Navigating the Factory Act and ESIC Coverage: Are We Compliant with Gas Operations in Agra?

Dear Expert,

I work in a Government company that is a major player in the gas industry in India. We are involved in the transmission, distribution, and marketing of natural gas, as well as CNG in the Agra region. Some percentage of the natural gas is imported at the Gujarat port from Qatar, while another portion is extracted from the Bombay High offshore. Both imported and indigenous gas mix at the Hazira terminal before being transported through underground pipelines to various locations in India, including Agra.

In Agra, our main task is to reduce the pressure of incoming gas from 90 bar to 16 bar (bar being a unit of pressure measurement) for distribution to individual consumers in the region. At the Agra station, we have six regular employees on the company's payroll, while the remaining eighteen are contract employees. We use grid power as well as a gas generator to operate and maintain various equipment, meters, lights, fans, etc.

Q1: Are we engaged in any manufacturing activity in Agra under the Factory Act, considering we only filter gas and reduce pressure from 90 bar to 16 bar?

Q2: Are we using power for manufacturing purposes as per the Factory Act to determine the minimum number of employees (20 or 10) involved in the activity? (Firstly, we are not manufacturing anything, and secondly, power is used for illumination, fans, meters, equipment, etc.)

Q3: Is the contractor required to provide ESIC coverage for its employees? The number of contractor's employees is 18, which is below the mandatory 20 (without power). However, when added to the 5 regular employees on the company's payroll, it exceeds 20.

Q4: At Mathura, Dholpur, Firozabad, and Babrala, there are stations identical to the one in Agra. The same contractor has deployed the same number of employees at these stations as well. Combined, the contractor has deployed 80 employees across all the stations. Can the contractor obtain coverage for all employees from a single ESIC office?

Note: The contractor was awarded this job through an all-India tender for maintenance work and not for the deployment of manpower. This contract is solely for maintenance activities, and payment is based solely on these activities.

Thank you.

By virtue of section 2(k) of the Factories Act, a manufacturing process means... making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery, or disposal... ". Here, your operation comes under the manufacturing process since you treat the gas with a view to using it by the ultimate consumers. Therefore, the operation being carried out is manufacturing in nature.

Secondly, to determine whether the Factories Act is applicable or not, the number of employees engaged directly and through contractors should be taken into account because the employees engaged through contractors are also involved in the primary or secondary processes or the business of the factory. Since the total number of employees engaged is more than 10, ESI will be applicable because it is a factory. For other establishments, it is 20 workers. For coverage purposes, the total number of employees includes employees directly employed and those engaged through contractors. For coverage, all branches/units of the same organization set up at other places where ESI is applicable will be considered. Therefore, saying that ESI will not be applicable has no merit.

An establishment is considered to be run with the aid of power if it is operated with at least a motor. There cannot be a station meant for filtering gas and reducing pressure where no power is used.

For ESI coverage, separate registration would be advisable. The establishment will also be covered by EPF.

Regards,

Madhu T.K