Centre to come up with Rs 1.2-lakh crore universal social security plan for poorest

The Economic Times, Yogima Seth
October 17, 2017, New Delhi


The government has drafted an ambitious Rs 1.2 lakh crore plan to provide universal social security coverage for the poorest fifth of the country as part of a bigger scheme that’s being planned for all individuals. 

This broader programme envisages three categories — the poorest 20%, who will get a government payout; those who subscribe on their own and formal sector workers who will need to set aside a fixed proportion of income toward the scheme. 

The labour ministry, which has drawn up the proposal, will soon send it to the finance ministry for vetting and funding with the intent of rolling it out next year as a compulsory scheme that could well form a key welfare platform ahead of the next general election. The scheme will have two tiers. The first of these comprises mandatory pension, insurance (both death and disability) and maternity coveragescheme and the second, optional medical, sickness and unemployment coverage. 

“Funds collected under the universal social security scheme will be divided into sub schemes and be ringfenced, meaning the benefits and the contribution will be commensurate,” a senior government official told ET on condition of anonymity. 

The optional element will depend on the funds collected under the mandatory scheme, the official said. The government feels the scheme will enjoy economies of scale and even those making self-contributions will find it attractive because of the large numbers involved. 

While funding the scheme will be a challenge for the government, which has pledged to stick to the deficit target, it is seen as one that will gain broad popular support. The new policy will be part of the social security code, one of four codes that the labour ministry is finalising and will subsume 17 existing items of legislation governing social security coverage in the country.

India's total workforce currently stands at 450 million, of which a little over 10% are in the organised sector and getting social security of some sort. Every year, more than 10 million people are added to the workforce but most don’t get even the minimum wage and lack any kind of social security coverage, being mostly in the unorganised sector. 

According to the official cited above, the annual cost of coverage to the poorest has been pegged at Rs 1.2 lakh crore. They are categorised as SECC 4 and are conservatively estimated at 20% of the population. SECC stands for Socio Economic and Caste Census. 
People under SECC 3 category — another 20% of population and mostly self-employed— will pay a lump sum to avail the benefits while the wage-employed class will pay as per the existing system. 

Under the existing system, in the organised sector, around 25% of the basic salary, including employee and employer contributions, goes toward the provident fund of the employee and another 6% for insurance, taking the total contribution to more than 30%. 





Location: New Delhi, Delhi, India

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