Karnataka’s insurance scheme for gig workers has reached only 30,256 registrations against a 230,000 target. The program faces challenges due to a High Court standoff where major platforms like Zomato and Swiggy are contesting mandatory welfare fees, creating uncertainty regarding regulatory compliance costs for these firms.
Karnataka’s attempt to formalize a social security net for the state’s gig workforce is seeing slow adoption. Data from the state Labour Department shows that only 30,256 workers have registered for the insurance program, which was launched in late 2023. This is significantly lower than the government's target of 230,000 registrations for an estimated workforce of up to 300,000 gig workers, most of whom operate in Bengaluru.
The Insurance Scheme and Participation Gap
The state government introduced the insurance package to cover risks inherent in platform-based jobs. It offers a total insurance cover of Rs 4 lakh, covering life, accident, permanent disability, and hospital reimbursements. However, officials noted that the enrollment process, which is voluntary, has not gained momentum. The use of portals like e-Shram and Seva Sindhu for registration has not yet translated into high participation, with the Labour Department indicating that a lack of proactive support from several delivery aggregator platforms has hampered the effort.
Legal Tensions Over Welfare Fees
The initiative is currently caught in a legal conflict related to the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, which came into effect in May 2025. The Act mandates that aggregators contribute to a welfare fund. While the Karnataka High Court has refused to pause the implementation of the Act, many major delivery platforms have challenged the legislation in court.
Because of this ongoing litigation, several large players—including Zomato, Swiggy, Blinkit, and Zepto—are currently depositing their mandated welfare fees into the court registry instead of directly to the state, pending a final judgment. In contrast, smaller or local operators like Yulu Bikes and Namma Yatri have reportedly chosen to pay the levies directly to the state department.
Investor Implications
For investors, this situation highlights a key regulatory risk in the gig economy. The primary concern is not just the immediate cost of the welfare fee, but the potential for increased operational and compliance costs if the state-mandated social security model becomes the standard across more regions. As unions, such as the Indian Federation of App-Based Transport Workers, continue to demand the release of these funds for direct worker benefits, the widening gap between the government’s policy goals and the platforms' operational practices remains a point of friction.
The next steps for investors to monitor include the Karnataka High Court’s final ruling on the Act, any adjustments to the welfare fee structure, and the potential for a unified regulatory framework that could influence how platform companies account for and manage their welfare-related expenses.