ESI scheme dilution is against workers interests

The Union Govt has been initiating ill-advised ‘reforms’ detrimental to the interests of workers in ESI Scheme which covers medical, retirement, sickness, disablement, dependent , maternity

Representative Image (social media)
Representative Image (social media)
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Dr Arun Mitra/IPA

India has a work force of about 54 crore people. Despite that they are engaged in the productivity and development of the nation, they remain marginalized. Since most of them are in unorganized sectors they are devoid of any social security benefits. Those in the government departments and public sector enterprises, who are covered under social security, are only about 3%. Among the rest work force small number are in formal economy and vast majority, 93%, are in the informal economy. Other than Government and public sector employees, only about 11% of the total work force is covered under the social security schemes.

The Employees’ State Insurance Scheme (ESIS) is a multidimensional social security scheme meant to provide Socio-economic protection to the employees in the organized sector against the events of sickness, maternity, disablement & death due to employment injury and to provide medical care to the insured employees and their families. The scheme provides full medical care to the employees registered under the ESI Act, 1948 during the period of his incapacity, restoration of his health and working capacity. It provides financial assistance to compensate the loss of his/her wages during the period of his/her abstention from work due to sickness, maternity and employment injury. The scheme also provides medical care to his/her family members.

The ESI scheme is different from any insurance scheme as it covers medical benefit, retirement benefit, sickness benefit, disablement benefit, dependent benefit, maternity benefit, confinement expenses, funeral expenses, unemployment allowance, vocational rehabilitation allowance. It covers from OPD care to in patient care to the post hospitalization expenses. No insurance scheme gives so much coverage. The ESIC could be a guiding scheme where the government directly imparts healthcare at various levels.

It is unfortunate that the Union Government has been initiating ill-advised ‘reforms’ in the ESI Scheme without differentiating between ‘health insurance’ and ‘social security’.

The ESIS is based on contributions by the employers to the amount of 4.75% of the wages and the workers to the amount of 1.75% of their wages. With effect from 1st July 2019, the rates of contributions to ESI Scheme will be reduced from 4.75% to 3.25% of wages for the employers and from 1.75% to 0.75% of wages for the workers, as decided by the Ministry of Labour and Employment.

The logic given by the government behind this reduction in contribution is that they have accumulated huge reserves out of this scheme. This needs to be studied on the basis of facts. During the period from 2014 to 2019, ‘non-earmarked reserves’ grew from Rs.15,650 crore in March 2013 to Rs.68,292 crore in March 2019. The reserves have accumulated because of the increase in the income ceiling for coverage under ESIC from Rs.15,000/- to Rs.21,000/- per month in January 2017. This added to the number of workers covered under the scheme, so the contribution amount. The other reason for increase in the reserves is that the government has in fact reduced its spending on the workers. In the year 2014, a lot of changes were effected in the ESI Scheme.

These curtailed a majority of benefits under the ESI Scheme, especially the super specialty treatment. This resulted in a huge reduction in the expenditure of the ESI. The eligibility criteria to get super specialty treatment which was three months of joining the scheme was changed to two year of service. The workers and their families could not avail the facilities during that period.


Another fact is that while the number of employees covered under the ESI increased from 1.95 crore to 3.11 crore i.e 59.5% during the period from 2014 to 2018, the number of dispensaries increased only marginally from 1418 to 1500 ie. 5.7% only. This has led to further underutilization of funds collected. There are only 44 model hospitals in the whole country, which is too low a number. The condition of the whole system is far from satisfactory as even many of the model hospitals do not have up to date facilities.

The infrastructure in terms of modern diagnostics, super specialty care and number of doctors and paramedical staff is not as per the requirement. There is huge rush of patients in each hospital which the unmatched number of doctors find difficult to cope with. Patients’ complaint invariably is that the availability of medicines too is not sufficient. Many a times the patients are out sourced for diagnostics and treatment. There is need to develop own infrastructure to cater to the needs of the patients effectively.

If proper medical care are extended to all the employees covered under the ESI scheme, as per calculations based on the expenditure towards medical care incurred by the ESIC Delhi, the expenditure on medical care alone may amount to Rs.18400/- crore per annum. (In Delhi, where the primary, secondary and tertiary medical care – all are administered by ESIC directly per capita medical expenditure is Rs.5,555/- in 2017-18). The income from contribution of ESIC in the year 2017-18 is Rs.20077/- crore. Meaning thereby, that the ESI will not save more than Rs.1677/- crore which in fact may not be sufficient to meet the other social security benefits to the employees. Thus the Labour Ministry through its decision, has been instrumental in piling up of huge reserves, without properly utilizing the same for providing social security to the employees and their family members.

There is need to differentiate between ‘health insurance’ and ‘social security’. Social security is non-negotiable, as it is enshrined in articles 39(e), 41 and 42 of the Directive Principles of the Constitution of India. Besides, social security is one of the fundamental principles of the International Labour Organisation (ILO), of which India is also a founding member. As per the established principles, social security, which is supplementary to the Fundamental Rights of citizens of the country, are mandatory and not something which could be left to the option of either the employees or employers.

Extension of Medical Care, sickness benefit, maternity benefit, employment injury benefit disablement benefit and dependent benefit (family benefit) are mandatory provisions as per internationally accepted social security standards. Leaving even one of these benefits out of the social security net, would be nothing but working in a manner contrary to the Directive Principles of the State Policy of our Constitution.

It has to be clearly understood by the decision makers that productivity of a person depends on his health. Any step to dilute the health scheme will affect productivity and thus development of the nation.

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