Reuters International

Policemen stand next to a damaged vehicle after a protest by garment workers in Bengaluru, India, April 19, 2016. REUTERS/Abhishek N. Chinnappa

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BENGALURU/NEW DELHI (Reuters) - India on Tuesday scrapped a controversial proposal restricting when workers could withdraw pension savings after thousands of protesters clashed with police in the information technology hub of Bengaluru.

Police fired tear gas to control the crowds as garment workers angry about the planned changes blocked roads in the southern city for a second day.

The government had proposed changes in February to how employees can withdraw savings from the Employee Provident Fund (EPF) before they retire, but decided on Tuesday to axe the plan, Labour Secretary Shankar Aggarwal told Reuters.

"We were already thinking about it (withdrawing the proposal) in the morning," he said. "There's no point continuing when the workers don't want it, why should we come in?"

Earlier on Tuesday, television footage showed smoke pouring from burnt-out buses and a smashed police vehicle, and police detained about 100 people, Bengaluru police commissioner N. S. Megharikh said, adding that the situation was now under control.

The decision to scrap the proposal -- under which the employer's contribution to the EPF would only be released at the retirement age of 58 -- marks Prime Minister Narendra Modi's government's second U-turn on changes to the pension fund.

In March, Finance Minister Arun Jaitley withdrew a plan to tax EPF withdrawals after an outcry from salaried, mostly middle class, workers.

About 36 million of the country's 1.3 billion people contribute to the EPF.

The protests in Bengaluru against the restrictions began on Monday in the city after about 200,000 garment workers, mostly women, took to the streets.

Jayaram K. Ramaiah, an official at the Garment and Textile Workers Union, said garment workers earning a monthly salary of 6,500 rupees (£68.3) depended on access to their pensions.

"Not just garment workers, all workers in the unorganised sector will be affected by this rule," he said before the government announced its decision. "What about the poor people who use it for important purposes like marriage or education?"

Ramaiah blamed "anti-social elements" for attacking police with stones and said 20 of his members were injured when police charged protesters with batons.

(Writing by Tommy Wilkes and Neha Dasgupta; Editing by Robert Birsel and Ken Ferris)

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