The Indian finance minister Arun Jaitley has recently assured the country that social security for unorganised workers will be made a reality soon. 43 crore unorganised sector workers of the country contribute 60-65 percent of GDP but are getting hardly anything in return.

Arun Jaitley, Union Minister for Finance. Pic:

The existing Unorganised Workers’ Social Security (UWSS) Act of 2008, which was to provide comprehensive social security to them, seems to be in cold storage with very few States implementing it in a meaningful way.  Instead of integrating and rationalising all splintered Acts and schemes to make one comprehensive general law, the Act has merely become one more among the splintered Acts.

First of all, it confers no rights and is only an enabling law.  It does not define the term ‘social security’. Nor does it cover all unorganised workers or make their registration compulsory as in other countries. It does not ensure a mechanism by which workers can be incrementally and mandatorily covered within a time-frame.

The UWSS Act correctly excludes those home-based workers, self-employed workers or wage workers, who are currently covered under the ESIC, EPFO and other Central Acts for the formal sector (listed in Schedule 2 of the Act). But it lays down the further condition that only those working in establishments with less than 10 workers are covered under the Act.  Among those again, those earning more than the monthly income fixed by the State governments are ineligible to come under the Act.

The ILO foresees universal coverage of workers for social security as a human right in its Convention No 102 on Social Security. It lists nine benefits that constitute social security, which are medical care and family benefits (child care), as well as benefits in the event of sickness, unemployment, old age, employment injury, maternity, invalidity and death of the breadwinner. It advocates immediate provision of a ‘minimum social floor’ of a few key benefits, if not all nine benefits.

This ‘minimum social floor’ comprises essential health services, child benefits,  income support combined with employment guarantees for those who cannot earn sufficient income for any reason,  and basic tax-financed pensions for the old, the disabled and those who have lost the main breadwinner in a family. It is disheartening that even this minimum social floor is not being guaranteed by the UWSS Act and its schemes as a right.

Limiting eligibility to certain classes of establishments with a certain number of workers, or certain sectors of employment, and fixing wage ceilings or BPL cards for eligibility, as is currently extant in the UWSS Act, goes against the principle of treating social security as the human right of every individual. Such limits could result in several workers falling between the two categories and hence outside the ambit of either the UWSS Act or the Acts for the formal sector.

In order to ensure that every unorganised worker is covered, the National Advisory Council, in its recommendations regarding the UWSS Act, had recommended that the definition of an unorganised worker could be: “All unorganised workers, including those who go in and out of the formal and informal sectors of the economy (like contract labourers); and excluded from the purview of the Act should be only two categories of workers: (i) workers in the formal sector who are already covered by the existing PF and ESIC schemes; and (ii)  self-employed workers and others who pay income tax and are relatively better-off, such as doctors and lawyers”.

The only requirement for registering an unorganised worker with the State Boards set up under the Act is that s/he should file a self-affidavit that s/he is an unorganised worker.  But currently, the Karnataka State Board, for instance, is insisting that NGOs, trade unions, etc. should certify that the worker is working in a specific sector, which is not required under the Act. 

Daily wage-earners loiter in search of work. Pic: Devanik Saha

Not only have sector-specific schemes been designed by the Centre and most States, separate schemes for each or a few social security benefits only have also been designed by the Centre and states.

The UWSS Act says that the 10 Schemes included in Schedule 1 of the Act shall be deemed to be welfare schemes formulated by the Central Government. 

The ten schemes listed in Schedule 1 of the Act are the following: 

  1. Aam Aadmi Bima Yojana (AABY)
  2. Rashtriya Swasthya Bima Yojana (RSBY)
  3. National Family Benefit Scheme (NFBS)
  4. Indira Gandhi National Social Assistance Scheme which provides pensions to the elderly, widows and the disabled (NSAS)
  5. Janani Suraksha Yojana (JSY)
  6. Janashree Bima Yojana (JBY)
  7. Handloom Weavers’ Comprehensive Welfare Scheme
  8. Handicraft Artisans’ Comprehensive Welfare Scheme
  9. National Fishermen’s Welfare Scheme.
  10. Master Craftsmen’s Pension Scheme (meant only for award-winning craftsmen)

Very little thought seems to have gone into the design of the UWSS Act while formulating it in this manner. The eleven schemes have different eligibility criteria for covering workers, have piecemeal and varying or overlapping benefits and are administered by different departments. While RSBY, NSAS, JSY are restricted to BPL families, AABY, JBY and the sector-based schemes prescribe no income limits. Then again, while RSBY, NPS and AABY are contributory, some others are not.

The schemes stipulating BPL as the eligibility criterion were meant to be poverty alleviation schemes and were not meant for workers per se. The welfare schemes for handloom workers, handicraft artisans and fishermen are sector-based while others are not. While the sector-based schemes provide healthcare as well as disability and other benefits, the other schemes provide either health care or disability and survivor’s benefits.

Each of the ten central schemes has varying amounts as benefits often for the same contingencies. Accidental death benefits, for example under the National Family Benefit Scheme (NFBS) amount to Rs 20000, under the Janashree Bima Yojana (JBY), it is Rs 50000 and under the AABY Rs 75000. Many of the amounts, especially pension such as under the Indira Gandhi National Social Assistance Scheme, are tokenistic and so low that they will not enable the pensioner to maintain a decent standard of living, as required by the ILO.

How will these differing criteria for individual schemes be reconciled with the criteria fixed for registration with the UWSS Board?  While there is reason enough for confusion within these ten listed schemes, the confusion gets compounded when the plethora of other overlapping schemes that are not listed under this Act, such as the special Acts for beedi workers, mine workers, construction workers etc. run by the Centre, and those run by the States, such as the Vajpayee Arogya Shree, Rajiv Arogya Shree, etc are also taken into account!

Registering with the UWSS Board does not make the unorganised worker automatically eligible to access benefits from these 10 schemes. But the worker will have to register with each of these schemes again and also pay the registration fees afresh as the administrative machinery is different for each of them.

A study by the Institute for Financial Management & Research (IFMR)  notes that currently, an unorganised sector worker who is eligible under the three schemes [Aam Aadmi Bima Yojana (AABY), Rashtriya Swasthya Bima Yojana (RSBY) and the National Pension Scheme (NPS-Swavalambhan)] has to enrol at three separate windows in order to be covered under all three of them – s/he has to enrol for health insurance at an RSBY enrolment station, buy a pension through an aggregator such as a bank or MFI, and enrol for life insurance through one of LIC’s nodal agencies. 

Most of the social security schemes rely on state-level nodal agencies for the distribution of the scheme, usually a state government department. For example, in most of the states implementing RSBY, the nodal agency is the Department of Labour and in some, the Health Department. The AABY and the Indira Gandhi National Social Assistance Scheme are administered by the Revenue Department, the Janani Suraksha Yojana by the Health Department, the Handloom Workers’ Welfare Scheme by the Handloom Development Corporation and so on.

“Nodal agencies like state government departments often suffer from weak institutional and staff capacity which hinders the implementation of programs” and the implementation of the scheme becomes  “just another function for the government department to perform among many administrative duties,” says the study by IFMR.

The State Boards are supposed to monitor the administration of the above ten central welfare schemes and also other schemes of the State Governments.  However, an RTI application with the Karnataka Board has revealed that the Board is not monitoring the implementation of any of these 10 schemes. The need is for Authorities/Boards with full authority to administer schemes. Germany has separate institutions managing statutory health insurance funds, pension funds, accident insurance funds and unemployment insurance funds, an architecture more desirable than multiple sector-specific boards.

Under Section 6(8) of the UWSS Act, the State Board has the liberty to formulate any suitable scheme for unorganised workers and there is no requirement that only sector-specific schemes should be framed, or that a separate scheme should be devised for each benefit, as is being done by some States. However, the Karnataka State Board, for instance, has devised only one scheme, namely, the Karnataka State Private Commercial Vehicle Drivers’ Accident Benefit Scheme and has covered  only 1.94 lakh private commercial vehicle drivers in seven years out of 2.1 crore unorganised workers in the state and provided just one accident benefit till date.

Unorganised sector workers. Pic: Ministry of Rural Development, Government of India

For an unorganised sector worker who is an agricultural worker in one season and a construction worker at other times, sector-specificity does not appear to make sense. The cost and confusion of having myriads of sector-specific schemes for the unorganised, and also individual schemes for different social security benefits, is unthinkable. 

Will the worker have to register himself anew with a different sector-specific scheme, each time he shifts his occupation from one sector to another?  In addition, will he have to register himself under a different scheme for each benefit? How many ID cards and records of work and contribution will he have to maintain? And how many points of delivery will he have to visit for claiming the varied benefits?

When Kerala, which pioneered sector-specific boards to begin with, has found them to be costly and unwieldy and is seeking to merge them, it is paradoxical why the Centre and States are continuing to replicate this failed model. A sector-based approach seems relevant only for the regulation of working conditions in a sector and unnecessary for the provision of social security. 

Also, if a single administrative body, such as the ESIC, can administer and deliver several benefits [namely, health care and sickness, maternity, accident, disability, unemployment  and dependent benefits, which encompass almost all the social security benefits recognised by the ILO, except family benefit and pension], why should separate schemes under multiple administrative machineries be devised for individual sectors and individual social security  benefits? 

“Vertically divided and administered sector-based schemes, cover only a few workers in an area and are expensive to administer....” and “in order to enable ease of access for the beneficiary, there is an urgent need to create a single-window architecture offering all products in order to eliminate the inefficiencies associated with multiple purchase points...,” says the IFMR study.

One needs to de-link the provision of social security for unorganised workers from sector-specificity. It then becomes possible to think in terms of an area-based approach, covering all workers living in an area irrespective of the sector they are working in.  A comprehensive scheme for social security covering all or a minimum social floor of benefits could then be devised and delivered at close proximity to workers.

All current, multiple and overlapping schemes for the same unorganised workers, such as the special Acts for beedi workers, mine workers, construction workers, etc., could be rationalised and integrated in a phased manner with the single scheme for unorganised workers.

It needs to be recognised, that the local bodies are ideally situated to perform the functions of registration and record-keeping as they are the only administrative organs of the state that reach right down to the lowest level, accessible to workers in every nook and corner of the country. ILO also calls for the integration and rationalisation of schemes and their delivery at grassroots level in a decentralised manner through local bodies. The National Commission for Enterprises in the Unorganised Sector (NCEUS) also rooted for an area-based approach with implementation through the local bodies.

The UWSS Act requires the District Administration to maintain records of the unorganised workers registered under the Act. But it also allows the state governments to direct the urban and rural local bodies, the Zilla Panchayat and the municipalities to perform the  role, which would be the more feasible and logical mechanism as these bodies are closest to the workers. But the Karnataka government has not directed the local bodies to do so.

Section 9 of the Act requires the state government itself to set up “as many Workers’ Facilitation Centres as may be found necessary” to aid in the dissemination of information about the schemes for social security of unorganised workers, facilitate the filing, processing and forwarding of applications. However, a metropolitan city like Bangalore with a population of almost one crore has merely two Workers’ Facilitation Centres run by NGOs.

It is unfortunate that while the Act says that record-keeping can be delegated to the local bodies, it does not unambiguously state that the WFCs too should be run by the local bodies themselves, which would have ensured the natural linkage between registration and record-keeping. It is a vagueness that seems deliberate to avoid responsibility for registering workers.

Section 8(a) of the Act says that the Board can “recommend the State Government (sic) in the formulation of suitable schemes....”.  This appears to mean that the Board has no autonomy to devise and approve its own schemes (as is done by the Building & Other Construction Workers’ Welfare Board, for example) but has to get every scheme devised by it approved by the state.  Whether the scheme gets any funding at all is again determined as per the whims of the state government. 

The Act itself does not provide any means of creating a Social Security Fund through contributions from workers, employers or governments but merely says that the State Boards can recommend to the State Governments ways and means of raising funds for their schemes. But the Karnataka Board, for instance, has not devised a mechanism or suggested to the State Government any means of raising funds.

This indicates inaction by the Board to make its own existence and functioning effective and sustainable. Nor has the State government sought financial assistance from the Central Government for any scheme, which it could have also done.

The Madhya Pradesh government had passed an Act in 2004 itself for providing social security to the unorganised sector, even before the Central Act came into being in 2008.  It had several positive features which are missing from the Central Act. That law devised the following ways of collecting funds for financing the benefits under the Act:  up to 1 percent additional tax on stamp duty and 5 percent on motor vehicles tax; 1 percent cess on forest produce; 5 percent cess on royalty on minor minerals; and 10 percent cess on market fee for agricultural produce. It also envisaged collection of up to 5 percent of wages paid by employers every month to their unorganised workers as employers’ contribution.  All the taxes and cesses are to be deposited in the Consolidated Fund of the State.

To save employers the monthly hassle, their contributions towards the social security of their unorganised workers could be collected as a cess on their annual turnover or on the overall man-days of work provided by them in a year to unorganised workers   Annual contributions from workers as a percentage of their annual earnings to cover all or the minimum social floor of benefits can be enforced for the registered members and made mandatory for all unorganised workers gradually. Higher contributions could be made for higher benefits.  Those earning less than a certain income limit could be excluded from having to make a contribution and the state could stand in on their behalf.

The National Social Security Fund, foreseen in the draft Bill of the NCEUS was to be financed from the contributions at rupee one per day by workers, employers and the government (i.e., Rs. 3 per worker per day or Rs. 1,095 per year). The government contribution was proposed to be divided between the Central and State governments in the ratio of 3:1 respectively (Rs. 0.75 per worker by the Centre and Rs. 0.25 per worker by the State governments).  Experts opine that the adequacy of the amount suggested by NCEUS needs to be tested by an actuarial study.

The National Advisory Council (NAC) has suggested that ‘aggregators’ could play the role of  mobilising, enrolling and registering workers, educating workers, issuing smart cards, etc.  NAC further recommends that a common ICT architecture, which could be Aadhar-based, must be developed for the effective and efficient implementation of the social security package.

Mr. T. S. Sankaran, a labour law expert and retired additional secretary, ministry of labour, has written in a critique of the Act: “Surely, the Parliament is ..... obliged to build into the law what constitutes appropriate and adequate social security for this vast mass of unorganised workers and their dependents, what eligibility criteria, if any, ought to be prescribed, what will be the scale of benefits that the workers and their families are entitled to receive and under what conditions, what will be the funding arrangements that must be put in position to meet the cost of social security and so on. Instead of doing all these and more, what our Parliamentarians are content with is to enact a law which enables the Central and State Governments to do whatever they deem expedient.”  

Is Mr. Jaitley listening?