SOCIAL INSURANCE SYSTEM FOR INDIA S UNORGANISED SECTOR WORKERS: THE CASE AND THE COST

Transcription

1 The Indian Journal of Labour Economics, Vol. 51, No. 2, 2008 SOCIAL INSURANCE SYSTEM FOR INDIA S UNORGANISED SECTOR WORKERS: THE CASE AND THE COST Santosh Mehrotra* India needs a comprehensive social insurance system of old-age pension, death/ disability insurance, health insurance and maternity benefits for workers in the unorganised sector. This paper argues that in the first phase, this system should be confined to those below the poverty line (BPL), which will keep fiscal costs down. Keeping fiscal costs down initially would be politically astute, as it could help in limiting the opposition to such social insurance on fiscal grounds. Over time, it should be expanded to incorporate those above the poverty line (APL); those above the poverty line in the unorganised sector will be required to bear an increasing share of the total costs through own contributions, with contributors in the higher income deciles paying a larger share of the total premium costs. The paper lays out the case for, and the costs of, such a BPL-focused social insurance system. Can the State expect to successfully improve the conditions of work (for example, hours of work, hazardous nature of work and hence safety conditions, and wage rates) in the prevailing labour market conditions, where there is excess supply of labour, where the unorganised sector workers themselves are fragmented and almost always not organised into unions, where they suffer from access to imperfect information, and where they are not fully aware of their limited rights and, to make it even more difficult, they are mostly illiterate or barely literate? The answer must be no. If the pre-requisites for improving their conditions of work do not exist, we would suggest that the State should focus its attention instead on improving the social protection for such workers, that is, social assistance and social insurance. This implies that the State should focus on doing the doable. This is one of the central arguments of this paper. It is physically impossible for the Indian State to even pretend to improve the conditions of work, when the dice in the labour market is so heavily loaded against informal workers. Even in the small scale organised sector enterprises, the State has recognised that the inspector raj does more harm than good, fattening the official inspectors at the expense of both the employers as well as the employees, with very little to show for it in terms of improved worker conditions. In the unorganised sector, therefore, there is little chance for the State to effectively monitor conditions of work, even if the requisite legislation was in place for hundreds of thousands of workplaces, and vastly varying trades, spread throughout the length and breadth of the rural and urban areas of this vast country. The inspector raj barely functions in the large organised sector, so to expect it to function in the micro-enterprises and household enterprises, where the production value chain extends to the household, is to live in a pipe-dream. Therefore, with due respect, we find the recommendations of the National Commission on Enterprises in the Unorganised Sector (NCEUS) report (NCEUS, 2007) regarding: a) a National Minimum Wage, and b) migrant workers, and other conditions of work, as rather unrealistic and hence infeasible it is not surprising then that the Bill on the Conditions of Work has not moved, and is unlikely to move in Parliament. Social protection, on the contrary, is not only necessary but feasible. The Parliamentary Standing * Senior Advisor, Planning Commission, Government of India.

2 166 THE INDIAN JOURNAL OF LABOUR ECONOMICS Committee examining the NCEUS proposals on social security has been very supportive of such a bill (as of December 2007). Why should such social protection be available for the unorganised sector? There are a number of reasons. First, though the ratio of the poor has been declining, the numbers of the poor have not for the last 30 years (320 million in 1973 and 302 million in 2005), and most poor work in the unorganised sector; inclusive growth, the objective of the Eleventh Plan, cannot have much meaning without some minimum social safety net for our unorganised sector workforce. Second, 93 per cent of India s workforce works in the informal sector, and hence without any social protection (NCEUS, 2007). Only the organised sector workforce has access to social protection. Third, this workforce in the unorganised sector contributes a very significant proportion of the total exports and 60 per cent to the total GDP in the economy. Fourth, the lack of social protection reduces productivity. Not only does lack of health protection reduce the number of man-days of work, but out-of-pocket medical costs constitute the second most important cause after dowry, of households first falling into debt, and then poverty. Fifth, the lack of social insurance leads to coping mechanisms by the vulnerable, which run the risk of turning transient poverty into longterm poverty. Thus, transient poverty may lead to the withdrawal of children from school or lead to workers in agriculture into debt bondage. Finally, for a rapidly growing economy, which has almost achieved middle-income status, it should be fiscally possible to provide such social protection. In other words, the first two reasons are moral ones (with clear equity implications), while the last four are purely economic and developmental ones. This paper examines the social protection that is currently available (Section I). It also examines the historical evolution of social protection in the now rich countries and its relevance for us in India (and Asia in general) (Section II). Section III spells out what the nature of this social protection regime should be for workers in the unorganised sector, in the light of the recent report of the NCEUS, and what could and should be put into place during the Eleventh Plan period. Section IV suggests indicative costs by component. Section V concludes the discussion. I. CURRENTLY AVAILABLE SOCIAL SECURITY FOR WORKERS IN THE UNORGANISED SECTOR Social protection consists of two categories of support to workers: first, social assistance, and second, social insurance. Social assistance (that is, cash assistance) should be provided to those unable to work (for example, the old and indigent, disabled, and poor widows, which the Central and several state governments are trying to do), and social insurance to those who are able to work but who have little access to a safety net that is normally available in the organised sector: old age pension, maternity benefit, and death and disability benefit, as also health coverage, which the Indian state has not succeeded in doing well so far. This is another key argument of this paper. 1. Old Age Pension Under the National Old Age Pension Scheme (NOAPS), old age pension of Rs.75 per month was provided to persons of 65 years of age and above, who are destitutes (since 1996). However, the Centre increased this pension to Rs. 200 a month for (Table 1). Normally states supplement this amount with an equivalent amount (see Table 2). The objective of NOAPS is to extend financial assistance to old destitutes who have little or no regular means of subsistence. In general, it has succeeded in giving them a sense of security in life and has definitely improved their quality of life. This old-age pension is non-contributory in the sense that the beneficiary has not contributed any premium over his or her lifetime; hence, it is more in the nature of social assistance.

3 SOCIAL INSURANCE SYSTEM FOR UNORGANISED SECTOR WORKERS 167 Table 1 Social Assistance Programmes of the Central Government Name of the scheme Eligibility Package of benefits National Old Age 65 years old, destitutes Rs. 200 per month National Family Benefit BPL persons in the age Lump sum family benefit of Rs.10,000 Scheme (NFBS) group 18 to 64 years to the bereaved household in case of death (natural or accidental) of the primary breadwinner (male or female). Note: NMBS was renamed as Janani Suraksha Yojana in It is now part of the National Rural Health Mission (NRHM). Table 2 Disbursement of Pension from ACA and the Contribution of the State Government under NOAPS during (in Rs.) State Central Government State Government Andhra Pradesh 200? Bihar 200? Chhattisgarh Goa Gujarat Haryana Himachal Pradesh 200? J&K 200? Jharkhand 200? Karnataka Kerala Madhya Pradesh Maharashtra Orissa 200? Punjab Rajasthan Tamil Nadu Uttar Pradesh Uttaranchal West Bengal NE States Arunachal Pradesh 200? Assam 200? Manipur 200? Meghalaya 200? Mizoram Nagaland 200? Sikkim Tripura UTs? A&N Islands Chandigarh 200? D&N Haveli 200? Daman and Diu 200? NCT Delhi Lakshadweep Pondicherry

4 168 THE INDIAN JOURNAL OF LABOUR ECONOMICS This pension was available only to BPL elderly destitutes until November Note that though this is called an old-age pension scheme, it is not really connected to one s earlier work status as a worker in the unorganised sector, despite the presumption that all these elderly BPL persons were workers in the unorganised sector. 2. Death and Disability Insurance Death and disability insurance for workers in the unorganised sector remains limited. A comprehensive scheme for social insurance of the Central Government is the Janashree Bima Yojana (started in 2000), providing insurance cover of Rs. 20,000 in case of natural death, Rs. 50,000 in case of death or total disability due to accident, and Rs. 25,000 in case of partial disability. The premium for these benefits is Rs. 200 per beneficiary, of which 50 per cent is contributed from the Social Security Fund of the Central Government, and 50 per cent by the beneficiary/ state government. Janashree is available to people in the age group of years living below or marginally above the poverty line. The scheme covers groups of 25 members or more, belonging to 24 approved occupation groups. 2 The limited reach of the benefits of the schemes to the unorganised workers and the absence of a direct link between a beneficiary and the Life Insurance Corporation (LIC, the public sector insurer) have been the major drawbacks of these schemes (see Table 3). Second, the Central Government announced the Aam Aadmi Bima Yojana in late The members of all rural landless households, in the age group of years are eligible for this scheme. The premium of Rs. 200 per member will be borne by the Central and state governments equally. The state government will be the nodal agency. A sum of Rs. 30,000 in case of natural death, and Rs. 75,000 in case of accidental death will be payable. A compensation of Rs. 75,000 will be payable in case of total permanent disability and of Rs. 37,500 in case of partial permanent Table 3 Social Insurance Schemes for Unorganised Workers of the Central Government Name of Eligibility Premium Package of Implemen the scheme benefits tation Janashree Bima Persons in the age Rs. 200 per beneficiary Rs. 20,000 for natural Through Yojana (JBY) group of 18 to 60 years (50% of premium, i.e. death, Rs. 50,000 for LIC and living below or Rs. 100 is contributed death or total permanent marginally above the from the Social Security disability due to poverty line. Fund and 50% accident, Rs. 25,000 for contributed by the partial disability. beneficiary/state govt./nodal agency). Aam Admi Rural landless Rs. 200 per member, Rs. 30,000 for natural Through Bima Yojana households, in the age- will be borne by the death, Rs. 75,000 for LIC (AABY) group of years Centre and states accidental death and equally. total permanent disability and Rs. 37,500 for partial permanent disability. Scholarship of Rs. 300 per quarter per child for two children of the beneficiaries studying in the 9th to 12th standards. Note: The benefit of Rs. 50,000 Janashree Bima Yojana on death/permanent disability due to accident has been increased to Rs. 75,000. On partial permanent disability due to accident, the benefit of Rs. 25,000 has been increased to Rs. 37,500 w.e.f 15 August, 2006.

5 SOCIAL INSURANCE SYSTEM FOR UNORGANISED SECTOR WORKERS 169 disability. The scheme will also pay a scholarship of Rs. 300 per quarter per child for two children of the beneficiaries studying in the ninth to twelfth standards for its beneficiaries. A recent development has been that two directly-targeted poverty reduction programmes have introduced a life insurance component: the rural self-employment programme (Sampoorna Grameen Swarozgar Yojana, SGSY, through the self-help groups that it promotes) and the rural wage employment guarantee programme (National Rural Employment Guarantee, NREG). Those who are members of self-help groups (mostly BPL women) and those willing to undertake manual labour (normally only BPL adults) are entitled to get life insurance cover. This is merely a means of ensuring that the benefits of the existing two schemes are made available to those poor households whose members are either self-help group members under the SGSY or have worked for 15 days under the NREG. 3. Health Insurance While the Central Government had introduced the Universal Health Insurance Plan a few years ago, it has barely taken off. Although there are a number of micro or community health insurance schemes in place in many states of India, their coverage is extremely limited (Mehrotra, 2007). A large number of community-based health insurance schemes also exist for those in the unorganised sector. Two of these, which are rather well known and have relatively larger coverage, are the Yeshasvini scheme in Karnataka (begun by the resourceful Dr. Devi Shetty of Narayana Hrudalaya, Bangalore, fame) in , which had enrolled two million farmers after only year of operation, and the SEWA health insurance scheme. However, in late 2007, the Central Government announced that a health insurance programme would begin on a pilot basis in most states. 4. Social Assistance The Central Government has a minimal programme of assistance for death and for maternity benefit. This includes the following schemes: The National Family Benefit Scheme (NFBS) provides a lump sum family benefit of Rs.10, 000 to the bereaved household in case of the death (natural or accidental) of the primary breadwinner (male or female), whose earnings contribute substantially to the total household income. This scheme is applicable to all eligible persons in the age group of 18 to 64 years. The bereaved household has to qualify as being one below the poverty line according to the criteria prescribed by the Government of India (see Table 1). Under the National Maternity Benefit Scheme (NMBS), there has been a provision for payment of Rs. 500 per pregnancy to women belonging to poor households for pre-natal and post-natal maternity care up to the first two live births. This benefit is provided to eligible women aged 19 years and above. The objective of this scheme is to extend financial assistance to pregnant women of households below the poverty line up to the first two live births. In order to ensure better linkage with nutrition and national population control programmes, NMBS was transferred to the Department of Family Welfare and was renamed as Janani Suraksha Yojana in The Central and state governments have also provided a variety of what are termed welfare funds, but those mostly do not really meet the criteria of social insurance since all of them do not cover old-age pension, death/disability benefit, and maternity benefit, as well as health insurance. There are essentially two types of welfare funds in India: tax-based ones and contributory ones. The Central Government has created tax-based funds for six types of mines (mica, iron, manganese, chrome, limestone and dolomite), beedi workers, cinema workers, dock workers and construction workers. All these funds are based on a tax levied on the products produced or services provided,

6 170 THE INDIAN JOURNAL OF LABOUR ECONOMICS and then earmarked for the use of workers in that product/service group. These funds were created by Acts of Parliament, and then separate legislation was passed to impose the tax. However, the majority of these funds do not provide the key benefits that characterise social insurance old-age pension, death and disability benefits, and maternity benefits. Instead the funds defray the costs of: medical facilities and hospitals; water supply and facilities for washing; educational facilities and scholarships; housing and recreational facilities; family planning; and transportation to and from places of work. The legislation also provides that the Central Government can use the funds to grant a loan or subsidy to a state government for other welfare schemes for workers in that trade. Similarly, several states in India have created funds that are contributory. Kerala has 20 such funds (for agricultural workers, auto rickshaw drivers, cashew workers, coir workers, construction workers, transport workers and others). Similarly, Assam has one for plantation workers, as do the states of Gujarat, Maharashtra, Karnataka and Punjab. The experience with contributory funds is not encouraging (Jhabvala and Subrahmanya, 2000). Their coverage has been limited, and there have been difficulties in collecting their contributions. Krishnamoorthy and Nair (2001) report that the Tamil Nadu construction workers fund does offer group personal accident insurance and natural death and maternity assistance, but also provides assistance for the education and marriage of children, and for funeral expenses. Given the limited benefits offered, the fund has accumulated large reserves. Welfare funds have historically been most prevalent in the southern and western regions, though they spread, to some extent, to the north and east in the 1990s; nevertheless, their overall coverage still remains limited. The overwhelming impression that the above description gives is that social insurance continues to remain in its infancy in India, at least for unorganised sector workers. O Keefe (2006) estimates that in the unorganised sector, less than one per cent of the workers have any formal pension coverage through public schemes (while in the organised sector, the corresponding share is 95 per cent). Unorganised sector coverage through commercial schemes is only 1.2 per cent for personal accident insurance, 0.5 per cent for private health insurance, and 23 per cent for life insurance. However, with India now boasting a $1 trillion economy, and with per capita incomes approaching middle-income status (nearing $1000 per person per annum), the absence of social insurance for the vast majority of workers in the unorganised sector should no longer be perceived as being inevitable. II. HISTORICAL EVOLUTION OF SOCIAL PROTECTION IN NOW INDUSTRIALISED COUNTRIES 3 Social protection in the now industrialised countries was the result of a long struggle, and was introduced only in fits and starts. In the age of Adam Smith and the rise of classical economics, governments barely imposed any taxes, and there were hardly any social programmes either. Through much of the nineteenth century, there were only two kinds of redistributive tax-based social spending: poor relief and public schools. By 1880 a full century after the beginning of the first Industrial Revolution in Britain and its spread to Europe social programmes had barely grown. Data for 21 European and North American countries show that all social transfers for these 21 countries still accounted for only 0.29 per cent of the GDP at current prices in However, by 1990, the median had grown to 24 per cent of the GDP. The century from 1880 to 1980 was the period that saw the rise of the state and it was social spending that led to its rise (Lindert, 2003). India s policy-makers need to keep this fact in mind when issues arise about the size of gross budgetary support (GBS) for social spending at the time of the budget preparation in January February.

7 SOCIAL INSURANCE SYSTEM FOR UNORGANISED SECTOR WORKERS 171 Secondly, a key question is whether rising social spending in these 21 rich countries damaged economic growth as neo-liberals in our country and elsewhere are likely to fear. Research has established that the growth of the welfare state in Europe and North America did no damage to the GDP per capita, which is why welfare states did not collapse. The finding that the net national costs of social transfers, and of the taxes that finance them are essentially zero is of extreme significance to current-day developing countries, including India. Lindert (2003) points out that two general principles explain why social spending has not weakened long-term economic growth. One is that high budget democracies show more care in choosing the design of taxes and transfers so as to avoid compromising growth. Second, broad universalism in taxes and entitlements fosters better growth than the low-budget countries preference for strict means testing and complicated tax compromises. The sequence of types of social programmes in advanced capitalist countries which is of relevance again in the contemporary developing countries was as follows. Throughout the nineteenth century, poor relief (or what today would be called social assistance or cash transfers) was the main form of social protection offered until around In fact, until 1880, there was almost no social insurance. Social insurance in Europe rose sharply during the period , including work accident insurance and old age pensions. Work accident was the first to be legislated; then came old age pension. Unemployment insurance and unemployment benefits came last (along with housing subsidies) halfway through the twentieth century. It would be not unreasonable to suggest that in India too, unemployment insurance and unemployment benefits are likely to flow to workers at a much later stage of development than prevails currently. In the Indian case, for unorganised workers, poor relief or social assistance in the form of the NSAP first began in Very little social insurance has been in existence. What exists has been examined above. The vast majority of unorganised sector workers have no social insurance at all. Thus, clearly there is a case for such social insurance, for the reasons mentioned at the beginning of this paper. III. THE SHAPE OF SOCIAL INSURANCE TO COME Like the NCEUS Report, we also argue for the three components of social insurance (SI): old age pension, death and disability benefit (or life insurance), and maternity benefit the three requirements of a minimum SI programme internationally recognised by the ILO. Like the NCEUS, we would also argue for a national Health Insurance for those in the unorganised sector, which may not have been necessary had our public health system been more functional than it is. Even though the National Rural Health Mission (NRHM) has led to a significant increase in public spending focused on reviving the public health infrastructure, the total public health spending is still only 1.3 per cent of the GDP, one of the lowest in the world, and is barely expected to rise to 2 per cent of the GDP at the end of the Eleventh Plan. The ratio of private health costs to public health expenditure is one of the lowest in the world, and lower than in the USA (which has one of the most privatised health systems in the world, and also one of the most unequal in the sense of depriving 40 million people of health insurance). In India, health insurance is required as out-of-pocket costs of obtaining health services are extremely high here. 4 It can be argued that a social insurance system for unorganised workers should not be voluntary. Past experience from other countries suggests that major coverage expansions do not usually result from voluntary social insurance systems; a compulsory system would thus be required. It is true that informal labour markets, wherein mandated participation can be enforced do display higher coverage rates, and expanding coverage for a largely unorganised sector workforce would be more difficult. However, India has, for long, run a system of ration cards for

8 172 THE INDIAN JOURNAL OF LABOUR ECONOMICS BPL families. Further, the country has had a 15-year tradition of identifying those who are BPL at least in rural areas. Although the 1992 and 1997 Censuses had identified the poor on the basis of income (1992) and consumption expenditure (1997), those proved to be infructuous, and hence non-money metric criteria had to be used in 2002 (13-criteria). However, that method has also led to large inclusion and exclusion errors, and identifying the rural poor is about to be put on a firmer methodological basis (see discussion in the next section). In any case, once the BPL households are identified, all that remains to be done is to actually provide the services to them. Historical experience of the rich countries does not suggest that the comprehensive system suggested by the NCEUS, put into place in one fell swoop, is a serious possibility. There is only a very limited political constituency behind it. The likely future shape of the social insurance (SI) system in the country for poor unorganised workers, which should be put into place incrementally, may have the components that are detailed below. First, maternity benefit will be put into place, as an extension of the current Janani Suraksha Yojana. In the Eleventh Plan document, we have advocated strongly for, and provided for an extended Maternity Benefit to all BPL mothers over the age of 18 years for their first two children. Note that this does not cover all unorganised workers, but only the 28 per cent of the population which, by Planning Commission estimates, are BPL. This benefit would be administered by the Ministry of Health (not the Ministry of Labour). The benefit would consist of Rs. 500 per month for six months, to be paid three months before childbirth (to enable the poor mother to stop work and thus put on weight with a view to reducing the phenomenon of low birth weight) and three months after childbirth (to enable the poor mother to exclusively breastfeed and also let her own body fully recover). Such a maternity benefit would thus help to reduce child malnutrition and child mortality, and improve the mother s health. Second, the Prime Minister announced on 15 August, 2007 that a Health Insurance plan for BPL families would be introduced slowly. Again, note that this is for BPL, and hence for onethird of the unorganised sector workers. Even if it were to cover all BPL families, that would be a huge improvement upon the current dysfunctional public health system. But introducing a health insurance system for BPL workers is a monumental and extremely challenging task among fragmented unorganised workers. Therefore, no one should expect miracles overnight even if the government has the best of intentions. Third, old age pension has already made a massive advance in the country, with the NSAP slated to cover, from 19 November, 2007, all BPL elderly persons, not just the destitute elderly (which were presumed to account for 50 per cent of the BPL population). It is being hoped that the NSAP would also soon get extended to: a) BPL widows over the age of 18 years, b) all differently-abled BPL persons, and c) possibly all BPL persons over the age of 60 years, rather than covering only those over the age of 65 years. This may happen within the next few years most probably, well within the period of the Eleventh Five-Year Plan. Efforts to elicit more coverage in the short-run are almost certain to fail. However, the Standing Committee of Parliament prepared a draft Bill on Social Security in the Unorganised Sector in late 2007, which seems to have adopted the following view. It says that: a) the content of the NCEUS proposals for extension of Old Age Pension will be extended to above the poverty line (APL) families in the unorganised sector, and the APL pension will be part contributory (with employers and governments also contributing); and b) the entire scheme will be implemented in a time-bound manner, within three years. These proposals of the Standing Committee will have significant financial implications for both Central and state governments. For BPL families, the government has already committed to

9 SOCIAL INSURANCE SYSTEM FOR UNORGANISED SECTOR WORKERS 173 bearing the entire cost of pensions, death/disability benefits and maternity benefits. However, for APL workers in the unorganised sector, the situation would be, and should be, very different. Whether the government will accept these proposals or not remains to be seen. Although APL families have to contribute to their old age pension as well as death/disability benefit, the beneficiaries share will not exceed half of the total cost, while the remaining will have to be borne by the Central and state governments. The real issue is whether the government would be willing to bear the fiscal cost. IV. COST AND FINANCING OF A SOCIAL INSURANCE SCHEME IN INDIA We would argue that in the first instance, the focus of social policy and financing to support that policy should be on ensuring that BPL persons are covered for the following four essential components of SI: old age pension, maternity benefit, health insurance, and life/disability insurance. Once all the BPL households are covered, the aim should be to widen the sweep in concentric circles to those above the poverty line, using possibly occupational groups as a criterion to bring them into the sweep of the benefits offered. It should be noted upfront that determining which precise families will be covered by the BPL criterion could be a contentious issue. Therefore, it is necessary to clarify what would be done to eliminate the contention. While the Planning Commission of India estimates the headcount ratio of poverty by state, the actual identification for rural areas is done by means of a quinquennial census of rural families; the first of these was undertaken in 1992, the second in 1997, the third (in most states) was in 2002, and a fourth census is now due. As for the urban poor, there has never been a proper, foolproof method of their identification. The Delhi government, for instance, has been using the method of asking families to self-attest that their income is below Rs 1 lakh per annum, and such families are regarded as poor. Apart from the well-known problems associated with using income as a means of identifying the poor, this method of self-attestation is subject to widespread abuse, given that the means for verifying income are weak. However, the Delhi government has recently made an effort (under the inspiration of the Supreme Court Commissioners for the Right to Food as well as the Planning Commission) to arrive at more directly observable, verifiable, and relative transparent criteria based upon essentially two filters: place of residence (authorised or unauthorised slum, homeless people) and certain occupational categories (for example, rickshaw pullers, roadside vendors, hawkers, rag-pickers, and so on). However, even in Delhi, this is just beginning, and there are few other such examples from urban India. Rural India, however, has already had three house-to-house censuses, but in each census, the criteria for identifying the poor have changed income in the first, consumption expenditure in the second, and 13 non-metric criteria in the third. The problems with the first two censuses are predictable. The third, using 13 criteria was has been poorly designed, and has, therefore, led to large exclusion and inclusion errors, thereby becoming a source of conflicts within the community. Hence, there will a complete re-design of the criteria in 2008 and a new census of rural households all over India will take place in early 2009, using more directly verifiable criteria. 5 We turn now to first the cost of such an SI system for the BPL households, and then to its financing. 1. Cost i) Old Age Pension (OAP) a. The total number of beneficiaries of OAP till November 2007 was 8.7 million, who were the destitute elderly persons (assumed to be 50 per cent of all the poor over the age

10 174 THE INDIAN JOURNAL OF LABOUR ECONOMICS of 65 years); all BPL persons are now covered, which implies that the number of beneficiaries is 14.3 million. The fund requirement for the scheme in its present form is Rs crore per annum (at prices). b. If the NOAP were extended to persons in the age group of years as well, an additional sum of Rs crore per annum would be needed for providing pension to million persons. Currently, there is no consensus that year olds should also receive the NOAPs, and hence the matter is likely to remain in abeyance for a while. c. We are recommending that BPL widows and disabled persons should also receive social assistance. If the extension of the scheme is restricted to widows and persons with multiple disabilities both in the age group of years, the additional fund requirement would be Rs crore. Strictly speaking, the extension of the NOAPs to widows and disabled persons is in the nature of social assistance, in fact, a conditional cash transfer, and not really part of a system of social insurance. Hence, we would not include this component in the costing of the total social insurance package for BPL families. ii) Maternity Benefit a. At present, under Janani Suraksha Yojana (JSY), a lump sum of Rs is paid to a pregnant mother to cover the costs of institutional delivery, plus Rs. 600 to the ASHA (Accredited Social Health Activist) as an incentive for promoting the practice of institutional delivery (the earlier national maternity benefit of Rs. 500 for pregnant mothers has been folded into JSY). This encourages institutional delivery, but gives no income support to poor pregnant women. Thus, poor pregnant women, who belong to BPL households, continue to do arduous labour (in their farms or as agricultural labourers) and thus do not put on adequate weight during pregnancy, leading to the widespread problem of low birth weight of infants among poor Indian women. In addition, poor women also resume work soon after childbirth, which does not allow their bodies to recover fully; moreover, they cannot exclusively breastfeed their babies after birth if they are working. Hence, it is of paramount importance for the good health of both the baby and the mother for a maternity benefit to be given to poor pregnant mothers for three months until childbirth, and then for another three months after birth. This would compensate them for the loss of wages or earnings for at least a six-month period when their bodies need rest and their babies need the maximum attention for proper development and the prevention of infections. b. Therefore, there is an urgent need for income support for BPL mothers at the rate of Rs. 500 per month per BPL pregnant mother to be given conditionally upon the mother getting ante- and post-natal health check-ups, and immunisation for the baby. c. For BPL mothers, this would cost Rs crore per annum. If shared at a ratio of 50:50 between the Centre and the states, the prospective cost would be Rs crore for each. iii) Health Insurance: Also for BPL Persons Only a. A Universal Health Insurance Scheme (UHIS), as noted above, had been announced by the Finance Minister of the Central government a few years ago, but it has not been very successful. b. Since late 2007, after the Prime Minister s announcement, a Health Insurance scheme is being implemented in several states, by the respective state governments. Based on premiums being paid in small-scale NGO-run health insurance schemes, a premium of Rs. 350 might be appropriate for family hospitalisation cover of Rs. 15, 000 per

11 SOCIAL INSURANCE SYSTEM FOR UNORGANISED SECTOR WORKERS 175 annum. c. The total cost of premium would be Rs crore of which the Centre could bear 75 per cent, the states 20 per cent, and the beneficiary 5 per cent of the total cost. d. The total cost of OAP, maternity benefit, and health insurance per annum would thus be: Rs crore + Rs crore + Rs crore = Rs crore (or 0.20 per cent of the GDP at prices). iv) Life Insurance, with Death/Disability Benefits a. The NCEUS estimates a Rs. 150 premium for a cover of Rs. 15, 000 to the worker for natural and accidental death. For all unorganised workers, both BPL and APL, this would entail a cost of Rs crore per annum, according to the NCEUS. For BPL persons alone, it would cost Rs. 756 crore, but this amount is for a cover, which is very low (Rs. 15, 000). b. Considering that the Janashri Bima Yojana for 24 categories of unorganised sector workers financed by the Central Government, which is currently in place, gives a benefit of Rs. 30,000 per death, Rs. 75, 000 for accidental death or total disability, and Rs. 37,500 for partial disability, we should presume that the cost for only the BPL persons would be at least double that of the cost estimated by NCEUS. But that still amounts to only Rs crore per annum. Hence, the grand total costs are as follows: c. The total for all four components for BPL persons only would come to Rs. 1,0 2,000 crore per annum or 0.22 per cent of the GDP at market prices in For comparison, we spent Rs. 12,000 crore on the NREG in , and are probably likely to spend over Rs. 20,000 crore in d. It is clearly a bearable fiscal burden, if the Centre and the states share it. e. There would be almost no contribution from the beneficiaries, since they are BPL persons. The idea here is not to present a detailed design of each programme, but to lay out the outlines. The detailed design may well require some contribution by the poor to each or some programme, though primarily with the objective of ensuring their ownership and thus greater awareness of their rights and entitlements. v) Financing In order to cover BPL households only, the following alternative means of financing need to be considered: a. Alternative one Impose a surcharge on income tax, earmarked for covering the costs of a social insurance fund. There is such a cess to finance elementary education, initiated in ; then, a similar cess was levied to finance the costs of secondary education in the Budget. This should be considered again. b. Alternative two: The resources could be arranged from the existing tax revenues, that is, Gross Budgetary Support (GBS). This is entirely possible since the GBS was up from Rs. 2,10, 000 crore in to Rs. 2,40,000 crore in

12 176 THE INDIAN JOURNAL OF LABOUR ECONOMICS If the population above the poverty line is to be slowly and sequentially included in the social insurance net, there are two pre-requisites. These are: 1. The beneficiaries own contributions would have to increase as they move up the income ladder, and a method will need to be devised to determine what that share of contribution would be with rising income in a given year. 2. The contribution to be made by governments, both Central and state, would have to correspondingly decline. A third modality of financing could, in principle, apply to both BPL and APL persons: product group/trade-based taxes, with revenues earmarked for social insurance for workers in that trade or product group (rather like the state and Central welfare funds already in existence and discussed earlier, for example, the Central beedi or Kerala welfare funds). The Standing Committee of Parliament had, in 2007, prepared a draft Bill on Social Security in the Unorganised Sector, which seems to have adopted the following view. It says that: a) the content of the NCEUS proposals for extension of Old Age Pension will be extended to APL families in the unorganised sector, and the APL Pension will be part contributory (with employers and governments also contributing); and b) the entire scheme will be implemented in a timebound manner, within three years. The reality could be different, since it is the executive and that too, the Centre and states jointly which would need to take decisions. Within a broad vision of extending SI to all unorganised sector workers, all three methods should be used to finance the SI with BPL persons receiving priority, and moving upwards through the income distribution, as we learn from our mistakes. V. CONCLUDING REMARKS We showed in the first section of this paper both that in India, social assistance is meagre, and that social insurance is limited and fragmentary; in both cases, it mainly covers BPL persons rather than all unorganised sector worker households. Only one-third of the latter are in the BPL category; two-thirds of them are above the poverty line. However, as the NCEUS has argued, on the basis of the NSS Survey, , on Employment, 77 per cent of the households in the country live on an amount of less than Rs. 20 per day, or less than $2 a day (on purchasing parity terms). Therefore, the case is strong for both increasing social assistance for unorganised sector workers, and for introducing social insurance. The case is particularly strong, since the labour market conditions do not exist for government intervention to help improve work conditions (other than social protection). As regards the shape of things to come, it seems that health insurance and maternity benefits for BPL persons can be potentially assured with gradual coverage being achieved during the Eleventh Plan. However, the maternity benefit is yet to be introduced in the fiscal year Also, while health insurance has been introduced in , it remains to be seen how long it will take to be universalise, even to the BPL, the health insurance package. As regards old-age pension, all BPL persons over the age of 65 years are already covered. As regards death/disability benefits, the currently available scheme covers, in principle, an increasing proportion of unorganised workers who are likely to be BPL. Nevertheless, it remains to be seen how much political commitment there really is to actually implement these even for all BPL workers in the unorganised sector, let alone for unorganised workers who are above the poverty line. The historical experience of the now industrialised countries suggests that there is a long struggle ahead.

13 SOCIAL INSURANCE SYSTEM FOR UNORGANISED SECTOR WORKERS 177 Notes 1. It has been extended to all BPL persons over the age of 65 years after 19 November, 2007, as discussed below. 2. These groups include beedi workers, brick-kiln workers, carpenters, cobblers, fishermen, hamals, handicraft artisans, handloom weavers, handloom and khadi weavers, lady tailors, leather and tannery workers, papad makers attached to SEWA, physically handicapped self-employed persons, primary milk producers, rickshaw pullers/auto drivers, safai karamcharis, salt growers, tendu leaf collectors, urban poor, forest workers, sericulture workers, toddy tappers, powerloom workers, and women in remote rural hilly areas. 3. This section draws heavily from the chapter Extending Social Insurance to Informal Wage Workers in Mehrotra and Biggeri (2007). 4. See Mehrotra (2007) for the design and costing of a national health insurance scheme. 5. An Expert Group, (of which the author is a member), has already been constituted by the Ministry of Rural Development in consultation with the Planning Commission, for this purpose. 6. The GDP at market prices was projected at Rs. 4,693,602 crore for (Ministry of Finance, Economic Survey 2007/8, Government of India, New Delhi). References Jhabvala, R. and Subramanya, R.K. (2000), The Unorganised Sector, Sage Publications, New Delhi. Krishnamoorthy, V. and Nair, R.P. (2001), The Welfare Fund for Construction Workers in Tamil Nadu, ESS Paper No. 18, Social Security Policy and Development Branch, ILO, Geneva. Lindert, P. (2003), Growing Public Social Spending and Economic Growth since the Eighteenth Century, Cambridge University Press, Cambridge, U.K. Mehrotra, Santosh (2007), Conceptualising a National Health Insurance in India for Unorganized Workers, (mimeo), Planning Commission, New Delhi. and Biggeri, M. (2007), Asian Informal Workers: Global Risks, Local Protection, Routledge, London and Delhi. NCEUS (2007), Conditions of Work in the Unorganised Sector, National Commission for Enterprises in the Unorganised Sector, New Delhi. O,Keefe, Philip (2006), Strengthening Employment and Social Security for Unorganised Sector Workers in India, in India: Meeting the Employment Challenge, Conference on Labour and Employment Issues in India, organised by Institute for Human Development, New Delhi, July

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