Vol. XLIII No. 26 June 30, 2019

Motive behind Reduction of ESIC Contribution

Prasanta Nandi Chowdhury

THE press release of the government in the late evening of June 13, announcing reduction in the contribution for Employees’ State Insurance (ESI) scheme hit the pages of national press on June 14.

The move appears to be good in that workers will be able to enjoy ESI benefits with a lower contribution as the medical and other benefits rendered by the ESI Corporation (ESIC) will continue to be the same. CITU and the Left trade unions vehemently opposed the role of the government. Sections of the media criticised them for taking such a critical view. Why did these trade unions oppose such reduction? Let us look at the details.

ESIC took up the matter of reduction of contribution in the interest of wider coverage of the employees under ESI scheme. The 174th meeting of the corporation, which was held on May 29, 2018, discussed the issue of rationalising the rate of contribution. It was proposed to reduce the combined rate of contribution, by the employers and employees, from existing 6.5 per cent to 5 per cent. The matter was referred to a sub-committee. The sub-committee proposed reduction of contribution of employers from 4.75 per cent to 4 per cent and of the employees from 1.75 per cent to 1 per cent. The report of the sub-committee was placed for discussion in the 175th meeting of the corporation. The corporation accepted the proposal. The draft notification for amendment of Rule 51 of the ESI (Central) Rules 1950 was issued on February 15, 2019. The 177th meeting of the corporation, held on 19th February 19, 2019, approved the budget estimate of the corporation for the year 2019-20, taking into consideration the impact of the reduced rate of contribution.

Meanwhile the model code of conduct for 17th parliamentary election came into force and implementation of reduced rate of contribution could not come into effect.

After the results were announced and the Modi-2 government took office, the 215th Standing committee meeting of ESIC was held on June 13, 2019, which was attended by the representatives of the employees, employers, and the central and state governments. This matter was neither in the agenda nor was in the reporting items. The government issued the press note in the evening, after the meeting was over. This is nothing but a gross travesty of the spirit of tripartite mechanism in a major social security body like ESI Corporation. The declaration of the government has no bearing with the spirit of discussion and decision of various meetings of the corporation.

As per ESIC   Act 1948, ESIC is an autonomous tripartite body. The Modi government has been trying to jeopardise the autonomy of the corporation since it came to power first time in 2014. All labour laws are being modified in the interest of the employers under the deceptive term of ‘labour law reforms’. Labour Codes are going to replace the labour laws. The Code on Social Security is designed to abolish the autonomy of both ESIC and EPFO (Employees’ Provident Fund Organisation).

The then finance minister Arun Jaitley, in his budget speech in 2015 proposed to provide option to the workers to choose a health insurance product recognised by the IRDA, ie, mediclaim. “The key feature of mediclaim is coverage for hospitalisation and treatment towards accident and pre-specified illnesses for a specific limited sum assured. The mediclaim premium is based on the sum assured”, while ESIC provides unlimited benefits against very limited contribution. The motive behind this proposal was not to favour the workers or the ESIC but to favour the insurance companies.

Contrary to the remark of Arun Jaitley, that EPF and ESI have ‘hostages rather than clients’, ESI is acclaimed even by global experts as a multidimensional social security system tailored to provide socio economic protection to the workers and their dependents. Besides full medical care for self and dependents that is admissible from day one of insurable employment, the insured persons are also entitled to a variety of cash benefits in times of physical distress due to sickness, temporary or permanent disablement etc resulting in loss of earning capacity and confinement in respect of insured women. Dependents of insured persons who die in industrial accidents or because of employment related injuries or occupational hazards are entitled to a monthly pension called the dependent’s benefit.

We may compare mediclaim insurance and ESI scheme in brief as per the extent of contribution and the benefits available. The motive behind mediclaim is profit, the premium is based on age, sum insured etc with provision of exclusion subject to medical check up. The motive of ESI is welfare, the contribution of one insured person covers all dependent members of her/his family without any medical check up, unlimited medical benefits with no exclusion and many other compensatory cash benefits.

The experience of the last five years of the Modi government reveals that the priority of this government is always benefit of employers over protecting the interest of the workers. Catchy slogans like ‘Make in India’, ‘Shramev Jayate’, labour law reforms did not do any good to the workers, while the cream of benefits are passed on to the employers.

Reduction of contribution to the tune of 0.75 per cent as proposed by ESIC did not satisfy the employers and the Modi government as well. Hence, the government unlawfully intervened into the assigned authority of the autonomous corporation to reduce the rate by 1.5 per cent while workers will have to be contended with reduction of 1 per cent. In order to have wider coverage of ESI scheme, trade unions demanded enhancement of wage ceiling from Rs 15,000 to 25,000. There was consensus in ESIC. But finally the wage ceiling was capped at Rs 21,000. The liability of this enhancement of wage ceiling is being removed. Employers’ liability will now be reduced by Rs 5000 crores per annum.

The concern of trade unions is very clear. The government should not be dictated by the business community, when parliament of India through Employees’ State Insurance Act, 1948 assigned the authority to tripartite forum, not the government. Commercial press owned by the business lobby fails to understand the spirit of the constitution of India, parliament of India as well democratic structures of the country.

The goal of ESIC was providing benefits to insured workers and their family members. Presently, curtailment of benefit of workers on this or that plea is being practiced in the name of eligibility criterion, non payment of contribution. In all these situations, workers or their family members requiring medical attention are the victims. Insured persons in the newly covered areas face serious hardship as no medical infrastructure has yet been developed by the ESIC. They are to contribute in full, where as no benefits are being enjoyed by the employee or their members of family. In this newly covered area, ESIC has made some tie-up arrangement with private clinics or hospitals with too limited medical logistics. Why is the government, which is so eager to provide relief to the employers, not exhibiting the same in extending the necessary facilities to these insured persons in the newly covered areas?