SOCIAL SECURITY IN
INDIA
COUNTRY PAPER
PRESENTED BY
DR MAHENDRA RAJU AMBATI
DIRECTOR
NATIONAL ACADEMY FOR TRAINING AND
RESEARCH IN SOCIAL SECURITY
DEMOGRAPHIC & ECONOMIC
INDICATORS OF INDIA
DEMOGRAPHIC INDICATORS
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POPULATION
CHILDREN
WORK FORCE
NON WORKING (OLD AGED ETC.)
COVERED IN THE FORMAL
SOCIAL SECURITY SYSTEMS
(viz EPFO/ESIC/GPF/CSPS
of private, public & Govt sectors)
COVERED IN THE INFORMAL
SOCIAL SECURITY SYSTEMS
(viz micro insurance etc
National Old Age Pension Scheme
UNIVERSAL SOCIAL ASSISTANCE
(Public Health/Education Etc)
Rural Employment Guarantee Scheme
( including PWD Works All over India)
LIFE EXPECTANCY
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1.2 BILLION
41% of Population
40% of Population
19% of Population
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14% of Work Force
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8% of Agri Labour
2% of Old Aged
85% House Holds
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25% Work Force
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69 Years
ECONOMIC INDICATORS
INDIA RISING
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RATE OF GDP GROWTH
RATE OF INFLATION
STOCK MARKET SENSEX CROSSED
( source : news paper reports )
: 9.5 %
: 3.5 %
: 19,000 POINTS
SOCIAL SECURITY SYSTEM IN INDIA
The segment of the
Formal Private Sector
• Participation in two social insurance programs is
mandatory for workers in establishments with more
than 20 employees who earn less than Rs 6,500 a
month.
• These workers constitute 49 percent of the
salaried work force and slightly more than 7
percent of the estimated total work force.
Formal Social Security Sector
Two funded pension schemes :
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2.
the Employment Provident Fund (EPF), a defined-contribution
program, and
the Employment Pension Scheme (EPS), a defined-benefit program
Both overseen by the Employees Provident Fund Organization
(EPFO) INDIA
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Employees Provident Fund Scheme was established in 1952 and
participation is mandatory for private and public enterprises in 177
specified sectors that employ more than 20 persons
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As of March 2006 the EPF covered about 43 million workers in 4,44,464
establishments
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As of end-March 2006, total corpus in EPFO was US$ 50 billion
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Which makes nevertheless EPFO a worlds largest social security
organization
Employees Pension Scheme.
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The EPS was established in 1995.
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As of March 2006 it covered about 20.5 million workers.
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The EPS is currently funded by employer of 8.33 percent of
employees' basic wages plus dearness allowance.
The EPS provides pension benefits that are calculated
1.
2.
On the basis of a worker's average salary in the 12 months preceding
retirement, and
A multiplicative factor calculated as years of service divided by seventy.
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The maximum replacement rate is 50 percent,
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As of end-March 2006, accumulated funds in the EPS were
US$ 20 billion.
EMPLOYEES PENSION SCHEME
COVERAGE
Organised Sector
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All public sector undertakings
All Cooperative sector units
All joint sector units
All private sector units viz.,
Factories
Hospitals
Hotels
Educational institutions so on so forth
Un Organised Sector
Building & construction
Agriculture Farms
Horticulture Farms
Dairy farms
Plantation workers viz
( Tea – coffee – rubber – cashew etc )
so on so forth
EMPLOYEES PENSION SCHEME
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BENEFITS
Pension for life to the member on superannuation/retirement
and invalidation.
Pension to Widow/Widower for life or till re-marriage.
Two children/orphan, two at a time additionally up to 25 years
of age simultaneously with widow/widower pension for five
children.
Children/orphan with total and permanent disability pension
or orphan pension irrespective of age and number of children
in the family.
Facility for payment of pension to nominee in the event of
member who is unmarried
Facility for payment of pension to dependent father/mother in
the event the member dies leaving behind no eligible family
members and no nomination
Commutation of pension up to 1/3rd of pension
EMPLOYEES STATE INSURANCE
COVERAGE
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All factory units
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All establishments
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No. of Insured employee family units about one million
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Total No. of Beneficiaries 36 million
Benefits
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Medical Benefits
Sickness Benefits
Maternity Benefits
Disablement Benefits
Temporary disablement benefits
Permanent disablement benefits
Dependants’ Benefits
Funeral Expenses
Medical Benefit to Retired Insured Persons
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Rehabilitation allowance including
Cash Benefits are disbursed by its Local pay offices
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Vocational Rehabilitation
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Unemployment Allowance
Civil service pension system
• The CSPS covers federal and state civil servants, a workforce
of over 12 million
• Workers make no contributions, and benefits are financed
directly from the respective federal or state government
budgets.
• The CSPS pays a retirement benefit at age 60 that is based on
years of service and average salary in the last year of service.
• The accrual rate is slightly over 1.5 percent replacement per
year of service, so that a worker with 33 years of service will
get a 50 percent replacement of final salary, as in the EPS.
• Within the central government, pension schemes are in place
separately for railways, telecommunications, defence etc.
Special provident funds
with family pension benefits
There are also some
mandatory provident funds linked to
specific occupations or states, such as
The Coal Miners Provident Fund
The Assam Tea Plantation Provident Fund
The Jammu & Kashmir Provident Fund
The Seamen s’ provident Fund
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Although managed by different trusts and fund managers, they all
generally follow the same investment and return rules as those funds
regulated by EPFO.
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Total membership in these schemes is roughly 2 million.
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Total corpus is around US $ 10 Billion
Voluntary Pension programs for
the formal sector
There are also a number of voluntary group pension plan
that exist primarily because of rules barring high earning
employees from participating in the EPF system.
• These pension schemes are either privately run by managers
appointed by employers, or annuities are run by the Life
Insurance Corporation (LIC).
• Although they are neither mandatory nor sponsored by the
government, they are mentioned here because they receive tax
preferences and because they are subject to restrictive
investment and annuity regulations.
• As of March 1998, the total accumulated funds for these group
pension plans was about US$15 billion
The Informal Social Security
Sector
Public
Provident
Fund
• There are no mandatory retirement-saving programs for the
self-employed or for workers in the informal and unorganized
sectors of the economy these workers can join the Public
Provident Fund (PPF).
• Members of the PPF can contribute between US$25 and US$
500 per fiscal year, and PPF accounts mature in 15 years.
• As of March 1998, there were 2.76 million accounts in the PPF,
representing less than one percent of the working population
with total outstanding balances of approximately US$15
billion.
National Old Age Pension Scheme
• NOAPS provides a benefit for the poorest workers of 65 years
of age in the informal sector.
MICRO INSURANCE (SOCIAL SECURITY)
FOR INFORMAL SECTOR
( ADMINISTERED BY CENTRAL & STATE GOVTS )
DELIVERED BY DISTRICT MAGISTRATES IN THE STATES
COVERAGE
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Agricultural Labour
Fisher men
Domestic helps
Rickshaw pullers
Toddy tappers So on so forth
BENEFITS
• Disability pension for life
• Widow pension for life
UNIVERSAL SOCIAL ASSISTANCE /
SOCIAL PROTECTION PROGRAMS
( ADMINISTERED BY CENTRAL & SEVERAL STATE GOVTS )
BENEFITS
• Free Medical & Health ( Govt Hospitals / Primary health
centers all over the country
• Free Education up to high school ( Govt schools all over the
country)
• Free Education for girls up to college ( Govt colleges all over
the country )
• Free Power to small farmers for agricultural purposes
• Free Power to single room tenements for low income groups
• Mid Day Meal in schools to children of low income families
UNIVERSAL SOCIAL ASSISTANCE /
SOCIAL PROTECTION PROGRAMS
( ADMINISTERED BY CENTRAL & SEVERAL STATE GOVTS )
BENEFITS
• Free transport in local trains / busses for old aged & physically
handicapped of any age
• Concessional ( half price ) fares in trains / busses any where in
the country for old aged & physically handicapped of any age
• Marriage allowances in kind for low income group
• Reservation for women up to 33 % in all jobs and for socially
oppressed class up to 15 % in all jobs all over the country
RURAL EMPLOYMENT
GURANTEE PROGRAM
• National Rural Employment Guarantee Program
promises wage employment to every rural household
(adult volunteers get unskilled manual work @ Rs 60/
per day per person)
• Through this Program the Government aims at
removing poverty by assuring at least 100 days'
employment
• ‘Public Works Department’ is another Rural
Employment Guarantee Program in place which
guarantees employment to rural unemployed population
through deploying Labour in ‘Roads & Building’
activities all over India.
RECOMMENDATIONS
by the presenter :
some of them presented before
EPFO/GOVT
ON COVERAGE
• Let there be ( central registration authority ) for issue of social security
number
• Let all employees get SSN to start with whether covered by EPFO or not
• Then on ongoing basis let every citizen get SSN from that central
registration authority
• Once every employee gets SSN, it becomes easy for EPFO to track
uncovered employees either from organised or unorganised sectors and
then to go for universal membership near total
ON INVESTMENT PORTFOLIO
• Open up limited investments into equity very cautiously in proven stock
options on test basis
• Venture into real estate/leasing investments/trading
RECOMMENDATIONS by the presenter :
some of them presented before EPFO/GOVT
…contd
ON DIVERSIFICATION OF BUSINESS OPPORTUNITIES
FOR MAKING SOCIAL SECURITY SYSTEM MORE ROBUST
Venture into fallowing activities
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Life & General Insurance
Stocks Trading
Housing & Development Finance
Banking
Venture Financing
Mutual funds
Real estate
Leasing finance & development
RECOMMENDATIONS by the presenter :
some of them presented before EPFO/GOVT
…contd
(ON CONSOLIDATION /UNIFICATION OF SOCIAL SECURITY SYSTEMS)
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Let there be new central ministry called MINISTRY OF SOCIAL SECURITY AND
SOCIAL PROTECTION
Let all the special PF s ( Coal mines/seamen s etc ) be merged into EPFO for uniform
benefit delivery
Let ESIC & EPFO be merged for uniform and efficient benefit delivery
Let all the micro insurance/social assistance programs & NOAP also be merged
Let all the above be under one umbrella for effective benefit delivery
Let all the social protection delivery mechanisms in STATE GOVTS viz.
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Maternity benefit act provision
Workers compensation act provisions
Contract workers abolition act provisions
Mining workers welfare act provisions
Beedi & cigar workers welfare act provisions
Domestic workers welfare act provisions of certain state Govts
so on so forth also be brought under one umbrella as suggested
under one CENTRAL MINISTRY OF SOCIAL SECURITY for uniform
efficient benefit delivery
If my above recommendations are accepted
by GOVT…..
Social Security System in INDIA can be
• More income generating
• Less vulnerable
• More sustainable
• Better benefits
• Commensurate with rate of inflation and finally
• Raise standards of living of the beneficiaries on ongoing basis
THANK YOU