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A socially secure unorganised worker

Social Security Scheme aims to bring the 30 crore unorganised workers under its ambit by 2011. Political will is all that?s needed, writes Arjun Sengupta.

india Updated: May 29, 2006 00:34 IST

The Common Minimum Programme of the UPA made a commitment to introduce Social Security for the workers in our unorganised sector. This is a stupendous task. About 92 per cent of our  workforce is unorganised. Most of them are extremely poor, working in conditions of severe adversities and uncertainty of income, employment and livelihood facilities. If even a beginning can be made to ameliorate their condition, it will make a major impact on our social welfare.

Social Security is meant to provide protection to workers most vulnerable to contingencies such as illness, accident, untimely death of the breadwinner, old age and unemployment. Any one of these can precipitate severe downturns in their living conditions. These problems are different from those related to deficiencies of capabilities in terms of inadequate employment, low earning, poor health and education conditions and other forms of deprivations. Social Security deals with only part of the problem of workers, but it's this part which has the potential of pushing a worker into total destitution.

All over the world, attempts have been made to deal with these problems through Social Security. In India also there are many such schemes designed in a piecemeal, uncoordinated manner, covering only less than 5 per cent of our total workforce. These are virtually non-existent for the unorganised workers, comprising landless agricultural labourers, small and marginal farmers, workers in animal husbandry, fishing, forestry and agro-processing, weavers, blacksmiths, carpenters and goldsmiths, construction workers, and those engaged in small and tiny enterprises, trade and transport, or working as street vendors, hawkers, ragpickers et al.

The National Commission for Enterprises has now worked out a scheme to provide Social Security to unorganised workers in the Unorganised Sector (NCEUS), after intensive consultation with service providers, insurance agencies, government departments and trade unions. This is the first time such a scheme with national coverage providing a minimum social security to the entire unorganised workforce of 30 crore has been designed. It is doable and financially viable. All it needs is political will.

The benefits

The scheme will provide benefits of health insurance, life insurance and old age security. Under health insurance, each worker will be entitled to hospitalisation for himself and his family, costing up to Rs  15,000 a year, in designated hospitals. All payments will be made by insurance companies to hospitals directly, without any cash transaction. It will  also include maternity benefit of Rs 1,000 for the member or spouse per year and disability-due-to-accident allowance of Rs 50 per day for 15 days as well as a one-time permanent disability grant of Rs 25,000.

Life insurance will provide a cover of Rs 15,000 for natural or accidental death. The old age security will have two elements. First, all below-poverty-level unorganised workers will get a monthly pension of Rs 200 for life after they attain the age of 60. All workers,  other than BPL, will be entitled to a Provident Fund Scheme which will accumulate to their account from the year of their registration, earning a return of 10 per cent a year. The workers will not be able to encash this amount before maturity, except when the fund is used as unemployment insurance. Then a worker can draw up to 50 per cent of the accumulated sum as unemployment benefit. At the age of 60, the worker may either continue with the scheme by contributing the full premium or withdraw the entire amount accumulated to his account or else, buy annuity with returns, just like a pension.

Financing

The scheme is based on a national contribution of Re 1 per worker per day by each registered worker, another Re 1 by employer and yet another Re 1 by the Central and State governments together. This would mean Rs 3 per worker per day as premium, with a total of Rs 1,095 per worker per year. If all 30 crore workers are registered, the total size of the premium would be around Rs 32,000 crore. The scheme hopes to reach this size over the next five years -- by 2011.

The scheme, however, provides for differentiated contribution by the workers and the government. All contribution of BPL workers of Re 1 per day will be actually paid by the Central government and not by the workers themselves. The Centre and the state governments together should also share the cost of the employer's contribution because the transaction cost of collecting it may be very high as most of these workers are self-employed, or migrants and with unidentifiable employers. In addition to this, it is assumed that the Centre would bear the cost of Rs 200 per month pension for the BPL workers by extending its current scheme of providing pension to destitute after the age of 65.  The additional cost on this account has been calculated to be relatively small.  To this has been added a modest administrative cost.

The total expenditure on the scheme will be Rs 7,637 crore in the first year of 2006-2007. Of this, the Centre's contribution would be Rs  6,674 crore, covering roughly seven crore workers. In 2010-11, when all 30 crore workers would be covered, the cost would be Rs 25,401 crore, with the Centre paying Rs 20,582 crore. Assuming that economy will grow at 8 per cent a year for the next five years, this amount will be only 0.20 per cent of the GDP, rising to 0.48 per cent in the last year.

The administration of this scheme will be decentralised. The Central Government, through the representative body of National Social Security Board, will be responsible for overseeing the scheme, helping the states in negotiating with other agencies and providing contribution through a special fund. State-specific Social Security Boards will be set up, with district offices responsible for issuing identity cards and providing for dispute settlement. In the field, Workers’ Facilitation Centres consisting of grassroot organisations, NGOs and panchayatis will be responsible for identifying workers, mobilising them for registration and guiding them.

Each worker on registration will be given a portable identity card, which can record the amounts contributed by the workers and the government as well as payments made out of that for their compensation. There will be no intermediary between the workers, service providers and record keepers in the post office or banks. The funds will be directly paid to the service providers by the state boards or the insurance agencies, minimising the scope of financial exploitation.

The scheme is also flexible enough to incorporate any other development in pension funding. It does not expose the poor unorganised workers' savings to the uncertainties of market-based insurance management. It has a built-in guarantee of 10 per cent return on the accumulated savings of the workers through a mechanism of National Fund. If and when private fund managers can provide such a guaranteed return, they can be incorporated in the system.

The only way to ensure the success of the scheme is popular pressure and the participatory process of decentralised administration. But more important is political will, which, it is hoped, the UPA will show.

(The writer is Chairman, National Committee for Enterprises in the Unorganised Sector)