/A


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