A high premium
The UPA must not be niggardly about its social insurance scheme, writes Prem Shankar Jha.Updated: Jun 02, 2006 01:08 IST
Arjun Singh has a terrible sense of timing. At precisely the moment when he set off a huge wave of resentment by announcing seat reservation for the backward classes in all centrally-aided centres of higher learning, a little noticed committee, the Arjun Sengupta Committee, was presenting to the Prime Minister a proposal which, if implemented, will cause a quiet revolution in the country.
The proposal, virtually ignored by the media, is for a social insurance scheme for unorganised workers. At present, it is only a draft. What is more, it is minimalist, because the committee does not want to ruffle the feathers of state governments and of the fiscally conservative finance ministry. But once its basic principles are accepted by the central and state governments, it can develop into a system for providing social security to the poor that few have dreamt of.
Just how revolutionary this scheme will be may be judged from the fact that so far 7.32 million workers have been given 100 days of work under the National Rural Employment Guarantee Programme. When this covers the entire country, the figure may rise to some 30 and 40 million persons. By contrast, the scheme now before the PM will transform the futures of no fewer than 350 million income earners. Since they all have families, this means just about 80 per cent of the country’s population. Best of all, unlike the NREGP, only a small portion of this scheme will have to be funded by the central and state governments. For the most part, the scheme will be self-financing.
The proposed scheme is intended to provide life insurance, accident insurance, health insurance, maternity benefits and an old age pension to about 360 million workers in the unorganised sector. Today, the only form of ‘social security’ that this vast workforce — six times larger than the workforce in the organised sector — enjoys is the protection of the joint family. But the joint family system is under extreme stress. The traditional bonds of obligation to one’s kith that made it work are breaking down under the stress of coping with urbanisation on the one hand, and fragmentation of land holdings and increasing difficulty in finding an alternate means of livelihood, on the other.
Some idea of how vulnerable the poor of a rapidly industrialising and urbanising society are may be had from sample surveys carried out by the National Sample Survey and Sewa, the Self-Help Women’s Association, in the Nineties. These showed that of the average of Rs 319 per capita spent on health in the country, 75 per cent came from the patients themselves. But these average figures are deceptive. In Gujarat, Sewa found, the bottom 10 per cent of families spent nearly 100 per cent of their average disposable incomes on health and have gone heavily into debt to do so. Needless to say, they enjoy no life or accident insurance. So an injured worker has not only to pay his medical bills but also loses his earnings while recovering.
Women are the worst affected. Ninety six per cent of all female workers are in the unorganised sector. In addition to the above hazards, they enjoy no maternity benefits. Even the LIC, which has been working with Sewa to provide group insurance to unorganised sector workers, has refused to insure them against maternity benefits since parenthood is planned and not a hazard of nature or occupation.
But the most serious threat of all is that posed by old age. Today people are living on an average twice as long as they did in the Forties.Yet there is no way for them to survive except to depend on their sons and, very occasionally, on their daughters. As jobs become harder to find, more and more old people are consumed with the fear that there will be no one capable of looking after them.
The need for social insurance is universally recognised. A fairly comprehensive scheme was first put in place for German workers by Bismarck in 1871. This was more than 35 years before Britain introduced social security. But neither country, nor the dozen or so of first generation industrialised countries that followed them, faced the organised-unorganised sector dichotomy that we face. There, industrialisation came when their populations were small. Therefore, except during industrial recessions, all of them faced a perennial shortage of labour. There were no minimum wages acts and no trade unions to create an aristocracy of the working class bent upon preserving its privileges, as happened in India. As a result, when social security of a sort did come to India, it came only to the organised sector.
The desire to insure the unorganised has existed for a long time. Two previous commissions, one on rural labour and the other on all labour, proposed a variety of schemes. But they failed mainly because the benefits proposed were so niggardly that they evoked very little response from the intended beneficiaries.
The only schemes that have provided some genuine relief were privately started by organisations like Sewa. These have covered, in theory, less than 5 per cent of the unorganised sector, but in practice have benefited less than half this number. Curiously, insurance, whether for the organised or unorganised sectors, was not part of the CMP. The credit for this goes entirely to the PM.
The Sengupta Committee’s proposal is a vast improvement on all of its predecessors. It has proposed a nationwide three-tier administrative structure, involving the central, state and local governments, which will depend heavily upon NGOs to reach all the beneficiaries. The proposal divides social insurance into three parts — health and maternity, life and accident insurance and an old age pension. It is to be financed equally by the insured workers, their employers and the government (which will also pick up the tab for the below poverty line workers). Each will pay a rupee a day, which will yield an annual corpus of Rs 32,850 crore for an estimated 300 million eligible workers.
Based on detailed and on the whole conservative actuarial calculations, the commission has estimated that the consolidated insurance premium will be Rs 530 per month, leaving Rs 565 to accumulate for an old age pension. It is aware that this is a meagre sum and will suffice to pay a monthly pension of Rs 200, but only after 20 years of payments by the beneficiary (i.e. a lock-in period of 20 years).
Despite its comprehensiveness, if these proposals are turned into law, this effort, too, might meet the same fate as its predecessors. Except in the area of health, the benefits are too meagre and the lock-in period too long to kindle popular enthusiasm. The main sufferers are, once again, the women and the aged. The former are to get a mere Rs 1,000, and that too just once. As for the aged, the commission itself recognises that even with supplementary allowances already been enacted, the consolidated minimum pension payable to the rural poor will not come to more than a third of the minimum wage.
The central weakness of the report is that instead of starting with what the poor need to lead a minimally secure life, especially in their old age, the committee began by setting a financial limit — a rupee a day from three contributing parties — and then has tried to stretch this as far as possible. That kind of niggardliness, which has arisen not from the committee but from its terms of reference, is what could scuttle the scheme and deny the Congress the huge political mileage that it could get from it.