1.0       The Common Minimum Programme (CMP) of the present Government, inter alia, has recognised as one of its basic principles of governance the need to “enhance the welfare and well-being of farmers, farm labour and workers, particularly those in the unorganised sector and assure a secure future for their families in every respect.” The CMP further states that

“The UPA government is firmly committed to ensure the welfare and well-being of all workers, particularly those in the unorganised sector who constitute 93 per cent of our workforce. Social security, health insurance and other schemes for such workers like weavers, handloom workers, fishermen and fisherwomen, toddy tappers, leather workers, plantation labour, beedi workers, etc. will be expanded.”

1.1             In order to implement the above commitment, the Government of India, among other measures, constituted the National Commission for Enterprises in the Unorganised Sector (NCEUS) vide Ministry of Small Scale Industries Resolution No. 5(2)/2004-ICC dated 20th September, 2004, under the Chairmanship of Professor Arjun Sengupta.  The current composition of this  Commission is as follows (see Appendix 1 also):


Professor Arjun Sengupta,                                  Chairman

Chairman,                                                                  [From 20.09.2004 to 01.07.2005]

Centre for Development and Human Rights,         [From 17.11.2005 till date]

New Delhi


Professor K. P. Kannan,

Fellow,                                                                       Full-time Member

Centre for Development Studies,                          [From 01.11.2004 till date]

Ulloor, Thiruvananthapuram 695011,



Professor Ravi S. Srivastava,                                 Full-time Member

Professor,                                                                  [From 01.05.2006 till date]

Centre for Studies in Regional Development,

Jawaharlal Nehru University,

New Delhi 110067.


Shri B.N. Yugandhar,                                              Part-time Member

Member,                                                                    [From 05.11.2004 till date]

Planning Commission,

New Delhi 110001.

Professor T.S. Papola,                                            Part-time Member

Director,                                                                     [From 06.04.2005 till date]

Institute for Studies in Industrial Development,

Vasant Kunj Institutional Area,

New Delhi 110070                                                                    


Shri V.K. Malhotra, IAS (Retd.)                               Member Secretary

                                                                                   [From 01. 03.2006 till date]


1.2       The Terms of Reference of the Commission are as follows:

  1. Review  the status of unorganized/informal sector in India including the nature of enterprises, their size, spread and scope, and magnitude of employment;
  2. Identify constraints faced by small enterprises with regard to freedom of carrying out the enterprise, access to raw materials, finance, skills, entrepreneurship development, infrastructure, technology and markets, and suggest measures to provide institutional support and linkages to facilitate easy access to them;
  3.  Suggest the legal and policy environment that should govern the informal/unorganized  sector for growth, employment, exports and promotion;
  4.  Examine the range of existing programmes that relate to employment generation in the informal/unorganized  sector and suggest improvement for  their redesign;
  5. Identify innovative legal and financing instruments to promote the growth of the informal sector;
  6.  Review the existing arrangements for estimating employment and unemployment in the informal sector, and examine why the rate of growth in employment has stagnated in the 1990s;
  7. Suggest elements of an employment strategy focussing  on the informal sector;
  8. Review Indian labour laws, consistent with labour rights, and with the requirements of expanding growth of industry and services, particularly in the informal sector, and improving productivity and competitiveness; and
  9. Review the social security system available for labour in the informal sector, and make recommendations for expanding their coverage.

1.3       Even as the Commission was deliberating on its Terms of Reference including the one on Social Security (No. 9), a draft Bill titled ‘The Unorganised Sector Workers’ Bill, 2004’, prepared by the Ministry of Labour and Employment of the Government of India, resulting from the recommendations of the Second Labour Commission, was sent to this Commission for its comments and possible revision. The background was that several stakeholders had expressed their opinion for a re-examination of the proposed Bill. The Bill had combined the issue of social security with that of the conditions of work and contained provisions wherein the self-employed, who constituted a majority of informal workers, had to pay a higher share of contribution to the proposed social security scheme. The coverage of the scheme was also intended to be very limited.  Some issues of implementation in the Bill also needed precise formulation.

1.4         On the basis of discussions within the Commission, and interactions with its Advisory Board, the Ministry of Labour and Employment and other stakeholders, the Commission proposed to the Central Government the preparation of two Bills, one on social security, and the other on conditions of work and livelihood promotion for workers in the unorganised sector. In order to enable the government to prepare the two new Bills, the Commission submitted two draft bills.

1.5              Following the submission of the two draft Bills, the Commission has further deliberated on the subject and is now putting forth a revised Bill on Social Security along with a report detailing its proposal for a national social security scheme which would be applicable to all workers engaged in informal employment.

1.6 The Commission will also be submitting another report to justify the draft Bill dealing with the conditions of work and livelihood promotion for unorganised workers.

Procedure Followed in Preparing the Report

1.7       The Commission began with consultations with the Advisory Board on the outlines of the proposed national social security scheme (Appendix 2 to the Report contains the composition of the Advisory Board). Subsequently, a draft Bill was submitted to the Central Government and placed in the public domain. Copies of the draft Bill were sent to several of the stakeholders including state governments, trade unions and other organisations working for and with the unorganised workers. The comments and suggestions received from these stakeholders formed the basis for the preparation of this Report.

1.8       Most State governments responded to the Commission’s request for comments and information on existing social security arrangements. In addition, some of the State governments stated their point of view at the 40th Session of the Indian Labour Conference held at New Delhi during 9-10 December, 2005. Members of the Commission had the opportunity to discuss the issue with some of the State governments during their visits to the states.

1.9       The Commission constituted a Task Force on Social Security for Unorganised Workers under the Chairmanship of Professor K.P. Kannan, Member of the Commission, to assist the Commission in the preparation of the Report as well as to act as a forum for discussion and deliberation of various issues connected with the subject (Appendix 3 to this Report gives the composition of the Task Force). 

1.10    The background information on the subject was collated in the Commission.  The India-based offices of three multilateral organisations, viz.  the International Labour Organisation (ILO), the World Bank and the United Nations Development Programme (UNDP) offered access to their studies pertaining to both India and other countries. Several academic scholars also responded to the draft Bill with their comments and suggestions. The subject was also discussed at various  conferences  such as the Conference on Employment and Income Security in India during April 6-8, 2005, organised jointly by the Indian Society of Labour Economics (IJLE), Institute for Human Development (IHD), New Delhi, the Planning Commission and the National Commission for Enterprises in the Unorganised Sector (NCEUS); the 47th Annual Conference of the Indian Society of Labour Economics held at the Jawaharlal Nehru University (JNU), New Delhi during December 15-17, 2005; and the Global Labour Forum held during December 13-14, 2005 at  New Delhi.

Framework of the Report

1.11    The Report is divided into two parts. Part I contains the text of the Report, which is organised as follows. Following this introductory Chapter, Chapter 2 highlights the definitions of the informal sector and informal workers, and the need for social security for this target group. Chapter 3 examines the main sources of insecurity for workers in the informal economy. Chapters 4 to 6 examine the existing protective social security arrangements initiated by the Central Government, State governments and voluntary organisations, in that order. Chapter 7 is a review of the international experience in the area of social security. It details the initiatives of large Asian countries such as China and Indonesia, and also provides a brief account of some successful cases such as Tunisia and Brazil. Chapter 8 summarises the existing models of social security and discusses, in detail, the salient features of the proposed national minimum social security that covers all workers in the informal economy. Chapter 9 discusses the organizational and implementation issues and the financial implications of the national minimum social security proposal. Chapter 10 documents the responses of different stakeholders and outlines their duties and responsibilities. Chapter 11 gives the main conclusions and recommendations. 

1.12    Part II contains the revised draft “Unorganised Workers Social Security Bill, 2006.”

1.13 A subsequent section on Appendices contains a summary of the existing social security schemes implemented by the Central and State governments as well as by various voluntary organisations, and the responses received from various stakeholders.


1.14    We place on record the advice, support and guidance given by Professor K. Jayashankar, Member of the Commission during the period 01.12.2004 to 09.03.2006 and Shri K.K. Jaswal, who was Member-Secretary during the period  01.11.2004 to 18.02.2006.

 1.15   The Commission benefited by the discussions in the Advisory Board as well as the suggestions made by several members. Some of them helped in organising conferences to discuss the draft of the Report.

1.16    The members of the Task Force contributed significantly to the preparation of this Report by holding discussions, and offering suggestions and written inputs.

1.17    Experts in the India office of the International Labour Organisation (ILO) and the World Bank assisted the Commission by providing information on the experiences of different countries. The ILO office in India also offered technical support by hiring a Consultant, Professor Jeemol Unni, to work for the Commission on a number of related subjects including social security.

1.18    The Secretary, Ministry of Labour and Employment of the Government of India and his officials as well all the State governments and the officials in the Departments of Labour assisted the Commission and provided relevant information. The representatives of trade unions, other organisations of the workers in the unorganised sector and social activists participated in discussions with the Commission at New Delhi and in the States visited by the Commission members.

1.19    The Commission takes this opportunity to thank the above individuals and organisations that have made constructive contributions towards the preparation of the Report and the Bill.

1.20     It is our pleasurable duty to place on record our deep appreciation of the valuable services rendered by the staff of the Commission. Shri Mahesh Kumar, Director, shouldered the main responsibility for co-ordinating all the activities related to the preparation of this Report and the functioning of the Task Force on Social Security. Professor Jeemol Unni, Consultant, provided valuable professional support. Dr. G. Raveendran, Consultant, and Shri S.V. Ramana Murthy, Deputy Secretary, provided vital assistance on statistical issues. Smt. Manisha Shridhar, Director, besides providing overall administrative support, assisted the Commission in its visits to selected states as well as in discussions with various stakeholders. Shri J.D. Hajela, Director, Shri D.P. Singh, Under Secretary, Shri Suresh Kumar, Under Secretary, Ms Anna Mathew, Research Associate and Shri H.S. Chhabra, Section Officer, provided crucial services in the functioning of the Commission, in general, and the preparation of this Report, in particular. 



Informal Sector, Informal Workers and Social Security


2.0       According to the international definition accepted by the UN Economic and Social Council (ECOSOC), the term ‘informal sector’ denotes: (a) all private unincorporated enterprises (informal enterprises) or households engaged in the production and sale of goods or services, and (b) enterprises with employment size below a pre-determined threshold (SNA, 1993).  The term ‘informal workers’ (or employment) is defined to include persons whose employment relationship is, in law or practice, not subject to labour legislation, social protection and certain employment benefits. Combining the two, the International Labour Organisation has coined the term ‘informal economy’ (ILO, 2002).


2.1       The term generally used in India to denote the informal sector is ‘unorganised sector’ and informal workers are referred to as ‘unorganised workers’.  In this Report, we therefore use the terms ‘unorganised sector’ and ‘informal sector’ interchangeably. Similarly, informal employment is referred to as unorganised employment in the Indian context. Whenever reference is made to the informal/unorganised sector and informal/unorganised workers conjointly, the term ‘informal economy’ is used.


2.2       The harmonisation of the concepts of unorganised sector and unorganised employment with that of the internationally adopted concepts of informal sector and informal employment has been achieved by adopting a uniform definition for the unorganised sector and unorganised employment cutting across type of activity.   On the basis of these definitions, the Commission has arrived at estimates of the workers in the unorganised/informal sector as well as those in informal employment.


2.3       The term ‘unorganised sector’ is used to denote the aggregate of economic units engaged in the production of goods and services with the primary objective of generating employment and income for  the persons engaged in the activity.   These units are typically small in size and not distinguishable from the households managing the activity.  The units thus constitute part of the household sector as unincorporated enterprises.    Although the contribution of these units in the economy of India has been very significant (around 60 per cent), there has not been any uniform definition of the sector reflecting its specific characteristics.   For statistical purposes, however, different agencies have been using different definitions leading to varying estimates of its size.  For example, the definition of organised sector used to estimate national income differed from that adopted for estimating employment.  The definitions were primarily based on data availability rather than on the characteristics of the sector.   It has, therefore, become necessary to evolve and use a proper definition of the unorganised sector.  The Commission deliberated on the issue extensively and considered the available international definitions.  It also analysed the existing data sets available through enterprise surveys conducted by the NSSO. It is noted that the certain legislations, e.g. the Factories Act, 1948, and the Payment of Gratuity Act, 1972 are applicable to enterprises employing ten or more workers. The characteristics of these enterprises in terms of legal status, productivity and other economic parameters are also distinctly different from those units employing less than ten workers as revealed by different surveys. A size criterion in terms of the number of workers in addition to the ownership criteria is, therefore, found to be appropriate in defining the unorganised/informal sector. Therefore, the Commission has adopted the following definition:


“All unincorporated private enterprises owned by individuals or households engaged in the production and sale of goods and services and operated on a proprietary or a partnership basis and employing less than 10 persons”.


2.4       Although the above definition does not make any distinction between agricultural and non-agricultural enterprises, the concept of enterprise is generally being used in India only in the context of the non-agriculture sector. The use of such a restrictive meaning of enterprise would lead to the exclusion of a large number of workers in the agriculture sector, unless a corresponding unit of enterprise in agriculture is specified and used. The Commission, therefore, believes that in the case of agriculture, each operational holding in crop production, animal husbandry, fishing, etc. needs to be considered as an enterprise for the purpose of applying the definition.


2.5       In the rural areas, the unorganised/informal sector mostly comprises landless agricultural labourers, small and marginal farmers, sharecroppers, persons engaged in animal husbandry and fishing, forest workers, toddy tappers, workers in agro-processing and food processing, and artisans such as weavers, blacksmiths, carpenters and goldsmiths.  In the urban areas, it mainly consists of manual labourers in construction, carpentry, trade and transport and small and tiny manufacturing enterprises as well as persons who work as street vendors and hawkers, head-load workers, garment makers, and rag pickers, among others.


2.6       Table 2.1 contains the estimates of employment in the organised and unorganised sectors during 1999-00 (55th Round of the National Sample Survey) based on the above definition of the unorganised sector.









Table 2.1: Estimates of Workers in the Organised and Unorganised Sectors

(in million, 1999-00)


Sl. no.

















Organised Agriculture











 Unorganised Agriculture











Total Agriculture











Organised Non-agriculture











 Unorganised Non- agriculture











Total Non- agriculture











Organised Total











 Unorganised Total











Grand Total










Note: In the absence of data on employment size in operational holdings, all employment other than that  in plantations is  included in the  unorganised agricultural sector.

Source: Computed from unit level data of NSS 55th Round, 1999-2000, Employment-Unemployment Survey.


2.7       The unorganised sector is an enterprise-based concept and does not reflect the characteristics of the jobs or employment relationships.  It is possible that some workers in the organised sector do not enjoy any job security, work security or social security.  In order to identify such categories of workers, it is necessary to complement the definition of unorganised sector with a definition of unorganised/informal employment. All the casual workers and unpaid family workers in all enterprises, irrespective of the sector, are being considered as unorganised workers.  Similarly, self-employed persons in the unorganised sector, and private households and other employees not eligible for paid sick/annual leave or other social security benefits offered by the employer, are also being considered as unorganised workers.  Thus the Commission has adopted the following definition of unorganised employment for the purposes of this Report:


“Unorganised Workers are all those who are working in the Unorganised Sector defined earlier and the workers in the formal sector without any employment security and social security provided by the employer”.


2.8       Estimates of formal and informal employment as on 1.1. 2000 based on the above definition of informal employment are given in Table 2.2.


Table 2.2:  Estimates of Workers in Formal and Informal Employment

(in million)

Sl. no.

















Total Employment

































Organised Employment

































Unorganised Employment
































Source: Computed from unit level data of NSS 55th Round, 1999-2000, Employment-Unemployment Survey.


2.9       As per the definitions adopted by the Commission and the corresponding estimates of employment, the inter-relationship between the sector of employment and the type of employment can be depicted as shown in Table 2.3.  If seen in the context of the definition of the sector, 85.8 per cent of the total employment in the Indian economy during the period 1999-2000 was accounted for by the unorganised/informal sector. This was around 340 million including 4 million workers whose job status can be characterised as formal.   As regards the type of employment, 91.3 per cent of the total employment was in the category of informal employment of around 362 million workers of which nearly 26 million were accounted for by the organised/formal sector.


Table 2.3: Inter-relationships between Definitions,

 1999-2000 (in million)



Employment Category
















 Source: Computed from unit level data of NSS 55th Round,

1999-2000, Employment-Unemployment Survey.

2.10         In most States, the share of informal workers is approximately the same as the national average; however, many smaller States have a lower share than the national average.  Only five States show a share that is around 80 per cent or less.   These include Delhi (70 per cent), Goa (72 per cent), Nagaland (74 per cent), Sikkim (79 per cent) and Kerala (80 per cent).  The relatively more industrialised States do not show a significantly lower share of informal workers.  In fact, their share is closer to the national average with Tamil Nadu registering 90 per cent, Gujarat 92 per cent and Maharashtra 88 per cent. In Table 2.4, we present the estimates of informal workers in the States and Union Territories.


Table 2.4: Distribution of Informal and Total Workers by State, 1999-2000 (Figures are in million)


Informal  Workers

Total Employment

Percentage of  Informal  Employment











Andhra Pradesh










Arunachal Pradesh




























































Himachal Pradesh










Jammu & Kashmir






























Madhya Pradesh




































































































Tamil Nadu




















Uttar Pradesh










West Bengal








































Dadra & Nagar Haveli










Daman & Diu










A & N Islands






























Source: Computed from unit level data of NSS 55th Round, 1999-2000, Employment-Unemployment Survey.

2.11    Since the focus of this Report is on social security for informal workers, the Commission is of the view that ‘informal employment’ should be taken as the target group for provision of social security as recommended here.  However, the Commission is keen that all informal workers as well as all informal enterprises be registered in order to enable them to receive all forms of support and assistance from the government. 


2.12    The social security problems of workers in the unorganised/informal sector may be divided into two sets of problems.  The first category arises out of deficiency or capability deprivation in terms of inadequate employment, low earnings, low health and educational status, among other factors, that are related to the generalised deprivation of the poorer sections of the population.  The second category arises out of adversity in the sense of an absence of adequate fallback mechanisms (safety nets) to meet contingencies such as ill-health, accident, death, and old age.  The fact that a majority of workers from the socially backward communities find themselves in the unorganised/informal sector imparts a certain social dimension to the characteristics of these workers.  In this context, the social security offered to these workers should also be seen as a form of social upliftment.


2.13    The absence of a meaningful social security arrangement does not merely pose problems for individual workers and their families.  It also has wider ramifications for the economy and society.  From an economic point of view, it debilitates the worker’s efficiency and his/her ability to contribute meaningfully to increasing production and productivity. Low earning power coupled with vulnerabilities leads to poverty which reduces the aggregate demand in the economy.  Socially, it leads to dissatisfaction and disaffection, especially when a small segment of the society is well-endowed and seen to be prospering.  The indirect costs of the absence of social security may well be increasing social costs caused by policing and management of crimes and illegal activities, widespread ill-health and a variety of related social problems. The social costs of managing such problems are often not appreciated in discussions concerning the designing of social security arrangements.


2.14    The focus of this Report is on protective social security for workers in the informal economy but we do realise that the complementarity of promotional social security should form part of an overall and integrated social policy.   A number of promotional social security programmes can also be compared with protective social security schemes.  The promotional programmes include the Integrated Child Development Scheme (ICDS), the Public Distribution System (PDS) targeted at the households Below the Poverty Line (BPL), the Mid-Day Meal Scheme for children in primary schools, housing schemes such as the Indira Awas Yojana (IAY), and so on.  A qualitative shift in the provision of promotional social security that is historically significant is the recent enactment of legislation to guarantee employment (of up to 100 days) to all rural households, on demand.   Known as the National Rural Employment Guarantee (NREG), this programme is a right-based one in that the State is obliged to provide employment on demand or pay specified compensation to the prospective workers.  The proposed national minimum social security should be seen as a complementary, but protective one, to this promotional social security. 


Articulating a Social Security Policy Framework


2.15    India is yet to evolve a comprehensive national social security policy for its entire working population. Currently, social security entitlements such as provident fund, gratuity, health cover, etc., that are legally binding are available for a majority of formal workers in the organised sector.  Formal social security arrangements in the unorganised sector are confined to a small minority of workers and assume the form of Welfare Funds for selected categories of workers sponsored by the Central Government and a few State governments. As may be noted from the following chapters, these schemes as well as those initiated by a number of voluntary organisations do not cover more than 5 to 6 per cent of the workers in the informal economy.


2.16    The Commission believes that social security is an important component of any social development agenda and is as relevant as physical security in the evolving concept of human security. The objective conditions in India are considered favourable to a meaningful societal transition in terms of human security. This could begin with the extension of the concept and coverage of social security through an inclusive agenda that will ensure a modicum of social security for sections of the workforce that have hitherto been deprived of access to such security.   


2.17    Recent studies show increasing dynamism in the informal sector in terms of both output and earnings.  The discussion on informalisation of the economy has so far only emphasised the employment aspect.  However, a recent study examined whether the informalisation has been accompanied by an increase in real informal wage, capital investment and value added in manufacturing at the all-India level.  The study found that as compared to the pre-reform period (1984-85 to 1989-90), the post-reform period (1989-90 to 1999-2000) witnessed an increase in informal wage (in manufacturing) accompanied by a real increase in fixed assets (proxy for capital investment) and value added. These results hold good for most of the States and Union Territories. The main finding of the study is that in order to understand the impact of reform on labour markets, one has to assess the working of the capital market as well (Marjit and Kar, 2004-05).


2.18    How does this compare with the trend in wages for agricultural workers who constitute the single largest segment of informal workers?  Recent studies by many scholars (e.g. Srivastava and Singh, 2005; Himanshu, 2005 and Nadhanael, 2005) have reported that the real wages for agricultural labourers continued to increase during the post-reform period as compared to the pre-reform period but at a reduced rate.  This is perhaps explained by the decline in public investment in agriculture during the post-reform period.  However, the real wage rates for non-agricultural occupations in rural India witnessed a higher growth rate during the post-reform period (1993-94 to1999-2000) as compared to the pre-reform period (1983 to 1993-94) (Himanshu, 2005).


2.19    While scholars have identified a number of factors that determine the agricultural wage rate, it is pertinent to note that, in general, wage rates as well as their growth rates, are lower in those States that have a high incidence of poverty in different manifestations.   This is the case with the States of Assam, Bihar, Madhya Pradesh, Orissa, Uttar Pradesh and West Bengal during the post-reform period.  These are also the States which offer very little social security for informal workers.   There is, therefore, a critical need to improve the larger social and economic conditions governing work and workers in the informal sector and a strategy for “levelling up”.


2.20    The proposal for extending the social security cover to the informal sector should be seen in this background.  In any case, the fiscal burden of the proposed scheme is likely to be minimal since it is based on the principle of ‘collective care arrangement’ under which all the stakeholders – workers, employers (wherever identifiable or their proxies in the form of beneficiaries of services), and the State – contribute.  There will be a legitimate ground for internalising the cost of social security to the society as a whole in the case of certain segments of the working poor (including agricultural labourers, home-based workers and independent workers like street vendors and artisans).  In such cases, the government will have to contribute a part of the cost of social security. 


2.21    Social security to the hitherto excluded workers in the informal sector, as envisaged in this proposal, is not a stand-alone one.  Although the country does not have a formal social policy, it does have a long-standing and universal social development agenda arising out of the Directive Principles enshrined in the Constitution.  In addition, it also has several target-oriented and long-standing programmes with the explicit objective of eradication of poverty and deprivation. There is need to locate the evolving/proposed national social security system within the framework of the existing (and also evolving) national social/human development programmes for the poor and the larger framework of universal social/human development programmes.  This may be seen at three different levels, which are detailed below.


2.22    Universal Programmes:  At the first level are  the universal programmes and schemes for basic social/human development such as the mission for literacy, schooling, healthcare services, drinking water and sanitation, technical training, etc. that should be viewed as being foundational to any sound social and economic development policy.  These programmes address the issue of creation and enhancement of human capabilities by offering entitlements to all citizens funded by the public exchequer.  The effectiveness and advancement of these functions of the State often constitute a pre-requisite for the effectiveness of specific protective social security policies and schemes such as the one proposed here.


2.23    Targeted Programmes for the Poor and the Vulnerable:  At the second level are the social/human development schemes that are intended to provide a measure of socio-economic security to the poorer citizens, irrespective of their status as working or non-working poor.  The underlying idea here is to meet both the promotional and protective needs of some sections of the population by offering them basic social security.   Over time, a number of such programmes have come to stay in the country.  As mentioned earlier, a recent major initiative to address the deficiency in basic social security of the poor is the National Rural Employment Guarantee (NREG), which differs from all other schemes preceding it because it is founded on the notion of ‘right to work’ and hence guaranteed by the State.  As a complement to these programmes, the National Rural Employment Guarantee (NREG) will go a long way towards satisfying the largely unmet basic social security needs of the working poor in India.


2.24    Social Security for Workers in the Unorganised/Informal Sector:  At the third level is the social security system for workers in the unorganised/informal sector.  This can be used to address the dual issues of deficiency and adversity which characterise the current social security programmes for the poor.    The issue of adversity, which arises out of various contingencies, has not yet been systematically addressed. The most important issues to be considered here include social security cover for ill- health, accidents/death and old age. These fall under the category of protective social security. To this can be added the social security concerns arising out of deficiency such as lack of access for the poor to credit/finance (especially for the self-employed), loans for upgrading skills, loans for housing, children’s education, etc. The distinctive feature in this case is that these are tailored to meet the social security concerns of workers qua workers in the unorganised/informal sector.  This may be seen as complementary to the universal and targeted programmes, which are based on citizenship and not work status. 


2.25    However, in the context of a developing country such as India, social security arrangements for the working poor have wider ramifications for the economy and society.  From a macro-economic point of view, it helps to develop a healthy and contented workforce capable of enhancing its contribution to the national income, which would, in turn, enhance the capacity of the economy to grow.  When more than 90 per cent of the workforce is in the unorganised/informal sector, there is greater urgency for sustaining a higher rate of growth of the economy.  A workforce with higher capability and security could contribute to higher growth, which, in turn, would enhance the aggregate demand in the economy through higher purchasing power of this vast mass of the workforce. The mutually reinforcing nature of this relationship needs to recognised and exploited. .

2.26    Given this background, the Report makes out a case for national minimum social security for all workers in the informal economy to be covered in a phased manner over a period of five years.   State governments and trade-specific welfare boards may also further contribute resources to this universal scheme in order to provide additional benefits, over time and in different regions.  The Commission believes that the effective implementation of this scheme will go a long way towards correcting the imbalances, manifested in a situation whereby a high rate of economic growth and prosperity of a section of its population co-exists with poverty, deprivation and adversity among vast masses of workers in its informal economy.






Sources of Insecurity


Security Needs of Informal Workers


3.0       The International Labour Organisation’s notion of social security as expressed in the International Convention No. 102, includes nine core contingencies that lead to stoppage or substantial reduction of earnings.  These are sickness, maternity, employment injury, unemployment, invalidity, old age, death, the need for long-term medical care and for supporting families with children.


3.1       There are a few studies in the Indian context which have analysed the impact of various sources of social security and the need for social security for informal sector workers. A recent study in Karnataka used a participatory method to derive the perceived social security needs of unorganised sector workers. Among the workers surveyed, 92.3 per cent felt that benefits towards old age, unemployment, death, sickness and employment injury were relevant for them. Women in the reproductive age groups also felt that maternity benefits were important (Rajasekhar, et. al., 2005). Each respondent was shown various pictures of these six types of needs and asked to assign priority to these needs. Priorities were assigned more or less in the same order. Workers in the informal sector were not homogeneous and various segments among them had different priorities. Among the informal workers, agricultural labourers felt that old age was a major concern followed by unemployment. Among construction workers, unemployment followed by old age and employment injury were assigned priority. Among domestic workers too, old age security was the major concern followed by unemployment and sickness. Among the women who gave priority to maternity were newly married women, pregnant women and those who had only girl children and were planning to have a male child.


3.2       An interesting aspect of this study was that about 7.7 per cent of the sample workers were unwilling to rank their priorities for security. It was found that these included the highly vulnerable category of households for whom all these insecurities were obviously not important enough since their basic entitlements had not been satisfactorily met.


Health Security


3.3       Health security can be described as ensuring low exposure to risk and providing access to healthcare services along with the ability to pay for medical care and medicine when necessary. Such health security should be equally available and accessible to all citizens.

3.4       A number of studies show that risks and crisis situations occurring due to a low level of health security are endemic for informal sector workers. A field study in India (Noponen and Kantor, 1996) observed that among the stress events that households faced, which placed their income and resources under great strain, illness episodes were the most important. Stress events associated with health dominated the outflows, comprising 48 per cent of the annual household expenditure, while rituals and marriages accounted for 30 per cent.


3.5       In a compilation of studies conducted on the poor working women of SEWA, Chen (2005) noted that the most common risks include illness and loss of job. Members of SEWA, who are all poor self-employed women, emphasise that ‘health is their only wealth’. Poor health status affects their productivity forcing them to spend their hard-earned money on expensive healthcare (Sinha, 2003).


3.6       In a study of people’s security concerns at the household level (Unni and Rani, 2002), it was reported that nearly half the workers felt that the nature of their work had an adverse effect on their health. While this finding may be based on the perceptions of the individual workers, their poor working environment and low income status, along with a high proportion of chronic addiction and illness, lead to insecurity among the households working in the informal sector. The vulnerability of the poor informal workers increases when they have to pay fully for their medical care with no subsidy or support. The study found that about 79 per cent of the workers paid for the entire cost of medical care without any support. The precarious existence of these workers seemed quite evident.  The workers not only suffered a loss of income due to sickness or ill health but also had to bear the entire cost burden of healthcare. Further, less than 5 per cent of the workers had some form of medical insurance. Even this was mainly because the sample consisted of some SEWA members, a trade union providing some medical insurance cover to its members.


3.7       Minor and Major Incidence of Illness: The risk of health insecurity needs to be categorised on the basis of the kind of illness, i.e. minor illness which can be treated with medication at home, and major illness necessitating hospitalisation.  The latter can be termed as a ‘catastrophic’ risk.  Catastrophic risks have been further categorised as those wherein the household health expenditures exceed either a certain fraction of the total household expenditures or their ability to pay (Garg and Karan, 2006). Household expenditure incurred on healthcare amounting to more than 5 per cent of the total non-food expenditure of the household is taken to be catastrophic.


3.8       Two studies found that illnesses requiring hospitalisation were often ‘catastrophic’, costing more than 10 per cent of the annual incomes of the households studied (Chen and Snodgrass, 2001). It is thus obvious why the poor are among the most vulnerable sections in any society. A shock that has a relatively small impact on the non-poor can be a cause for great concern for the poor, since even marginal downward fluctuations in income can push them irreversibly below destitution levels (Noponen and Kantor, 1996).


3.9       It has been observed that in countries where a higher share of out-of-pocket expenditure is incurred on health, a greater proportion of the households are likely to face catastrophic risk. In India, a WHO (2005) study estimated that out-of-pocket expenditure was over three-quarters of the total health expenditure. A micro-study found this expenditure to vary from about 55 per cent in Punjab to 75 per cent in Karnataka (Garg and Karan, 2006).       


3.10    In 1999-2000 (NSSO data), about a quarter and 48 per cent of the total households in the country spent more than 5 per cent of their total and non-food consumption expenditure, respectively on out-of-pocket expenditure on health.  More than 3.4 per cent of households, i.e. approximately 6 million households faced the catastrophic risk of spending more than 40 per cent of their total non-food expenditure on out-of-pocket expenditure (Garg and Karan, 2006).      


3.11    Risk of Untreated Morbidity among the Poor: A number of studies have shown that if the poor lack the resources to pay for healthcare, they often forego it completely or end up becoming indebted or impoverished while trying to pay for it. On an average, the poorest quintile is 2.6 times more likely than the richest to forego medical treatment when ill (quoted in Devadasan, et. al., 2004). A study of slums in the two metropolitan cities of Chennai and Delhi found that 89 per cent of sick individuals residing in these slums did not obtain treatment when ill (Sunder, et. al., 2002). The relatively rich were more likely to obtain treatment.


3.12    According to the NSS data, the extent of untreated morbidity (which is always higher among the poor), showed a steep gradient between the lower and upper ends of the economic spectrum (Iyer and Sen, 2000). In 1995-96, the NSS reported 180 per 1000 cases of untreated illness episodes among men in the bottom decile group, which dropped to 38 in the top decile group in urban areas. Among women, the incidence of untreated morbidity was 193 per 1000 in the bottom decile and 67 in the top decile group. Women in the poorest households were the least likely to receive medical attention. Obviously, poverty was a major factor contributing to the failure of households in seeking treatment during illness.


3.13    Cost of Treatment: The cost of treatment includes medical fees, cost of medicines and diagnostic facilities, hospitalisation and the cost of travel, boarding and lodging. According to the NSS, the cost of treatment includes direct payment to the hospital, and the cost of medicines, investigations and tests.  The NSS data records a steep rise in the cost of healthcare during the period 1985-86 to 1995-96. The cost of out-patient treatment rose by 132 per cent in the rural and by 146 per cent in the urban areas during this period. The cost of in-patient care rose by 436 per cent in the rural (Rs.3202 per episode in 1995-96) and by 320 per cent in the urban (Rs. 3921 per episode) areas during the given period (Iyer and Sen, 2000).

3.14    The average expenditure for hospitalisation per hospitalised treatment, varied considerably across states and across rural and urban areas. In 1986-87, the lowest reported total expenditure for treatment in rural and urban sectors was in Kerala. The highest average total expenditure was Rs. 2053 and Rs. 1821 for rural and urban Delhi, respectively, as compared to a low of Rs. 464 and Rs.487 in rural and urban Kerala, respectively (Krishnan, 1999).


3.15    There can be various reasons for the low cost of treatment in Kerala. However, the most important cause is the high density of government health facilities in rural areas and a high degree of competition between the public and private sector in healthcare in the state. Thus, the availability of public health infrastructure is crucial for bringing down the cost of treatment.


3.16    Further, there is a large difference in the cost of treatment incurred at private and public hospitals.   Variation across states for such treatment has also been observed.  The lowest cost reported by the NSS was for rural patients in Kerala who were treated in government hospitals. A rural patient in Kerala would have had to pay three and a half times more for treatment in a private hospital, while in other states, he would have had to pay four to five times more for treatment in private hospitals. In general, urban patients paid more for treatment in both government and private hospitals. As compared to the base figure of hospital payment made by a rural patient in Kerala, the urban hospital payments were higher by 1.7 to 6 times (Krishnan, 1999).


3.17    Burden of Treatment: There is a difference between the ‘cost of treatment’ and ‘burden of treatment’ as pointed out by Krishnan (1999). The latter includes the cost of treatment (depending on the nature and duration of illness) plus ‘the loss of income of the patient and others during the period of illness’.  The burden of treatment for an individual or family is defined as the ratio of total cost of illness to the income of the individual or family. Using NSS 1986-87 data, Krishnan (1999) estimated the relative burden of treatment, including only direct costs, as the ratio of treatment cost to the annual per capita expenditure of each monthly per capita expenditure decile group, to assess the extent of the financial burden faced by different socio-economic groups.


3.18    The burden of treatment in government hospitals in the rural sector is below 30 per cent in Kerala, Tamil Nadu and West Bengal, while it varies from 100 to 230 per cent in Bihar, Assam, Punjab, Rajasthan, Haryana and Uttar Pradesh. The burden of treatment in private hospitals in the rural areas exceeds 100 per cent in all states except Assam, West Bengal, Kerala and Tamil Nadu.  This implies that many households in these states financed healthcare by incurring debt or foregoing their overall consumption.  Such a reduction in consumption, often of the food intake, could increase the risk of infection and morbidity in the society. Women and children are likely to face higher risks in this regard.


3.19    The burden of treatment appeared to be lower in the urban areas in spite of the higher cost reported earlier. This may be partly due to the somewhat higher levels of consumption expenditure incurred even for the urban poor.  In 1986-87, excluding Uttar Pradesh, the burden of treatment in government hospitals incurred in all other states was below 100 per cent. For treatment in the private hospitals in urban areas, however, the burden exceeded 100 per cent in all states except Assam, Haryana, Karnataka, Kerala, Gujarat and West Bengal.


3.20    The Commission is aware that none of the poverty alleviation programmes makes any allowance for the burden of treatment. Sickness is a random event and hence income transfer is not a solution. We are convinced that a comprehensive health policy for the future should be built on the foundation of a strong public healthcare infrastructure and a comprehensive insurance plan for hospitalisation.


Maternity Needs


3.21    India has a high maternal mortality rate, even judging by the standards of developing countries as a whole, not to speak of the Asian region.  The National Human Development Report prepared by the Planning Commission (GOI, 2002) states that, as of 1999, the maternal mortality rate (MMR) was 407 (indicating deaths per 100,000 deliveries  based on the Sample Registration System, SRS). The National Family Health Survey (NFHS), I and II, however, recorded a higher MMR and worse still, an increase in MMR from 424 in 1992-93 to 540 in 1998 (Priya, 2006).


3.22    The national average, however, conceals the considerable regional variation within India with Kerala registering a maternal mortality rate of 198 only and Uttar Pradesh a rate as high as 707. Even after half a century of independence, one of the most frequent causes of death among women in India is maternal mortality. Abortion, haemorrhage, toxaemia and anaemia account for the large majority of all maternal deaths. These causes of mortality suggest that a large number of maternal deaths are preventable. While nutrition and adequate spacing between births are important, the crucial factor that often comes into play is the lack of professional help during delivery.  If institutional delivery is taken as an indicator, then Kerala shows, as of 1999, almost complete coverage (with 94 per cent of the births in the State taking place in healthcare institutions) as against 42 per cent for the country as a whole, and less than 30 per cent for many States including the large ones such as Uttar Pradesh, Bihar and Madhya Pradesh. Thus the urgent need for adequate health infrastructure in the country cannot be over-emphasised.   However, a security cover such as an insurance scheme offering maternity benefits is also likely to increase the chances of institutional delivery, leading to a consequent decline in maternal deaths.


3.23    Among poor women facing the additional burden of economic activity in the informal sector where the conditions of work are strenuous, the chances of maternal mortality would be higher, particularly if these women have no access to proper health facilities.  Another concern expressed by the poor informal women workers is the loss of income during the advanced period of maternity and immediately after childbirth, when they are not able to work for some time. Maternity and childbirth also entail a lot of risks and expenses that could plunge a poor household into a financial crisis involving borrowing and high interest expenditure. This would inevitably result in reduction in incomes and savings for the poor households (Sinha, 2003).


Life and Accident Security


3.24    The death of a breadwinner is a tragic event, but in the case of informal workers, it also raises the question of survival for the family left behind due to the permanent loss of income. Further, death entails additional expenses for which the family has to borrow money, often on onerous terms, spend savings or sell assets.  


3.25    An accident, either during the course of work or otherwise, is a major crisis for informal workers since it leads to loss of income. It further implies additional expenditure of medicines, hospitalisation, etc. If the accident leads to partial and/or permanent disability, the financial loss is much greater. 


Old Age Security


3.26         The share of the aged (60+ years) in India is lower than the corresponding figure in its Asian neighbours in East and South-east Asia. However, as the demographic transition picks up in India, the share of the aged is likely to increase. Projections indicate that the current share of 7.47 per cent for the aged is likely to increase to 9.8 per cent by 2021. What is important from the social security point of view is the need for an institutional mechanism for taking care of the aged informal workers, in general, and the poor, in particular.


3.27    The study by Rajasekhar, et. al. (2005) mentioned earlier, revealed that old age was a major concern for the workers.  According to the study, agricultural labourers and construction workers reported the fear of not being able to work during old age. Insecurity with regard to old age was perhaps due to the breaking up of the joint family system and also because the poor were more likely to be living in nuclear families.


3.28    With the proportion of aged persons expected to increase significantly in the future, their work-related insecurities are also expected to increase due to various reasons. Firstly, adults in poor households themselves face insecurity of work and income in their quest to lead lives of security and some dignity. Successive Population Censuses have shown a declining work participation rate (WPR) among the elderly. This may be a positive feature, implying that they are able to retire early. For the informal workers, however, this could be a source of risk, since their earnings during their working lives are unlikely to support their needs in the old age. Secondly, in India, the aged are generally dependent on their children for support. The presence of the aged in poor families adds to the financial burden and further deprivation of the family as a whole. The insecurity of the household is further exacerbated by general poverty and greater morbidity among the aged. Thirdly, the absence of adequate public healthcare facilities, and the increasing cost of private healthcare facilities for the aged can throw the household into a major crisis (Alam, 2006).


3.29    In the Karnataka study cited earlier, most of the workers who reported old age as the most important source of insecurity, were those who were above the age of 41 years (Rajasekhar, et. al., 2005). The younger workers showed less concern for old age. About 35 per cent of the workers were in the age group of 31 to 40 years and less than 12 per cent were above the age of 50 years. The younger workers are preoccupied with the travails of their immediate day-to-day survival and think of longer term insecurity only after some of their needs have been met.


Unemployment Insecurity


3.30    The micro-studies quoted earlier indicated that another source of insecurity reported by the informal workers was unemployment. In India, poor workers were unlikely to remain unemployed for long and this was reflected in low rates of open unemployment. In 1999-2000, the unemployment rate by daily status was 7.3 per cent and there were 26.6 million unemployed workers in the country.  However, a greater proportion of these workers are likely to be urban educated youth. For the informal/unorganised workers, under-employment and low productivity employment with the consequent risk of low incomes and high levels of poverty constitutes   a greater source of insecurity.


3.31    In a People’s Security Survey conducted in Ahmedabad district, workers were directly asked whether they were able to obtain work on a regular basis on most days that they wished to work.  About 23 per cent of the respondents reported irregularity of employment. At 44 per cent, this figure was the largest for casual workers (Unni and Rani, 2002).  Under-employment in the form of irregularity of work is also a source of insecurity for the informal workers.


3.32    In India, the newly enacted National Rural Employment Guarantee (NREG) Act is an attempt to provide employment security by guaranteeing at least 100 days of work in the most backward districts of the country. The Employment Guarantee holds the promise of significantly alleviating the problem of under-employment for those sections of the labouring population who can undertake manual labour. However, informal workers who are varied in terms of both the nature and location of work, would continue to face the risk of loss of employment for a variety of reasons. Hence the provision of unemployment allowance to informal workers to help them face certain types of contingencies needs to be considered.



Central Government Initiatives

4.0       The Central Government has, over the years, taken a number of initiatives to extend social security cover to workers in the unorganised sector. However, the social security entitlements backed by legislation have been mainly for workers in the organised sector. The legislation-backed entitlements for the unorganised sector are limited for workers in certain occupations. Their coverage would roughly be around 15 million (around 5 million covered by Central Government schemes and the remaining by State government schemes).  To this, we may add the National Old Age Pension Scheme (NOAPS), which covers around six million people. This takes the total number of persons covered under various social security schemes to 21 million,  which is equivalent to a mere  6 per cent of the total number of unorganised/informal workers of around 362 million, as in the year 2000. 


4.1       The model for social security that has so far been adopted by the Central Government as also the State governments is that of Welfare Funds.  Typically, this model is a tripartite one, consisting of the representatives of workers, employers (wherever identifiable) and of the government.  A Welfare Fund is managed by a Board appointed by the government, with its chief executive being a government functionary.  Defined social security cover is given to the worker-members of the Funds for which contributions are collected from the workers, from the employers (usually through a cess) and, in most cases, from the government. Apart from the Welfare Fund Model,  a few  ‘schemes’  are implemented by the Central Government through public sector insurance companies while  a few others are directly implemented by various departments. Most of the social security benefits consist of life insurance (natural or accidental), compensation for disability and some assistance for health-related problems.


4.2       A detailed table highlighting the main features of the Central Government sponsored social security schemes is given in Appendix 4.


4.3       The various Central Government initiatives are delineated forthwith. While our focus is on social security for unorganised workers, the protective social security programme provided to the very poor citizens without any reference to their status as workers is mentioned to begin with.  This is the National Social Assistance Programme (NSAP).  However, most of the beneficiaries of this programme may have been workers in the unorganised sector.  After a brief review of the NSAP, we focus on the protective social security for workers in the unorganised sector provided by the Central Government for selected occupations.


National Social Assistance Programme (NSAP), (1995)

4.4       The NSAP is considered to be the first national programme of a cash-transfer nature in the country. Many, if not all, State governments had initiated such a programme much before the NSAP. The programme intends to protect poor and destitute persons in events of insecurities during old age, death of the breadwinner and maternity. The scheme is 100 per cent Centrally funded to ensure that a measure of social protection, albeit limited, is available to the poor and old persons throughout the country. The programme was launched to cover the following three benefits:


a)     National Old Age Pension Scheme (NOAPS): The applicant, who is more than 65 years of age, should be a destitute in the sense of having little or no regular means of subsistence from his/her own sources of income or through the support of family members or other sources. A financial assistance of Rs 75/- p.m. per beneficiary was given earlier, which has now been increased to Rs 200/- p.m. The coverage under this scheme is 72.8 lakh as in 2005-2006. The expenditure reported by various States upto February 2006 is Rs.195.66 crores.


b)     National Family Benefit Scheme (NFBS):   This scheme is targeted at households Below Poverty Line (BPL) after the death of the primary breadwinner in each of these families. The applicant should be in the age group of 18 to 65 years. A lump sum financial assistance of Rs. 10,000/- is given to the targeted family. The coverage under the scheme is 2.11 lakhs as in 2005-2006. The expenditure reported by various States upto February 2006 is Rs.80.62 crores.


c)      National Maternity Benefit Scheme (NMBS): This scheme is meant for pregnant women in  BPL households for up to their first two live births, provided these women are aged  19 years and above. It gave a lump sum assistance of Rs. 500/- per beneficiary and covered 11.52 lakh women beneficiaries as in 2000-01. The scheme has been transferred from the Ministry of Rural Development to the Department of Health and Family Welfare with effect from 2000-01 and has been redesigned as the Janani Suraksha Yojana in which the targeted women in BPL households are provided cash benefits of up to Rs.1300 in rural areas and up to Rs.800 in urban areas for ante-natal care and institutional deliveries.

4.5       The Gram Panchayats and Municipalities play an important role in the identification of beneficiaries, monitoring of the programmes and the disbursement of funds. The State government communicates the targets for NOAPS and other schemes to the Gram Panchayats/Municipalities so that identification of the targets can be undertaken by the Gram Panchayats in the gram sabhas and by the Municipalities in the neighbourhood/mohalla committees.

4.6       The NSAP has been transferred to the State Plan from the Year 2002-03.  The Ministry of Finance releases funds under the scheme to the States/UTs in the form of Additional Central Assistance (ACA). This ACA is over and above the normal allocation of the State for welfare schemes as reflected in the State’s budget so as to ensure a minimum level of expenditure on the welfare schemes. The States therefore have to provide for Mandatory Minimum Provision (MMP) for these schemes in their respective budgets. This consideration would be taken into account while determining the level of Central assistance.  The parameters for determining the Central assistance are the population of the State, poverty ratio in the total population, proportion of persons aged 65 years and above in the total population, proportion of persons aged 18-64 years in the total population, age- specific mortality in the age group of 18-64 years, the crude birth rate, and the proportion of first two live births per woman in the total number of births. The Audit report and the Utilisation Certificate by the State Government are used to monitor the progress of the scheme and the release of further funds. The total allocation of funds for NOAPS, NFBS and the Annapurna scheme by the Ministry of Rural Development for the year 2005-06 has been Rs.1190 crore of which Rs.880.39 crore has been released upto December 2005 and the total expenditure reported on the three schemes upto February 2006 is Rs.290.22 crore. As mentioned earlier, a cash-transfer based social assistance programme for the old aged poor, widows and the handicapped has been in existence in a number of States for quite some time.  The nature of the national scheme has made it possible to extend this scheme to various States, which hitherto did not have any such scheme.  Many State governments have contributed an additional sum to provide a pension exceeding the national minimum of Rs.75 per month.  For example, the States of Tamil Nadu, Punjab and Haryana provided a pension of Rs.200 per month per beneficiary including the contribution of the Central government.  States like Kerala and Orissa paid a sum ranging between Rs.140-150.  However, there are States which did not make any contribution of their own, which includes the relatively richer State of Maharashtra.

4.7       By launching this scheme, the government has recognised that a social security measure of this nature demands both national attention and initiative. In fact, the Central Government has enhanced the benefit under the NOAPS from Rs.75 to Rs.200 per month from 2006-07 onwards, thereby providing half the amount required for crossing the officially determined poverty line per person per month.

Central Welfare Funds


4.8       Separate legislations have been enacted by the Parliament to set up five Welfare Funds to be administered by the Ministry of Labour to provide housing, medical care, social security, education and recreational facilities to workers engaged in selected mining operations, beedi-making and the production of feature films (called cine workers). All these funds are financed out of the proceeds of cess levied under respective Cess/Fund Acts on manufactured beedi, feature films, export of mica, consumption of limestone and  dolomite, and the consumption and export of iron ore, manganese ore and chrome ore.  The Funds have been created by the following Acts:


a)     The Mica Mines Labour Welfare Fund Act (1946),

b)     The Limestone  and Dolomite Mines Labour Welfare Fund Act (1972),

c)      The Iron Ore, Manganese Ore and Chrome Ore Mines Labour Welfare Fund Act (1976),

d)     The Beedi Workers Welfare Fund Act (1976), and

e)     The Cine Workers Welfare Fund Act (1981).

4.9       These schemes provide for medical assistance of Rs.150/- for the purchase of spectacles, reservation of beds in tuberculosis (T.B.) hospitals, treatment and subsistence allowance not exceeding Rs.750/- p.m. in case of tuberculosis, and reimbursement of expenditure up to Rs.10 lakh for heart disease and kidney transplant. The annual expenditure under these funds is around Rs. 100 crore.   According to the Ministry of Labour and Employment, these schemes presently cover more than 40 lakh workers and their families.

4.10    The current rates of cess levied on the products are (i) 4.5 per cent ad valorem on the export of mica (with effect from November 1, 1990), (ii) One rupee per metric tonne of limestone and dolomite (with effect from December 27, 2000), and (iii) Re. one, four and six per tonne, respectively for iron ore, manganese ore and chrome ore. The relatively active Fund among all these is the one relating to beedi workers.

The Beedi Workers Welfare Fund Act (1976)


4.11    A premium of Rs.18/- per member per annum is shared equally by the Labour Welfare Organisation and the Social Security Fund. In addition to the benefits accorded to mine workers, beedi workers are insured under the General Insurance Scheme.  This scheme provides Rs.3000/- in case of natural death,  Rs.25,000/- in case of accidental deaths or total permanent disability and Rs.12,500/- in case of partial permanent disability. There is also an Integrated Housing Scheme for beedi workers, which has recently been liberalised, and the amount of housing subsidy has been increased from Rs.20,000/-   to Rs.40,000/- per tenement.

4.12    Apart from the provision of individual claim-based benefits, a new scheme was started during 2004-05 to improve the supply side of healthcare benefits for the beedi workers.  Under this scheme, all the State Governments/ESIC/beedi workers housing co-operative societies/reputed NGOs/Central or State Government-recognised private hospitals intending to construct or expand their  existing infrastructure exclusively for providing both indoor and outdoor medical facilities to beedi workers and their dependents shall be eligible for a one-time grant-in-aid of up to Rs.200 lakh (2 crores) or 75 per cent of the actual cost of construction of hospital building or including the cost of medical equipments, whichever is less.  A one-time grant-in-aid would also be available for the purchase of ambulance/mobile van equipped with medical/laparoscopic equipments and accessories up to a limit of Rs.4 lakh or 75 per cent of the total cost, whichever is less. They will also be eligible for an amount equivalent to the medicines supplied to beedi workers and their dependents upto an amount not exceeding Rs.10 lakh per annum or 75 per cent of the actual cost, whichever is less. The current rate of cess levied is Rs.4/- per thousand beedies with effect from April 1, 2005.

The Cine Workers Welfare Fund Act (1981)

4.13    Cine workers, whose income ceiling is Rs.1600/- p.m., are included in the scheme. The premium of Rs.30/- annually per member is fully paid by the Welfare Fund. Benefits include Rs.5000/- in the case of natural death and Rs.10,000/- in the case of accidental death under the Group Insurance Scheme.

4.14    The current rate of cess is Rs.20,000/- per feature film in Hindi and English, and Rs.10,000/- per feature film in regional languages with effect from  April 20, 2001.


4.15    As per the Annual Report 2005-06 of the Ministry of Labour and Employment, the achievements of the Welfare Funds are reflected in Table 4.1.


Table 4.1: Achievements of Welfare Funds (Rs. in Crore)




2005-06 *

Utilisation of Welfare Funds



Cess collection



Expenditure on  healthcare  facilities



Assistance sanctioned for housing



Expenditure on educational assistance



Expenditure on recreational facilities



Note:*2005-06 figures are up to September 2005.


 4.16   As regards the extent of coverage of the various Welfare Funds administered by the Ministry of Labour and Employment, the Ministry vide letter No. Z-2005/17/05-W.11 dated August 10, 2005 has, inter alia, informed the Commission that “So far as number of workers actually receiving the benefits (along with amounts) is concerned, it is intimated that the actual number of workers receiving the benefits under different schemes are not maintained”.


Varishta Pension Bima (2003)


4.17    This scheme is exclusively meant for unorganised sector workers aged 55 years and above. The scheme is fully financed by the investment of the beneficiary with an annual return of 9 per cent in the form of monthly pension. The amount of pension benefit varies according to the amount invested from a minimum of Rs.33,335/- to a maximum of Rs.2,66,665/-. The minimum and maximum monthly pension per month would be Rs.250/- and Rs.2000/-, respectively. The scheme is implemented by the Life Insurance Corporation of India (LIC). The Government provides subsidy to the LIC to the tune of the difference of actual pension payout @ 9 per cent and the amount actually earned by the LIC on the corpus. The amount of subsidy received by LIC from the Government for this scheme, which guarantees a pension of 9 per cent payable monthly, was about Rs.250 crores during 2005-06.


Janshree Bima Yojana (2000)

4.18 The Janshree Bima Yojana is targeted at the urban and rural poor who live below the poverty line or on the margin. The premium for the insurance cover would be Rs.200/- per annum of which 50 per cent would be borne by the Central Government through the newly set up Social Security Fund. The balance premium would have to be paid by the individual or some nodal agency or the State Government.

4.19 The scheme provides for payment of Rs.20,000/- to the nominee in the event of death of the policy-holder due to natural causes. In the case of accidental death or permanent disability, the benefit will be enhanced to Rs.50,000/-  while in the case of partial disability, the policy-holder would get Rs.25,000/-. The scheme will be administered by the LIC and will be applicable to groups of at least 25 members. The groups will be identified and notified by the LIC in consultation with the designated nodal agency in specific areas. The nodal agencies could be the panchayats, non-governmental organisations, self-help groups (SHGs) or any other institutionalised arrangement.

Unorganised Sector Workers Social Security Scheme (2004)

4.20    As an outcome of the recommendations of the Second National Labour Commission, the Central Government launched the Unorganised Sector Workers Social Security Scheme (2002) on a pilot basis in 50 districts. It is available for unorganised and self-employed workers drawing salary/wage/income of not more than Rs.6500/- per month. The scheme is financed by contribution at Rs.50/- per month from workers in the age group of 18-35 years and Rs.100/- per month for workers in the age group of 36-50 years. The contribution of the employers is Rs.100/- per month while that of the government is 1.16 per cent of the monthly wages of the workers. The scheme includes the following three benefits:


a)                 Old-Age Pension Scheme:  This includes a minimum pension of Rs.500/- per month at the age of 60 years or permanent/total disability and family pension in case of the death of the worker.


b)                 Personal Accidental Insurance: This provision includes accidental insurance of Rs.1 lakh.


c)                  Medical Insurance: This includes a medical reimbursement of hospitalisation expenses up to Rs.30,000/- in a year and Rs.25,000/- for accidental death.


4.21    So far only 3,500 workers have been enrolled under the scheme. This scheme is virtually closed as it has no statutory backing, is voluntary in nature and has had no contribution from the employers.     

Universal Health Insurance Scheme (UHIS), 2004

4.22    The community-based Universal Health Insurance Scheme was launched by the four public sector general insurance companies in July 2003. The UHIS was redesigned in 2004-05 exclusively for persons and families below the poverty line with a premium of Rs.165/- for individuals, Rs.248/- for families of five persons and Rs.330/- for a family of seven. The benefits under the scheme were reimbursement of medical expenses up to Rs.30,000/- towards hospitalisation,  an insurance cover for death due to accident of Rs.25000/- and compensation due to loss of earning at the rate of Rs.50/- per day up to a maximum of 15 days. However UHIS excludes maternity benefits and outpatients care. The coverage is around one crore persons during the current year.


Scheme for Handloom Weavers and Artisans


4.23    This programme offers the following benefits:

a)     Thrift Fund Scheme: Under this scheme, every member contributes 8 paise per rupee of wage earned while the Central and State governments contribute 4 paise each to the fund. The scheme is implemented by the Weavers Co-operative Societies/Corporations. It provides for temporary advance, and both partial and final withdrawal.


b)     New Insurance Scheme: This scheme is implemented by the United India Insurance Company and financed by the Central Government (Rs.60/-), State government (Rs. 40/-) and handloom weavers (Rs. 20/-) to share an annual premium of Rs. 120/-. The benefits include Rs.1000/- in the case of loss of dwelling due to natural calamities or fire, Rs.1 lakh   in case of accidental death, reimbursement of hospitalisation  charges up to Rs.2000/- and maternity benefits.


c)     Group Insurance Scheme: Under this scheme an assured sum of Rs.10,000/- will be given.


d)     Pension Plan Scheme: A sum of Rs.1000/- per month is given to a master craftsperson who is unable to work due to old age.


e)     Insurance for Powerloom Weavers:  This scheme insures workers in the age group of 18-60 years with an income of Rs.700 p.m.  The Central and the State governments equally share the annual premium of Rs. 120/-. Benefits are given in the case of natural death (Rs.10,000/-) and accidental death (Rs.20,000/-). In addition, the accumulated amount in the beneficiary’s running account earns an interest at 11 per cent per annum.


Krishi Samajik Suraksha Yojana (started on July 1, 2001 and closed on February 24, 2004). 


4.24    This scheme was carried out in 50 identified districts to cover about 10 lakh agricultural workers.  The Life Insurance Corporation of India (LIC) implemented the scheme, which covered agricultural workers in the age group of 18-50 years. The worker was required to pay Re.1/- per day while the contribution of the government was Rs.2/- per day. Benefits included life-cum-accident insurance,  a lump sum  of Rs.4,000/- as money back after the tenth  year and to be doubled after every next ten  years till the age of 60; and pension ranging from Rs.100/- to Rs.1,900/- per month depending upon the age of entry. However, due to paucity of funds, the Ministry of Finance decided to close this scheme while retaining the scheme for the workers registered till February 24, 2004.


4.25    More than 2.53 lakh agricultural workers were covered under this scheme in 50 select districts in 28 States. There was also a demand from other districts for extension of the scheme to the agricultural workers in their areas, which was not agreed upon. The scheme was implemented either through the Gram Panchayats or through the nodal agencies.  The demand of the nodal agencies for some amount of reimbursement of administrative expenses was rejected by the Ministry.

Umbrella Legislation for the Welfare of Construction Workers (1996)

4.26    One of the notable initiatives in regulating the conditions of work and provision of a measure of social security relates to the group of construction workers who form one of the largest segments of workers in the unorganised sector.  Two umbrella legislations have been passed by the Parliament on the basis of which the States are expected to enact State-level legislations. These two Central Acts are:


a)     The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996; and

b)     The Building and Other Construction Workers Welfare Cess Act (1996).


4.27    Following these Acts, the Building and Other Construction Workers (ECS) Central Rules, 1998 have been notified on November 19, 1998.  The Act is applicable to every establishment that employs ten or more workers in any building or construction work, wherein the project is worth more than Rs.10 lakh. The Welfare Funds proposed in the Act are to be financed by contributions from beneficiaries, levy of a cess on construction works at a rate ranging between 1 and 2 per cent of the construction cost incurred by an employer and non-mandatory grants by the State/Central governments. The benefits include support in the event of accident, old age pension, housing loans, payment of insurance premium, children’s education, medical and maternity benefits.


4.28    Under these umbrella legislations, all State governments are expected to enact their own legislations.  So far only six States have enacted such legislations.  Most of the other States are still in the process of adoption and implementation of these Acts.  The State of Kerala was the first to bring about legislation on social security and welfare for construction workers, even before the Central legislation, which perhaps acted as a precursor to such a national level legislation.  The State of Tamil Nadu also brought about legislation in 1997 under which one of the categories of employment included ‘Employment in Construction Work’. The Boards and Funds set up for providing a measure of social security for construction workers were set up in Kerala in 1990 and 1997 in Tamil Nadu.  






State Level Initiatives

5.0             Apart from the Central government’s initiatives on social security described in the previous chapter, a number of social security initiatives have also been taken at the state level. These initiatives, however, have been found to be uneven in terms of the coverage of both states as well as workers.


5.1             As regards statutory provisions, Kerala leads all other states with the available figures indicating that the large number of Welfare Funds currently being implemented have covered 54 per cent of the informal workers in the State.  Tamil Nadu also has a system of Welfare Funds aimed at providing some social security to the workers in the unorganised sector. A relatively well functioning Welfare Board/Fund for head-load workers (Mathadi workers) exists in Maharashtra but it is yet to be extended to other workers in the unorganised sector.  A few other states such as Gujarat, Karnataka, Andhra Pradesh and Madhya Pradesh have also established Welfare Boards/Funds for selected categories of workers. West Bengal has recently introduced a statutory provision of social security for the unorganised workers in the form of a Provident Fund.  This model has now also been followed by the State of Tripura. Apart from these statutory provisions, a number of other schemes also operate in many, if not all, states. 


5.2       With the exception of a few, most initiatives do not cover sickness.  They mostly cover requirements such as accidental death and injury, maternity and some financial assistance for the education of children. As we have noted earlier, one of the major insecurities of workers stems from the frequent incidences of illness and need for medical care and hospitalisation of the workers and other family members.


5.3       Even in states with statutorily backed Welfare Boards and Funds, there is considerable scope for rationalisation of contributions and benefits.  There is also a need for bringing down the costs of administration.  Professional management systems are also required for the management of funds and for strengthening the delivery mechanisms. A table highlighting the main features of the social security schemes at the State level is given in Appendix 5.


5.4       Given the number of provisions (both in terms of Welfare Funds and schemes) addressed to specific categories of workers, there is a case for establishing a state-level board that will, inter alia, extend social security coverage to all the workers.  At the same time, such a state-level body can also take care of the implementation of national level schemes.  It is with this in mind that the Commission has proposed the setting up of an authority each at the national level as well as at the state level.  They would be designed in such a way as to include the existing arrangements while ensuring a minimum level of security at the national level for all unorganised workers in the country, the details of which are discussed later in the report.


5.5       Brief reviews of the existing schemes currently under implementation in selected states are given in the following part of the chapter.  While assessing the social security schemes for workers in the unorganised sector, our focus is mainly on the protective forms of social security.  Two kinds of social security measures that have a wide coverage are described here. The first covers social security for the citizens as a group while the other covers workers in the unorganised sector.



5.6       As the recent Human Development Report for Kerala indicates,  unlike most other States in India, the State shows very little disparity in several social development indicators such as between rural and urban areas as well as between the male and female population (Centre for Development Studies, 2006). This is because the Kerala government, in response to sustained public action, has been providing a range of promotional and protective forms of social security, albeit in a limited measure, which cover an overwhelming majority of the population, especially those in the poorer households.  This has helped Kerala to raise its level of human development for the population, in general, and the poorer sections, in particular (Kannan and Francis 2001). It has been argued that the earlier investments in human development, including protective social security measures, have now started paying off in terms of economic growth (Kannan, 2005).

Old Age Pensions for Destitutes and Rural Labourers


5.7       Pension schemes for the poor old aged persons cover all those above 60 years of age and those who are destitutes, widows, people with disabilities, and leprosy and cancer patients. A special pension is given to unmarried women above 50 years of age.  In addition, the State government disburses pension as per the norms of the National Social Assistance Programme of the Government of India to destitutes above 65 years of age. During 2003-04, the Kerala government spent around Rs.150 crores on disbursement of old age pensions to the above-mentioned categories of poor.   This included budgetary support of an amount of Rs.4.5 crores for payment of pension to old aged agricultural labourers (about 3.7 lakh persons) since the Welfare Fund of the agricultural labourers did not have the capacity to pay.  Such budgetary support is also extended to a few other categories of workers such as coir workers and fishermen whenever their Welfare Funds fall short of the required financial resources.


5.8       A number of Welfare Funds in Kerala have instituted old age pension for their members.  They include toddy tappers, head-load workers, cashew workers, khadi workers, coir workers, fish workers, handloom workers, liquor shop assistants, beedi workers, tailors and construction workers.  In most cases, the monthly pension varies from Rs.100 to Rs.200.  The details of these pension schemes are given in Appendix 6.

Welfare Funds for Unorganised Sector Workers

5.9       The successive Governments in Kerala found that the problems facing workers in the informal sector were due to lack of definite employee-employer relationships and insecurities arising out of the fluctuations in their income. The Welfare Funds thus signified an attempt to resolve these issues through institutional innovations.


5.10         At present, there are 23 Welfare Boards for the unorganised/informal workers functioning in Kerala (in addition to the Centrally administered fund for beedi and cigar workers). They cover a wide range of occupations and have come to be seen as an important institutional arrangement for providing a measure of social security to the informal workers.  Details of these arrangements are given in Appendix 7.


5.11    Some of these Welfare Funds are statutory while the others are non-statutory. The contributions to these Funds are made by the workers, employers and the government. The current organisational model of these Funds is one in which a government officer is deputed to function as the Chief Executive while the other  staff members are also deputed from various government departments.  A Board, consisting of representatives from government, employers and employees, acts as a catalysing force to ensure the dynamic functioning of the Fund. However, the state continues to wield enormous power on crucial policy decisions.


5.12    The individual contributions of employers and employees is determined after taking into account a number of  both specific and common factors. Therefore, the contributions of employers, employees and government vary across Funds, as no uniform or fixed pattern is commonly applicable for all the Funds. The diverse nature of occupations and differential earning opportunities and risks associated with each of them may be leading to such differences in contribution. It seems that the State’s contribution to the Funds is relatively higher than that of the workers because of the latter’s lower ability to pay. As we can see from Table 5.1, in some cases, a cess is levied on the product while in other cases, employers directly make contributions to the Funds. Thus, the rates of contribution vary in keeping with the nature of occupations.


Table 5.1: Details of Contributions under Different Welfare Funds in Kerala






13% of workers’ wages

8% of the wages


Varies from year to year, till now Rs. 40 lakh in total

Rs. 8 per half year per worker

Rs. 4 per half year per worker


25% of workers wages (including gratuity of 5%)

10% of wage


13% of workers’ wages

8% of workers wages

Advocate Clerk

Rs. 90 per year per member

Rs. 60 per annum per member


Rs. 2 per every Rs. 10 contributed by the worker

Rs. 10 per month per worker


Twice the amount contributed by the employer

Re. 1 per worker per working day

50 paise per worker per working day


10% of workers’ wages

10% of workers’ wages

10% of workers’ wages


Grant which is twice the amount contributed by workers

1% of the turnover

Re. 1 per month per worker


Government  contribution for pension and group insurance

Dealer - 1% of turnover, vessel owner – Re. 1 to Rs. 7 per month for 9 months. Net owner – Re.  1 per month

3% of value of fish caught or 3% of wage and Rs. 30 per worker per year


Twice the workers’ and self-employers’ contribution

1% of annual turnover  and an amount equal to workers’ contribution

Re. 1 per month, Rs. 2 per month by self- employed


Rs.  1 lakh for pension purpose

15% of workers’ wages

10% of workers’ wages




10% of initial members’ contribution per annum

1% of construction cost yearly contribution also made  by contractors (Rs. 100 to Rs. 1000)

Monthly contribution per member in slabs of Rs. 10, Rs. 15 and Rs. 25


Landowner’s contribution 0-1 ha. Rs. 10 per year and above 1 ha. Rs. 15

Rs. 2 per month per worker


20% of members’ contribution

Category A/B Rs. 15/10 per month


10% of members’ contribution

Category A/B Rs. 15/10 per month


10% of members’ contribution

Rs. 10 per month per worker

Rs. 20 per month per worker


10% of members’ contribution

Rs. 20 per month Rs. 10 per helper per month


10% of the workers’ contribution

Rs. 5 per month per worker

Rs 10/worker and Rs 15/ self-employee per month

Source: Government of Kerala, Economic Review 2004.


5.13    The coverage of workers across the Welfare Funds varies. Female workers outnumber males in the cashew, tailoring, coir and beedi industries.  In the Cashew Workers’ Welfare Board, 96 per cent of the enrolled workers are female, while the corresponding figure in the Coir Workers’ Welfare Board is 81.6 per cent. In contrast, in other Boards like those of Toddy Workers, Head-load Workers and Abkari Workers, above 90 per cent of the workers are male.  The details are given in Table 5.2. The total coverage comes to 54 per cent of all informal workers in Kerala as in 2000.


5.14    The benefits accruing to workers vary across Funds. However, they seem to cover a number of aspects. Some of the major benefits are:  Provident Fund, gratuity, monthly pension (old age), disability and accident cover, health cover, unemployment relief, educational allowance, housing assistance, marriage assistance and funeral expenses.


5.15         As we can see from Table 5.2, the average size of the Welfare Funds varies enormously in terms of the number of workers and financial capacity. The latter is influenced by variations in the workers’ capacity to pay.  Among the financially large Welfare Funds are those of construction workers, head-load workers and toddy tappers.  The weaker Funds include those of agricultural labourers, khadi workers and handloom workers.  During 2003-04, the total expenditure of 22 Welfare Boards was reported to be Rs. 175.13 crore  which included expenditures worth Rs. 68 crore incurred by  the  Toddy  Tappers’  Welfare  Board, Rs. 33.4 crore by  the  Head-load  Workers’  Welfare  Board and Rs. 24 crore  by the  Construction  Workers’  Welfare  Board.  The administrative expense was around Rs. 23 crore or 13 per cent of the total expenditure.

Table 5.2: Coverage of Workers under Different Welfare Funds in Kerala (2003)


 Category of Workers

No. of Workers (in 000’)  Covered under the  Scheme

1. Anganwadi workers


2. Toddy tappers


3. Cashew workers


4. Abkari workers


5. Fish workers


6. Labourers*


7.Construction workers


8. Khadi workers


9. Lottery workers


10. Motor transport workers


11. Coir workers


12. Handloom workers


13. Beedi and   cigar  workers WF


14. Auto-rickshaw workers


15. Head-load workers


16. Tailoring workers


17. Bamboo workers


18. Artisans


19. Traders


20. Ration dealers


21. Co-operative employees


22. Agriculture  workers


Total Informal workers covered


Total Informal workers estimated by the Commission


Percentage Covered


            Source: Government of Kerala, Economic Review 2004.





Old Age Pensions


5.16    In Tamil Nadu, old age pension is available to (a) aged poor who are 65 years and above; (b) destitute and physically handicapped; (c) destitute widows; (d) destitute agricultural labourers; and (e) destitute/deserted wives. Presently, the total number of beneficiaries under the various pension schemes is estimated to be 11.8 lakhs. Besides pensions, the beneficiaries are also entitled to clothing and foodgrains.


Annapurna Scheme


5.17    Under the Annapurna Scheme, foodgrains are distributed to the destitutes/senior citizens covered under the National Old Age Pension Scheme. The beneficiaries are given 10 kgs of rice per month free of cost. The Government of India has fixed a target of 71,974 beneficiaries for Tamil Nadu under the scheme.

Welfare Funds/Boards for Workers in the Unorganised Sector

5.18    Apart from the various social assistance schemes mentioned above, the State of Tamil Nadu has also set up Welfare Boards for providing social security to selected categories of workers in the unorganised sector.  These are detailed below.


The Tamil Nadu Construction Workers’ Welfare Board


5.19    The number of construction workers who have registered with this Board is 6.31 lakhs as on December 31, 2004.  During the period from January 1, 2004 to December 31, 2004, a sum of Rs. 26.31 crores was received as contribution to this Board. A sum of Rs. 27.76 lakhs was collected as Registration Fee at the rate of Rs.25/- per worker. Identity cards have been issued to all registered construction workers free of cost. A number of schemes are being implemented under the Board which inter alia cover:


(a)   Group Personal Accident Insurance Scheme:  All registered construction workers have been insured under Group Personal Accident Insurance Scheme. Every year, the Board pays the renewal amount of the premium to the insurance company. In the event of the death of a registered construction worker in an accident, a sum of Rs.1 lakh is paid to the nominee of the deceased. For the loss of limbs, eyes, etc., compensation up to Rs.1 lakh is paid depending upon the percentage of loss.


(b)   Assistance for Education:  Financial  assistance ranging from Rs. 1,000/- to Rs. 10,000/- per annum is provided for the education of the son/daughter of a registered construction worker, depending on the course of study and whether the student was a day scholar or lived in a hostel.


(c)    Assistance for Marriage:  Assistance worth  Rs.2,000/- is paid to a registered construction worker to help him/her meet his/her  own marriage expenses as well as those of a son or daughter.


(d)   Assistance for Maternity/Abortion/Miscarriage:  Assistance of a sum of Rs. 2000/- is paid to a registered woman construction worker to meet expenses incurred on the delivery of a child or on a miscarriage or termination of pregnancy.


(e)   Assistance to Family in Case of Natural Death:   In the event of the death of a registered construction worker, a sum of Rs.10,000/- is paid as assistance to his/her nominee.


(f)     Assistance for Funeral Expenses:  In the event of death (either natural or accidental) of a registered construction worker, the nominee is paid a sum of Rs. 2,000/- as assistance to meet the funeral expenses.


(g)   Assistance for Reimbursement of Cost of Spectacles:  A sum of Rs.250/- is paid to 1000 workers every year towards reimbursement of expense incurred on the purchase of spectacles.


(h)   Old Age Pension:  A pension of Rs.200/- per month is paid to workers who have been members of the Board continuously for five years and have attained the age of 60 years.


Tamil Nadu Manual Workers’ Social Security and Welfare Board


5.20    A number of Welfare Boards for various categories of unorganised sector workers have been constituted in Tamil Nadu over the years. In order to ensure the proper management of these Boards, the Government amalgamated nine Boards with the Tamil Nadu Manual Workers’ Social Security and Welfare Board with effect from July 21, 2004. These Boards were specifically meant to oversee the welfare of auto-rickshaws and taxi drivers, washermen, hairdressers, tailors, palm tree workers, handicraft workers, footwear and leather goods manufacturers and tannery workers, artists, and handloom and handloom silk weaving workers.


5.21    The manual workers who were already registered with the amalgamated Boards would continue to get the benefits under the Tamil Nadu Manual Workers’ Social Security and Welfare Board. The Tamil Nadu Manual Workers’ Social Security and Welfare Scheme, 2001, is applicable to 60 categories of employments out of 67 categories included in the Schedule to the Tamil Nadu Manual Workers’ (Regulation of Employment and Conditions of Work) Act, 1982.


5.22    Benefits similar to those offered by the Construction Workers’ Board are also available for Group Personal Accident Insurance. In the event of the death of a registered construction worker in an accident, a sum of Rs.1 lakh is paid to the nominee of the deceased. For the loss of limbs, eyes, etc., compensation of up to Rs.1 lakh is paid depending upon the percentage of loss.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     5.23    Assistance ranging from Rs.1000/- to Rs.10,000/- per annum is paid for the education of a son/daughter depending on the course of study and on whether the student was a day scholar or lived in a hostel.  Assistance worth Rs.2000/- each is offered for marriage and for maternity.


5.24    A manual worker has to pay a one-time contribution of Rs.100/- at the time of registration and has to pay Rs. 10/- once in two years for the renewal of registration. The number of workers registered from January 1, 2004 to December 31, 2004 is 58,959. The total number of workers registered so far is 7.02 lakhs.


Integrated Beedi Workers’ Housing Scheme in Tamil Nadu


5.25 The State government is offering Rs. 5,000/- per house as State Government's subsidy for the "Integrated Housing Scheme for Beedi Workers" of the Government of India. As per this Scheme, the Government of India is providing a subsidy up to a maximum of Rs. 20,000/- or 50 per cent of the cost of construction of a house, whichever is less.


The Mathadi Workers’ Welfare Board

5.26    The Maharashtra Government brought out a legislation in 1969 called “The Maharashtra Mathadi, Hamal and other Manual Workers’ (Regulation of Employment and Welfare) Act, 1969”, to provide a range of social security measures to the manual workers engaged in the loading and unloading of goods. This legislation was a culmination of a series of demands and representations made by the trade unions for a number of years.

5.27    Since 1969, the Mathadi labour market has been regulated by the Mathadi Tripartite Boards.  Today there are around 50,000 registered employers with almost 150,000 workers registered under 39 different Mathadi Boards in the State of Maharashtra.  Each of these Boards (sometimes even a group of smaller boards) is headed by a Chairman appointed by the Government of Maharashtra and in addition, there is an equal number of representatives from the workers’ unions and employers’ associations.  Each Board has its own staff members including the secretary, personnel officer, chief accountant, inspectors and clerks.  All the staff members get paid out of the levy, which is negotiated every 3-4 years, charged on the employers.

5.28    Some of the main features of two of the Mathadi Workers’ Boards are presented in Table 5.3.

Table 5.3:  Main Features of Two Mathadi Boards


The Goods Transport Unprotected Workers (1971)

The Cloth Market and Shops, Mumbai


As on

May  2005

March  2005

No. of Registered Employers



No. of Actual Workers



No.  of Tollies


(Size 2 to 200)

Variable but very small

Average Monthly Wages for  All  Workers (Rs. in lakh)





Wages + Levy (Rs. in lakh)



Average  Monthly  Wages of  Workers (Rs.)

(Inclusive of  Benefits)

6,516 (including levy)


Total  Annual Turnover (Rs. crores)


22 .00

LIC Policy  Holders



Income Tax-payers



(Prof. Tax paid in Rs. 1,98,490)

Administrative  Staff



Administrative  Expenses (Rs. lakh)




10 +


Membership  Fees (Rupees per annum)





Dearness Allowance

CPI linked

CPI linked

P.F.  Contribution by  Workers


8.33 %

Hospital Contribution by Workers (Rs.  per month)




Profession Tax (Rs.  per month)




Source: Ramesh C. Datta, 2005.


Benefits Provided by the Boards


5.29    The various benefits provided by the Boards are discussed below.


(a)   Regulation of Conditions of Work: The main functions of a Board are to settle disputes between the Union(s) and the Employers, arrange meetings for negotiations, get new employers and workers registered, and distribute wages and social security benefits.  At the workplace site, Mukadam’s direct tolli workers  distribute work and allocate workplaces, co-ordinate between the employers and the board, tally and give  the `daily work sheets' to the board, etc.  They also have to handle disputes among the workers. The Board also undertakes long- term `wage and work description' agreements between some major large companies including some MNCs and specific `tollies of workers', under the Maharashtra Mathadi, Hamal and other Manual Workers (Regulation of Employment and Welfare) Act, 1969.


(b)   Health: One of the major achievements of the Mathadi Workers’ Boards has been their effort in starting hospitals and healthcare facilities for most of its workers including their families.  In 1976, Anna Patil started a dispensary under a trust on a part-time basis.  By 1978, it started working full-time.  Today, two hospitals, with an annual budget of Rs. 4-5 crores, are run by six Mathadi Boards.  In addition to this, there are 12 dispensaries.  The hospitals have facilities for 75 beds.   Each of the six boards contributes 2 per cent of its levy while each worker contributes Rs. 50/- per month.  These hospitals provide a range of diagnostic services like radiology, pathology and sonography to around 1.1 lakh workers and their families.  Besides, 5,907 workers also availed of the indoor medical facilities in the two hospitals during the year 2003-04.


During the last few years some of the Mathadi Boards have been able to get the workers insured against accident, injuries and death.  For example, Mathadi Boards in Pune are paying Rs. 152/- per annum as premium out of the Board's administrative account to cover workers for a benefit of Rs. 25,000/- in case of injury and Rs. 2,00,000 in case of death.  This scheme has been finalised by the Mathadi Board in consultation with the General Insurance Corporation (GIC).


(c)   Housing: The Mathadi Boards have also helped about 4,000 of their workers to get housing facilities on ownership basis.   For this purpose, the workers have taken loans from GIC and HDFC, and have also drawn money from their provident fund accounts.


(d)   Education: The Boards are also trying to promote formal education among Mathadi families.  Since 1982, they have instituted a number of scholarships for the children of Mathadi workers. More than 100 children were offered scholarships in 1997.




Financial Resources


5.30    A two per cent levy is deducted from each of the employers’ total contribution given to the Mathadi Boards every month. Each worker makes an annual payment of Rs. 600/- from his wages towards healthcare for himself and his family members.  Further details of these contributions are given in Table 5.4.


Table 5.4: Details of Income of Mathadi Boards (in Lakh)


Year 2002-03

Year 2003-04

Worker’s Contribution



Board’s Contribution



Employees’ and  Employer’s Contribution



Interest on Bank S/B and F.D. A/c.



Sundry Receipts



Non-Mathadi Patients’  Receipts (Investigation)







Maharashtra Security Guards’ Boards


5.31    The Maharashtra Security Guards’ Boards were set up under the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1961. They work on the same lines as the Mathadi Boards. Under the Act, the employer as well as the security guards have to be registered with the Boards. The registered guards are assigned to the various employers. Through a single window system, the Boards provide training and benefits such as provident fund, gratuity, leave with wages, uniforms, ex-gratia and ESI to the registered security guards.




5.32    The Boards fix the wage rates on the basis of a negotiated settlement between the workers and the employers.  If there were no agreement between them, the Board would fix the rates by itself. The current rate fixed by the Boards for a security guard is Rs. 2,750/-, which is much higher than the minimum wages fixed by the State government. The employers have to deposit the wages earned by the guards with the Boards along with a premium of 46.75 per cent for covering social security and other benefits.







The Karnataka Labour Welfare Board

5.33         The Karnataka Labour Welfare Board was constituted under the Karnataka Unorganised Workers’ Welfare Act, 2002 to administer welfare schemes for these workers. It applies to 68 categories of employment in the unorganised sector under a specified schedule. This includes labour in agriculture, horticulture, floriculture, sericulture and arecanut gardening. Beedi, Ports and Mines workers are not eligible under the Scheme.

                                                                                                                                                                                                                                                                                                                                                                                                              5.34    Almost all the benefits offered under this Scheme are in the form of financial assistance for specified purposes. These include:  (a)  medical assistance scheme, (b)  financial assistance for the purchase of  spectacles, (c)  financial assistance for the purchase of  hearing   aids,  (d)  financial assistance for the purchase of artificial organs  for the disabled, (e)  financial assistance to  pregnant women  workers, (f)  financial assistance to  workers in the case of accidents, (g) Financial assistance to the family of the deceased workmen for  performing the latter’s last rites, (h)  supply of Tri-cycles to disabled workers, (i)  financial assistance for  self-employment schemes, and (j)  scholarship  schemes for  the children of employees studying in eighth standard and above.




Andhra Pradesh Labour Welfare Fund


5.35    Andhra Pradesh introduced the Labour Welfare Fund Board in 1998. The aim of the Board is to enrol factory workers, workers in shops and other establishments, and motor transport workers. The Board has set up the Andhra Pradesh Unorganised Labour Welfare Fund. As of 2002, it has enrolled about 10 lakh members and the annual collection from workers and employers is estimated to be around Rs. 72 lakhs. The annual contributory amount is Rs. 2/- for employees and Rs. 5/- for employers.


5.36    Since 1990-91, the State government has been giving an annual grant of Rs. 20 lakh. However, it has not contributed any grant during the last two years. The current corpus of the Fund is around Rs. 10.5 crores. The benefits offered to members and their dependents include scholarships for children, medical aid to workers, funeral expenses and emergent economic amelioration schemes. There is no provision for old age pension for the informal workers registered in the Fund.









The Goa Employment (Conditions of Service) and Retirement Benefit Act


5.37    The State of Goa has enacted The Goa Employment (Conditions of Service) and Retirement Benefit Act, 2005. According to this Act, the employer is required to issue Social Security Cards to the workers engaged by him in both the organised and unorganised sectors. Detailed information about the worker is embossed on the chip of his card.


5.38    Coverage:  The Act covers all workers in all establishments in every industrial activity, including services and construction, and plantations. Only establishments engaged in agriculture and self-employed professionals are excluded from the Act.


5.39    Benefits:  The Social Security Scheme under the Act provides retirement benefits to the unorganised sector workers who have completed 240 days of continuous employment. The contribution is to be made by the employer at the rate of 5 per cent of the gross wages of the workers and deposited in the Retirement Fund to be maintained by the Government.  The contribution made by the employer in the worker’s account is deposited with the Government along with an interest of 6 per cent or as fixed by the Government to be paid to the worker when he reaches the age of 50 years, or to his dependent/heirs in case of death of the worker before the age of 50 years. This scheme allows for portability of the benefits of the scheme if the worker changes his employer. The Registered Number on the Social Security Card does not change in case of a change of employer and is valid within the State of Goa.




Provident Fund for Unorganised Workers


5.40    The West Bengal Government introduced a State-assisted Scheme of Provident Fund for Unorganised Workers under the Labour Department in 2001 through a Government Resolution.


5.41    Coverage:  All wage and self-employed workers between the ages of 18 to 55 years in the unorganised sector in the state and with an average family income of not more than Rs. 3500/- per month are eligible to be covered by the scheme on a voluntary basis. Workers employed in nearly 50 industry groups and 16 self-employed activities listed in a schedule of employment are eligible for the provident fund scheme.  As on September 2005, there were about 6.45 lakh subscribers of whom nearly 3.8 lakhs were women. The amount collected from subscription was nearly Rs. 26 crores by September 2005 and the government contribution upto March 2005 was about Rs. 20 crores. Each subscriber-worker contributes Rs. 20 per month with a matching amount contributed by the State government.


5.42    Benefit:  The worker receives the total contribution along with the interest on attainment of the age of 55 years. In the event of death of the worker, the total amount, contribution plus interest, is paid to the nominee. In the event of prolonged default for a consecutive six months, the accrued amount is refunded to the workers. The account is revived if the contributions are made up to date. The State government may prescribe provisions for loans and withdrawals from the fund as and when deemed necessary.


Building and Construction Workers (Regulation of Employment and Conditions of Service) Act, 2004


5.43    The above legislation is in accordance with the umbrella legislation under the Building and Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 of the Government of India.  Subsequently, a West Bengal Building and Other Construction Workers Welfare Board was set up to provide various benefits to the registered beneficiaries. These are listed below.


5.44    Benefits:  A registered beneficiary, who has been working as a building worker for not less than five years after registration as a beneficiary, shall, on completion of 60 years of age, be eligible for pension at Rs.150/- per month.  An increase of Rs. 10/- may also be sanctioned by the Board on the completion of every year of service beyond five years. The Board may sanction a maximum amount of Rs. 2000/- per annum to a registered worker towards medical expenses for the treatment of the beneficiary or his dependents suffering from TB, cancer, heart disease, kidney disease, leprosy, etc. In cases where an operation is involved for the treatment of such diseases, a maximum amount of Rs. 15,000/- may be sanctioned. The Board may also sanction financial assistance for the education of the children of such beneficiaries. The Board provides maternity benefit to a female beneficiary not more than twice.


5.45 Financial assistance to the beneficiaries may be sanctioned for hospitalisation  for a period of five days or more due to accident at Rs. 200/- per day for the first five days and Rs. 20/- per day for the remaining days, subject to a maximum of Rs. 1,000/-. In case of disability, the Board may sanction up to Rs. 10,000/-.  It may also sanction an amount of Rs. 10,000/- to the nominee of the dependents of a beneficiary towards death benefit. If the death is caused by an accident during the course of employment, the nominee or dependent of the beneficiary may be paid Rs. 30,000/- as death benefit.








Assisted Scheme for Unorganised Workers (Asanghatita Shramik Shayika Prakalpa)


5.46         The Government of Tripura introduced an Assisted Scheme for Unorganised Workers (Asanghatita Shramik Shayika Prakalpa) in 2001. This Scheme is very similar to the Provident Fund Scheme of the West Bengal government. All wage and self-employed workers between the ages of 21 to 55 years in the unorganised sector in the state and with an average family income of not more then Rs. 3500/- per month are eligible to be covered by the scheme on a voluntary basis. Workers employed in 15 industry groups and 17 self-employed activities listed in a schedule of employment are eligible for the benefits under the scheme. At the time of enrolment of the worker under the scheme, an identity card-cum-passbook are issued to the worker under the signature of the authorised officer on deposit of Rs. 5/- only. Each subscriber-worker has to contribute Rs. 25/- per month with a matching contribution by the State Government.


5.47    Benefit:  The worker receives the total contribution along with the interest on attainment of the age of 55 years. In the event of death of the workers, the total amount, contribution plus interest is paid to the nominee. In the event of prolonged default, not paid for six months, the accrued amount is refunded to the workers after a lock-in period of three years. The account is revived if the contributions are made up- to- date.


Tripura Beedi Shramik (Old Age Pension) Scheme (2001)


5.48    A person who is fully engaged in and dependent on the manufacture of beedies for his/her livelihood and has attained the age of 65 years is eligible to get  a pension of Rs. 125/- per month under this scheme.




The Gujarat Rural Workers Welfare Board

5.49    The Government of Gujarat has raised a social security fund of Rs. 5 crores under the poverty alleviation programme. The Gujarat Rural Workers’ Welfare Board administers four insurance schemes under this programme for rural workers. These are the: (a) Group Insurance Scheme for Landless Agricultural Labourers, (b) Group Insurance Scheme for Fishermen  and Forest Workers, (c) Group Insurance Scheme for Salt Workers, and (d) Shramik Suraksha Scheme for both rural and urban unorganised  workers. There is another Financial Assistance Scheme for the welfare and development activities of agricultural labourers and rural workers.

Welfare Scheme for Salt Workers

5.50    The State Government has implemented the following schemes for the 45,801 salt workers located in 35 talukas of 13 districts of the State through the Gujarat Rural Workers’ Welfare Board.  These are: (a) construction of welfare centres such as balvadis, primary health centres, libraries, etc., (b) setting up of children’s crèches at worksites, and (c) offering financial assistance for housing.  Identity cards are also issued to the salt workers.



Old Age Pension


5.51    The old age pension scheme was started as early as 1964 in the State of Punjab.  The eligibility for the pension scheme is the attainment of the age of 65 years for men and 60 years for women. There is an economic limit of Rs. 1,000/- for the monthly income, if the applicant is single and up to Rs. 1,500/- per month for a family of two. Further, he/she should be a bona fide resident of Punjab and should have been residing in Punjab for at least for 3 years. A pension of Rs.200 per month per beneficiary is paid on a quarterly basis through designated banks. 

Financial Assistance to Widows and Destitute Women

5.52    A similar pension scheme for destitute women and widows was started in 1968. The applicant is eligible for benefits under this scheme if she has attained the age of 60 years, is a bona fide resident of Punjab and has been residing in the State for the last three years.  Widows or women deprived of their husbands’ support for any reason and unmarried destitute women of 30 years of age and above, are also eligible for financial assistance under this scheme. A monthly pension of Rs. 200/- per beneficiary is paid on a quarterly basis.

Financial Assistance to Dependent Children

5.53    The benefit of another similar scheme is also available for orphans and destitute children below the age of 21 years. This scheme was also started in 1968. The criterion for eligibility under this scheme is that the income of the child’s mother or father/guardian should not exceed Rs. 1000/- per month. In cases where the parents are alive, and the joint income of both the mother and father does not exceed Rs. 1500/- per month, financial assistance is restricted for only up to two children. Relaxation in the income limit to the extent of Rs. 300/- per child for a maximum of two children is admissible. The pension amount is Rs. 200/- per month per beneficiary, which is to be paid quarterly.



Financial Assistance to Disabled Persons

5.54      Under this scheme, which has been operational since 1982, handicapped persons with severe disability or permanent infirmity caused by blindness, retardation or chronic illness are eligible for a pension of Rs. 200/- per month.  if the income of the person concerned and  his/her spouse or parents  is not more than Rs. 1000/-  per month.

Punjab Labour Welfare Board


5.55    The Punjab Labour Welfare, Board, a statutory body, was created in 1974 under the Punjab Labour Welfare Fund Act, 1965. It is headed by the Welfare Commissioner, Punjab. The Board is implementing various welfare schemes for the benefit of industrial workers and their families. 




Old Age Pension Scheme


5.56         This scheme aims to provide social security to old persons who are unable to sustain themselves from their own resources.  Applicants have to be residents of Haryana and aged 60 years or above.  A monthly pension of Rs. 200/- is provided to each of the beneficiaries. 


Pension to Widows and Destitute Women


5.57    Under this scheme, a monthly pension of Rs. 200/- per beneficiary is provided to widows and destitute women, or married women who have been deprived of  financial support from their husbands and  whose income from all sources is less than Rs. 10,000/- per annum. The pensioner should be 18 years of age or above and a domicile of Haryana.   

Pension to Physically Handicapped Persons

5.58    This scheme, which provides a monthly pension of Rs. 200/-  to all beneficiaries, is intended for people with a minimum of 70 per cent  disability including the blind, deaf and  dumb, those with very low IQ, and the mentally retarded. The pensioners should be domiciles of Haryana and age 18 years or above.  Their income should not exceed Rs.10,000/ - per annum.

 Financial Assistance in the Event of Accident

5.59    This scheme is being run by the Haryana Labour Welfare Board since 1992. It provides financial assistance to workers who meet with an accident during the duty period. The application should be received within a year of the accident. The financial help offered varies from Rs. 5000/- to Rs. 10,000/- on the basis of the disability percentage fixed by the Government hospitals/ESI Board. In addition, a sum of Rs. 5000/- is provided to the nominee of the beneficiary if the latter meets with a fatal accident.

Haryana Labour Welfare Board

5.60    The Haryana Labour Welfare Board was constituted under the Punjab Labour Fund Act, 1965. This Board is running various welfare programmes for the workers, which include cash award to the children of industrial workers, the Mukhya Mantri Shram Puraskar Yojana, financial help to workers on the occasion of a daughter’s marriage, reimbursement of computer education expenses, incentive under the family welfare scheme, excursion-cum-study tours for workers, etc. The Haryana Labour Welfare Board also runs a scheme offering financial assistance to workers who meet with an accident during the duty period. The application should be received within a year of the accident. The financial help provided varies from Rs. 5000/- to Rs. 10,000/- on the basis of the disability percentage fixed by the government hospitals/ESI Board. In addition, a sum of Rs. 5000/- is provided to the beneficiary’s nominee if the former meets with a fatal accident.


5.61    The State of Uttar Pradesh is the largest State in India but has a lower per capita income than the national average.  Apart from a couple of social assistance schemes for the poor aged and the disabled, which offer  very limited coverage, no scheme has been reported for providing social security to the vast number of workers in the unorganised sector in the State.


Old Age Kisan Pension Yojana


5.62    The beneficiaries under this scheme receive Rs. 125/- per month on reaching the age of 60 years.  The scheme also provides a grant to destitute widows for the marriage of their daughters. 


Viklang Pension Scheme


5.63    A pension of Rs.125/- per month is provided to destitute and handicapped persons with a monthly income of below Rs. 225/-. 

Welfare of Handicapped

5.64    A number of schemes have been operational in the State for the welfare of the handicapped, including grant-in aid for maintenance to destitute handicapped, scholarship to the handicapped students and to the children of handicapped persons, grant-in-aid for purchase of artificial limbs, hearing aids, etc., award for marriage between disabled and normal persons, and grant to handicapped persons for the construction of shops is available. Also, as part of a welfare measure, twelve schools for handicapped children are functioning in the State, where the children are provided free education, boarding and lodging.  Of these schools, four are for the visually challenged, four for the hearing and speech challenged, two for the physically challenged and two for the mentally challenged. Recently, seven workshops-cum-production centres for imparting free vocational training with free boarding and food facilities for the handicapped have also been opened.


5.65    The Government of Madhya Pradesh constituted an Unorganised Sector Workers Committee in 2001 to study the conditions and make recommendations for improving the working conditions and social security needs of the workers in the unorganised sector. It presented its report in 2002 and recommended legislation to provide a measure of social security to the workers in the unorganised sector. 

Two Welfare Boards/Funds for Urban and Rural Areas

5.66    On the basis of the powers conferred by the Madhya Pradesh Unorganised Welfare Act, 2003, the State Government laid down the Madhya Pradesh Unorganised Welfare Rules, 2005, relating to the constitution of a Welfare Board, its functions and other matters. This Act is applicable to all the categories of employment  specified in the  Schedule and covers  agricultural and allied workers, quarry and brick kiln workers, manual workers engaged in loading and unloading in markets, shops, markets under the control of the Madhya Pradesh Krishi Upaj Mandi Adhiniyam, 1972, public transport and food godowns, workers in the  khadi, handloom, powerloom, dyeing, printing and tailoring industries, workers making agarbattis, embroidery items, ready- made garments, food products like pickles and papads, cooked  food and  toys, workers in the leather and footwear industries, those engaged  in cleaning and scavenging, rag-picking  and door-to-door collection of old newspapers, raddi and kabadi, motor transport workers under the Motor Transport Workers Act, 1961, workers plying cycle-rickshaws, auto-rickshaws and taxis, workers in flour, rice and dal mills, private security services, plastic industries, wood works, utensil making, artisans, fireworks and match-making, and cartons and other packaging materials.


5.67    Two separate Welfare Boards for Unorganised Workers were constituted for the rural and urban areas in the State. Each of them consisted of the Minister for Labour as the Ex-officio Chairman, Secretary to the Labour Department and Finance Department, Labour Commissioner, six members appointed by the Government representing employers of the unorganised sector and six members representing unorganised workers, two of whom had to be women, and one each belonging to the Scheduled Castes (SCs), Scheduled Tribes (STs) and Backward Castes (BCs).  Two separate Madhya Pradesh Unorganised Sector Welfare Funds were constituted for the rural and urban areas, which were to be administered by the Board.


5.68    The benefits to be extended to all the members who have contributed to these Funds are: old age, family and disability assistance and pension, loan for purchase or construction of house, interest subsidy for housing loan taken from  a  housing finance institution, assistance for education like scholarship, loan, interest subsidy for education loan, cash award for meritorious students, loan for tools and small machines, interest subsidy for loans for supplementary income- generating activities, marriage assistance, medical assistance, maternity assistance, group insurance, assistance for payment of insurance premium, funeral assistance and ex-gratia payment in case of death. These benefits are normally credited into the bank account of the member.


5.69    There is also a provision for the registration of the establishments to which the Act applies and for the contribution of the employer based on the number of workers in the establishment. Similarly, there is also a provision for contribution by the workers. No amount has, however, been specified in the Act.





State Social Security Pension

5.70    Under this scheme, old persons, widows, destitutes, handicapped persons and bonded labourers are covered.  A pension of Rs. 100/- per month is paid to old persons, who are aged 60 years and above, with an annual income of Rs. 5,000/- in rural areas and Rs. 5500/- in urban areas.  There is a relaxation of the age limit for widows, handicapped persons and bonded labourers.  The State Government provides 100 per cent funding for the scheme.


NGOs’ Intervention in the Social Security of Unorganised Sector Workers

6.0       A large number of voluntary and people’s organisations are involved in providing a measure of protective social security to workers and their families in the unorganised sector in the country.  However, such provision is often part of a larger package of services that include promotional social security such as access to micro-credit, housing, preventive healthcare and employment.  For the purposes of this report, we have selected organisations in the voluntary sector, which provide protective social security in one way or another.


6.1       In view of the absence of a single data source on the voluntary organisations, we had to rely on the available information compiled by international organisations, especially the International Labour Organisation’s (ILO’s) New Delhi Office, and information that was directly made available to the Commission. The observations in this report are based on data obtained from 54 organisations.


6.2       The total number of individuals covered by various social security schemes undertaken by NGOs is around 33.51 lakh.  In addition, about 1.06 lakh households have been covered as beneficiary units under various schemes. Further, community schemes cover around 40 villages.  If all these are converted into individual coverage, it would amount to around 48 to 50 lakhs.  This accounts for about 1.5 per cent of the estimated workforce in the unorganised sector.  Even if we assume that a number of small organisations might have been left out of the data set, it is quite unlikely for the entire voluntary sector coverage to be more than two to three per cent of the total workforce in the unorganised sector.  Appendix 8 gives a profile of the organisations involved in social security schemes.


6.3       The low coverage as a proportion of the total workforce by the NGOs should, however, not be used to underplay the contribution of the voluntary sector in this field.  In fact, it the contribution of the voluntary sector highlights a variety of best practices used by it as also the task of building, albeit slowly, institutional models that are closer to fulfilling the needs of the people at the grassroots level.  A few large organisations that have been covering several districts in more than one state,  have established themselves as people’s organisations managed by highly dedicated and  educated leaders,  who have emerged as the catalysers of socio-economic change in the country.


6.4       The geographical coverage of organisations shows that they are concentrated in the three southern states {Andhra Pradesh (16), Karnataka (8) and Tamil Nadu (12)},   the two western states of Gujarat (5) and Maharashtra (10), and one eastern state, i.e. West Bengal (5).  As described in the previous chapter, Kerala (5) has a well-developed state-initiated and supervised protective social security system in the form of Welfare Funds/Boards, which explains the small presence of the voluntary sector in the State. However, the absence of the voluntary sector in most other states, especially in the large states of Uttar Pradesh (3), Bihar (1), Chattisgarh (1), Madhya Pradesh (1), and Orissa (3), is accompanied by the low presence or complete absence of any state-initiated social security system.  This should indeed be viewed as a matter of concern.


6.5       It should be emphasised that most social security schemes in the voluntary sector were initiated in the early 1990s.   Out of the 43 schemes for which data were available, 70 per cent were started in the early 1990s, and 30 per cent between 2000 and 2003. This indicates that the issue of protective social security has recently entered the agenda of the voluntary sector.


6.6       Out of the 45 schemes for which data were available, 45 per cent accounted for a coverage of less than 10,000 members, 40 per cent covered 10,000 to 100,000 members, while the remaining accounted for a coverage of more than 100,000 members. This includes a scheme that covers 100,000 households.


6.7 The predominant form of social security provided by these organisations was in terms of coverage for health-related risks.  Of the total, 34 schemes provided health insurance services.  The next item accounting for the maximum coverage was insurance cover for death under 28 schemes followed by 13 schemes providing cover for disability.  Maternity benefit (2 schemes) and old age pension (4 schemes) were quite low in the order of priority.  Most of the schemes dealt with single risk (38), mostly in the area of health insurance.  While nine schemes covered two risks, eight covered   three risks, and only one scheme covered four risks.

Health Insurance

6.8       In India, the prices prevailing in the market for health are beyond the reach of the poor, who are often compelled to access health services at the market rates with disastrous consequences for their already fragile economic status.  The public system is supposed to provide free healthcare services to the poor, but this objective is seldom realised for a variety of reasons, including the poor state of the public healthcare system, especially in rural India.  This state of affairs may explain the popularity of community-based health insurance systems initiated by the voluntary organisations. The NGOs run different types of health insurance schemes, each of which may be suitable, depending on the characteristics of the target population and their health profile, as also the health risks to which community is exposed.


6.9       There are two ways of providing health insurance in the voluntary sector.  In the first and popular case, the organisation acts as an intermediary between a formal provider and the insured community {as in the case of two large organisations, i.e. the Self Employed Women’s Association (SEWA) in Ahmedabad, and Action of Community Organisation, Rehabilitation and Development (ACCORD) in the Nilgiris}.  In the second case, the organisation itself provides insurance to the targeted community. The formal providers in the first case are mostly insurance companies in the public sector such as the National Insurance Company, New India Assurance Company, United India Insurance Company, Oriental Insurance Company, and the Life Insurance Corporation of India.  Two private sector companies that have now made their presence felt in the schemes sponsored by the voluntary organisations are ICICI and HDFC.


6.10    As mentioned earlier, most of the social security package consists of health insurance.  A majority of the schemes provide assistance for meeting illness-related expenses including consultation, outpatient treatment and hospitalisation. However, these schemes differ from each other.  Presently, the coverage accounts for around 28.91 lakh people, along with a number of families and villages that are being provided healthcare.  Thirteen of the voluntary organisations club healthcare with life insurance and disability, covering 7.23 lakh beneficiaries, including 4000 families and 1200 couples.

Life and Disability

6.11    The healthcare schemes are followed by schemes for ‘life’ insurance, which covers both natural and accidental death.  About 22 organisations have included life insurance in their social security package, in which 19 schemes are clubbed with other packages. Organisations like Co-operative Development Foundation (Andhra Pradesh), Sangamitra (Karnataka) and Grameen Development Service (Uttar Pradesh) offer a package for life insurance alone. About 13 organisations provide disability allowance.


6.12    Link with Insurance Company: Out of the 54 organisations reviewed, half of them (28) already work in collaboration with a formal insurance company for providing the insurance package. The Trivandrum District Fishermen’s Federation is the only organisation that has secured finance from a non-insurance company: it takes loan from the Rashtriya Mahila Kosh to provide social security to fishermen and their families. It may be  noted that out of 21 organisations offering healthcare alone, only 3 have links with any insurance company while the rest of the schemes provide the insurance benefit from their own premium collected/fund.  However, out of 33 organisations providing other benefits (this also includes schemes clubbed with healthcare), 27 are working in collaboration with one or the other of the insurance companies.


6.13    Premium: In most of the schemes, the premium ranges from Rs. 50/- per year to Rs. 200/- per year, depending on the income of the beneficiary. There are higher premium rates also in the range of Rs. 3000/- (as in the case of the Voluntary Health Service meant for rural villagers and urban dwellers), Rs. 1000/- (as in the case of the Co-operative Development Foundation in Andhra Pradesh which is meant for primary agricultural workers) and Rs. 500/- (in the case of Activists for Social Alternatives, which is meant for villagers engaged in animal husbandry and trade and craft). Since most of the organisations offer different packages for different benefits, the premium also has to be paid separately. But SEWA’s Integrated Insurance scheme is an exception wherein one can avail of all these benefits by paying a single premium of Rs. 100/-.


6.14    Benefits: The benefits included under the health insurance schemes are mainly reimbursement of hospitalisation and out-patient treatment. It ranges from benefits as low as Rs. 250/- to Rs. 30,000/-. Remuneration for hospitalisation covers a wide range of illnesses but mostly excludes congenital and chronic diseases. Most of the NGOs pay a higher remuneration in the case of natural or accidental death; SEWA, for instance, offers up to Rs. 65,000/- for accidental death. Even the compensation given for disability is as high as up to Rs. 50,000/- by NGOs like ANKURAM (Andhra Pradesh) and NIDAN (Bihar). However, the range of benefits offered varies according to the premium paid.


6.15    Even though the schemes offer such significant benefits, in most of the cases, they are operated in such a way that the beneficiary has to pay out of his pocket at the time of illness and is  reimbursed only later by  the provider, which, in most cases, is some insurance company. For this reason, there is a good chance that people may avoid hospitalisation and treatment in the fear that all their costs may eventually not be reimbursed. On the other hand, in cases of assistance offered for funeral expenses and disability, they don’t have an option and the amount given by the provider comes as a boon for the beneficiary and his/her family.


6.16    Studies have shown that even if the poor are insured under any scheme, they may fail to use it because they do not understand the significance or implications of insurance;  they also may not have the confidence to use the service they have paid for, or they may simply forget that they are insured. So first-time buyers of the insurance services need to be nursed even after they have made the purchase.


Old Age Pension


6.17    There is little involvement of the voluntary sector in providing pension schemes to the unorganised sector workers. This is perhaps understandable in view of the fact that pension schemes require long-term planning involving the collection of contributions, management of funds and assurance of a pre-determined pension amount during the old age period.  However, three voluntary organisations have come up with pension schemes- SEWA (Gujarat), DHAN (Tamil Nadu) and Anna Purna Mahila Mandal (Maharashtra).


6.18    The Gujarat-based Self Employed Women’s Association (SEWA) plan for social security is widely regarded as one of the more successful ones in this field. SEWA has established a bank daily collection initiative that brings a collection post to women on a daily basis. These are women who work between 14 and 16 hours a day, and cannot therefore find time to travel to the local bank and make deposits. Most members of the social security scheme earn less than Rs. 100/- per day and do not have any formal education. SEWA Bank initially guaranteed a nominal return of 12 per cent, and upon maturity, the money was returned as either a lump sum or in an annuity format to the beneficiary. As of 2002, SEWA initiated a new plan offering only 7 per cent return with lower minimum contributions and the removal of early withdrawal options. Already SEWA Bank has over 5,000 accounts managing almost Rs. 7.5 million. The SEWA Bank scheme serves as an example worth emulation for many Self-Help Groups (SHGs) across India.


6.19    The women members of Annapurna Mahila Mandal in Maharashtra mobilise their small savings and once the amount reaches Rs. 5000/-, it is invested in an LIC pension scheme. The  savings amounts, invested by LIC in sound securities, double  every six years and after 20 years, the amount becomes  Rs. 50,000/-. On this principal amount, a fixed amount of Rs. 500/- per month is paid to the woman beneficiary as old age pension. The principal can be paid to her nominee at the time of her death but the nominee is not eligible for the amount if the beneficiary’s death is not natural.




6.20    SEWA has a social security scheme for women workers in the event of their becoming widows. They give an amount of Rs. 15,000/- on widowhood on various premium levels of Rs. 85/-, Rs. 200/- and Rs. 400/-.


6.21    SEWA and WWF (Working Women’s Forum, India) are the only two NGOs who provide maternity benefit. SEWA Gujarat gives the women members Rs. 300/- for every incidence of childbirth.


6.22    Bharathi Integrated Rural Development Society (Andhra Pradesh) is the only NGO that has a provision for funeral expenses. It gives an amount of Rs. 500/- for immediate funeral expenses that cover both the member and spouse at a premium of Rs. 50/- per client per year.


Distinctive Practices Among NGOs


6.23    As part of its special project on   reproductive healthcare for women in partnership with the United Nations Population Fund, the Working Women’s Forum, India (WWF) selects and trains women cadres from the poorer neighbourhood communities to work at the grassroots level and use their marketing skills to advocate the need for healthcare among the poor. WWF's healthcare programme conceptualises a human- centred approach covering a wide spectrum of women from birth to adolescence to the reproductive age groups and even beyond the reproductive stage, among the older age group of women.  The healthcare system of WWF has had an impact on a population of about 1 million in 720 slums and 340 villages through 960 health cadres operating at the grassroots level.

6.24    Further, the WWF has evolved a comprehensive Social Security Programme for its members by networking several insurance companies. Presently, about 5 lakh members are covered under the scheme for insurance for life, full/partial disability, accidents and crisis management to facilitate rehabilitation during natural calamities. An innovative Health Insurance Programme initiated by WWF provides for maternity benefits, reimbursement of hospitalisation expenses and the organisation of preventive health check-ups. 

6.25    For protective social security, the Self Employed Women’s Association (SEWA) offers a risk cover to its members in an integrated manner.  For a premium of Rs. 60/-, an individual member is covered for illness, accident and disability, natural death, and loss of assets due to fire or flood, and also receives a maternity benefit. The accidental insurance for members and their spouses is carried out in collaboration with New India Assurance (NIA), while insurance for natural death and accident is still done by LIC.  An annual premium of Rs. 60/- entitles an individual SEWA member to all the benefits like risk coverage for maternity, natural and accidental death of the member and spouse, and loss of assets during riots, flood, fire or theft. For an additional payment of Rs. 15/- per annum, the husband of the member is also covered under the life insurance component of the LIC scheme. The other products are only available to SEWA members. SEWA has designed another method to enable members to pay the premium. For the Lifelong Insurance Scheme or Fixed Deposit Scheme, the members pay a fixed deposit of Rs. 500/- to the SEWA Bank and the premium is paid from the interest rate, which amounts to exactly Rs. 65/-. If the husband is to be covered under the life insurance scheme, the fixed deposit has to be Rs. 700. The Fixed Deposit customers get the maternity benefit as a bonus.


6.26    Recently, SEWA has re-negotiated the scheme with the insurance company, and it is now known as the SEWA PACKAGE 2006 wherein two options are made available to its members. Under option 1, the woman member pays Rs. 100/- as premium and avails of benefits for natural death (Rs. 5000/-), Mediclaim (Rs. 2000/-), fire insurance (Rs. 15,000/-), accidental death compensation of self (Rs. 35,000/-) and death of spouse (Rs. 15,000/-). Under option 2, on payment of a premium of Rs. 225/-, the benefits offered are for natural death (Rs. 10,000/-), Mediclaim (Rs. 6000/-), fire insurance (Rs.30,000/-), and accidental death compensation of self (Rs 45,000/-) and death of spouse (Rs. 15,000/-). SEWA carries out all the tasks associated with the scheme itself including premium collection, promotion, education, servicing, claim processing, accounts and record-keeping. In other words, all the functions of the insurance company except taking of the risk are undertaken by SEWA.


6.27    In order to meet the healthcare requirements of adivasis, ACCORD, which is working exclusively in the Nilgiri district of Tamil Nadu, started by setting up a hospital in December 1990. Later, in collaboration with the Adivasi Munnetra Sangam (AMS) and Association for Health Welfare in the Nilgiris (ASHWINI), ACCORD launched a Community Health Insurance (AAA-CHI) scheme in 1992. The premium (with each member paying an average of Rs. 22/- per annum) is not adequate to cover the entire cost.  This is taken care of by a subsidy on premium funded by a Dutch donor agency (called CEBEMO) while the rest of the money comes in the form of a cross-subsidy from the non-tribal population. While AAA has insured tribals on a mass scale with a formal insurance company (Royal Sundaram Alliance [RSA] Private Ltd.) by paying the total premium for five years, the tribals repay this premium on an annual basis. The premium collected as well as the details of those insured are handed over to the hospital accountant once a month.  There are two benefit packages – a package provided by the insurance company to AAA and another one provided by AAA to the adivasis. RSA assures hospital care with an upper limit of Rs. 1000/- per patient per year, which includes most common ailments but excludes psychiatric illnesses. AAA thus offers a more comprehensive package to the adivasi community.


6.28    Further, any claim for hospitalisation for an excluded illness is not taken up by ASHWINI and claims are made only to a maximum amount of Rs. 1500. The insurance company, in turn, reimburses ASHWINI on a regular basis, usually after a lag time of three to six months. The reimbursement rates have been in the range of 95-100 per cent. The scheme could overcome the issue of affordability by adopting a reduced premium rate. As insurance was a new concept, ACCORD paid Rs. 65/- per adivasi in the first round. Later, the members were asked to repay at a rate of Rs. 4/- per person initially, and the amount was gradually raised to Rs. 6/-, and then to Rs. 8/- in the subsequent years. In this way, the entire premium is repaid by the adivasis within a span of five years.


6.29    The Karuna Trust (KT) in Mysore along with the National Insurance Company (NIC) offers the following insurance package in a public-private partnership initiative. For a premium of Rs. 30/- per person per annum, the insurance company pays, in the event of hospitalisation, Rs. 100/- per day per patient (of which Rs. 50/- per day is given directly to the NGO for the purchase of drugs while Rs. 50 per day is given to the patient in lieu of loss of wages) with a maximum cover of Rs. 2,500 for all in-patient care at public health facilities. The package includes all kinds of illnesses and diseases, with no exclusion nor any waiting period involved. The premium was subsidised fully for the poor (defined as Below the Poverty Line households) SC/ST population, and partially for BPL non-SC/ST households while there was no subsidy for Above the Poverty Line (APL) households. The scheme, however, faces the problem of sustainability as UNDP cannot be expected to continue to subsidise the premium.


6.30    Another public-private partnership initiative is evident in an initiative taken by the Vivekananda Foundation that signed a Memorandum of Understanding (MoU) in 1996 with the government of Karnataka. The Thithimathi Primary Health Centre (PHC) was handed over, along with the assets and equipment, to the Foundation for a period of ten years. It was decided that 25 per cent of the personnel cost would be met by the Foundation while the government would pay Rs. 75,000/- per annum for drugs. The government has a policy of not collecting user fee at the PHC level. Gradually the health centre was converted into a ten-bed hospital which can also provide secondary health services.  Presently, the Thithimathi PHC covers about 13,569 people.





International Experience



7.0       The Commission feels that it is important to examine, albeit briefly, the international experience in the provision of social security, especially of a protective nature, so as to draw some lessons for India, keeping in mind its own level of income, structure of the economy and the need to provide  social security.  With this objective in mind, the Commission has made a quick de tour into: (a) the historical experience of Western countries, (b) the contemporary experience of developing countries with a record of extending social security beyond those working in the organised sector, and (c) the recent experience of countries, especially in Asia, in extending social security.


7.1       The notion that social security, especially of a protective kind, is not affordable for countries with low levels of income is quite widespread, even among some sections of scholars in the field.  Atkinson and Hills (1991), for example, even argue that there is very little that the developing countries can learn from the experience of the developed countries, especially that of Britain, France and the USA. Both the level of development and the structure of the economies in developing countries are thought to be very different from those of the developed countries.


 “As a result, the institutional assumption that social security schemes can be introduced for the bulk of the population, while a reasonable goal of twentieth-century reformers in Western countries, has little applicability to developing countries” (p.104).


7.2       Such opinions, however, do not take into account either the long-term evolution of social security in the present-day developed  Western countries or  the impressive gains made by the developing countries since decolonisation or even  the demonstration of the feasibility of both promotional and protective social security arrangements in selected countries and regions despite low levels of income and the presence of a sizeable informal sector in the economy (e.g. Costa Rica, Tunisia, the State of Kerala in India, and Sri Lanka).  Many countries are, in fact, following a model that combines social security arrangements with efforts to enhance aggregate economic growth. 


7.3       In his magnum opus, In Care of the State (de Swaan, 1988), the Dutch political scientist, Abram de Swaan gives a detailed account of the evolution of social policy and social security in Western countries.   It should be noted at the outset that the Mosaic Law, the socio-political systems of classical Greece and the Roman Empire, the edicts of Asoka, the simple rules of early Christian communities, and the institutions of family, village, and caste in India, to mention a few instances, all contained elements of what is today known as social security. In Europe it was the Church, beginning with the ninth century, which sought donations from the settled farmers and general public to feed and maintain the ‘vagrants’, ‘beggars’ and the ‘sick’, i.e. those who faced acute deficiency in meeting minimum access to resources to maintain their life.  A compulsory levy for the upkeep of the poor was not common in those times.  When the modern period began, rights to private property and use were well-established in Europe and those who did not own land, worked on other people’s property to eke out a living.  By the sixteenth century, long before the advent of the Industrial Revolution, large cities in Europe had well-established ‘poor houses’ wherein thousands of poor people were looked after so that the local communities could live peacefully.  It was the Elizabethan Poor Laws, which for the first time in 1601, stipulated the standards for looking after the poor; and the Church levied sufficient ‘poor rates’ on the landowners in order to finance the whole set-up.   Relief for the poor in the United States in the seventeenth and eighteenth centuries followed the broad framework of the Elizabethan Poor Law. Around that period, the responsibility of looking after the poor was shifted from the Church to the locally elected ‘overseers of the poor’.  As time went by, these societies gradually started getting more and more involved into a system of direct administration of the poor.  In those times – as it indeed is in our own times among large sections of the rich and the middle class – the general notion was that the poor are so because they are lazy.  Within the framework of this logic, in the seventeenth century, ‘work houses’ were established to provide work and shelter to all the able-bodied unemployed, vagrants and other poor people. 


7.4       Unlike many other revolutions, the Industrial Revolution, shook the very foundations of the agrarian system in rural areas and the commercial/mercantile system in the urban centres of Europe.  However, even during the dawn of the Industrial Revolution, orphanages, old age asylums, insanity wards and maternity houses were run by local governments, and a system of social security supported by the state was gaining more and more importance in Europe.  Collective action was the spontaneous answer by the elite sections of European society to the threat posed by several social scourges including crime, cholera, anarchy and squalor resulting from the existence of large numbers of unemployed, vagrant and sick people in society.  The shift from individual action to collective action (as represented by the  State) occurred not out of any philanthropic motive, but due to the threat that these posed to the established social order as thousands migrated into the cities each day in search of work and a better living during the period of the Industrial  Revolution.  By the last decade of the nineteenth century, the social security system, as we know it now, was well-embedded in the social fabric and governments had already established systems for the care of the destitute and the poor.


7.5       This interpretation emphasises that the privileged classes had a vested interest in promoting a measure of social security for the poor who were seen as les classes dangereuses.  But the other side of the story is that the practice of social security evolved as a result of the initiatives and demands generated by the labouring classes.  This had happened, even prior to the emergence of trade unions, in the form of mutual benefit societies of workers in many countries, most prominently in Western Europe but it  could not sustain itself because these societies offered limited forms of collective care (through mutual help) without internalising the  costs to the society at large.  However, they could be interpreted as the precursors for wider notions of social security, especially those based on work to take care of contingencies (see, e.g., Linden, 1996).


7.6       Given the irresistible influence of socialism in the European continent by the late nineteenth century, it was, in fact, the organised strength of the working class that stood to facilitate the evolution of social security in terms of ‘welfare state’ policies.  Here the emphasis was to secure a minimum of social security arising out of one’s status as a worker but bargained and fought collectively.  The state, in keeping with its ‘legitimation function’, initiated public policies to woo the working class away from the Social Democrats, who were preaching socialism. The first of these tactics came from the ‘Bismarckian socialism’ of Germany in 1883 in the form of a comprehensive scheme of social security, offering the workers insurance against accident, sickness and old age.  Although it represented the paternalist function of the state that Bismarck, as a conservative, had always held, its prime function was as a weapon against the social democrats.  This, however, directly brought the concept of social insurance into the realm of public policy and responsibility of the state.  Of course, the motivation did not come from an overwhelming concern for the plight of the working poor.  It was, as mentioned earlier, the outcome of the nationalistic agenda of an activist state and was opposed by both the workers, movement as well as the German Parliament.


7.7       However, the Bismarckian model of social security survived many vicissitudes and came to be adopted with variations by many other European countries during the next half century.  The British experience was characterised by compromises by both the workers’ unions and employers, and which was mediated by the state.  The later advent of social insurance in France was based on a tripartite coalition among the state, sections of the workers’ movement and big industrialists.  In the United States, the social policy of the State was slow to catch up with that in Europe though it remained the local agenda of mutual benefit societies.   The dramatic spread of social security in the sense of social insurance in The Netherlands is a post-War phenomenon, as in many other European countries.  A Workmen’s Compensation Act came into force in 1901, the Invalidity and Old Age Pension Act in 1919 and “implementation of a sickness insurance law, also enacted in 1913, was delayed until 1930” (de Swaan, 1988, p.210).  Compulsory state unemployment insurance came into effect only in 1952.


7.8       The experience of Europe in the matter of evolution of social policy for providing a comprehensive measure of social security took place in a historical context in first- time industrialising countries. This does not, however, mean that such a historical experience is not relevant to the contemporary concern for social security in developing countries.  The dynamics of social and economic change were certainly different, but it throws up important questions that are pertinent to the institutionalisation of social security in poorer countries.  Some of these are highlighted below since they deserve to be considered in order to arrive at a global perspective on this important social issue.


7.9       First of all, the division between ‘promotional’ and ‘protective’ social security fits in neatly with the European experience.  Promotional security came into being through a long process beginning with charity, community service, and philanthropy, but was later transformed into a collective concern to be addressed by the State.  Thus poor relief, basic education and health care started with collective charitable arrangements first at the local (parish) level, then at the city level, and finally at the national level.  Later, housing was added to the basic social security arrangements organised and implemented by the state.  These were added and extended to all deserving citizens in the post-War era. Social security schemes to meet contingencies were introduced through the work status of individuals but those who could not meet the minimum requirements were taken care of by the state through the provision of old age pension and unemployment allowance.  But what needs to be noted is their continuing relevance in many rich countries despite considerable increases in the per capita incomes of these countries.


7.10    Secondly, the evolutionary trajectory of social security in European countries suggests the increasing and also effective role of the State from an early stage.  This interventionist role of the state pre-dated full-scale industrialisation.  This lesson is an important one from the contemporary perspective wherein many may be persuaded to think that the State in the developing countries is not yet in a position to address the entire range of issues relating to social security.  It is in this context that considerable attention is being accorded to the role of non-State actors in taking care of some aspects of social security.  This might seem attractive in the present-day conditions.  But historical experience suggests that there is hardly any effective alternative to the role of the State in providing a modicum of social security, especially for the poorer sections of the population.


7.11    Thirdly, one has to consider the role of demand from below.  Workers’ movements played an important role in forcing the state to institute social policies that addressed the issues of both ‘promotional’ and ‘protective’ social security.  This underlines the crucial nature of the social dynamic that contributed to the evolution of a public policy on social security issues.  This is perhaps absent in many developing countries.  But it would be an under-estimation to conclude that many developing countries did not go through the required social dynamics.  National liberation movements often emphasised not only the political emancipation but also the social emancipation of the people.  The achievements of a number of developing countries during the period 1950-80 point to this.


7.12    Fourthly, a process of industrialisation and an increasingly urbanised economy and society accompanied the process of evolution of social policy in Europe. The capacity of the State to manage social issues had grown enormously, especially after the experience of managing war- time situations.  However, this is not the case with most of the developing countries.  The process of industrialisation is slow and given the pace of technological change, fewer and fewer people are needed to produce more and more industrial output.  Most of these countries are still rural in character.  This situation, therefore, poses new challenges to the State in these countries in meeting the requirements of providing a broad range of social security.


7.13    Despite the vastly different economic structure and stage of development in the developing countries, the expectations of people in these countries are perhaps much higher than among the people in Europe in an era when social security concerns were just beginning to be addressed as a collective issue.  This is because of the increasing integration of countries through the technologies of transport and communication as well as the power of transmission of ideas from one place to another.  The challenge of social security in developing countries is, therefore, also one of meeting the gap between expectations and reality.

The Experience of Developing Countries


7.14    The experience of China in providing some social security to those who are outside the formal sector of the economy is of particular relevance to India for  a number of reasons.  First of all, China is a large – in fact larger – country by size and population with a number of provinces.  It has increasingly liberalised its economy, both internally and externally, and has moved away from a comprehensive system of basic social security, including employment and income, for all its population.  This has resulted in an enhanced sense of vulnerability and urgency for providing alternative systems of social security consistent with its market-oriented economic policies.


7.15    China’s social security system needs to be understood in terms of: (a) urban social security, and (b) rural social security.  The social security system for urban areas is rather well- developed and institutionalised as compared to the system being implemented in the rural areas.   As in India, social security in China too includes both the promotional schemes, directed to meet problems of deficiency, and protective ones, directed to meet contingencies.  However, again like in India, the former has received far more attention than the latter.

Urban Di Bao

7.16    The social security for the poor in urban China is based on household income and other indicators of the quality of life.   The beneficiaries are provided a Minimum Living Allowance called Di Bao in Chinese. Until the late 1990s, the urban di bao programme was enforced by various urban local governments.  However, the programme was adopted as a national policy in the late 1990s.  The criterion for eligibility is that the per capita household income of the prospective beneficiary should be below the so- called “di bao level”. The eligibility is determined on the basis of stringent tests, including the quality of housing of the applicant and the type of school where his/her children are sent, with the local authorities enjoying considerable discretion. There is no single di bao for all urban areas and there are   considerable variations in the allowance for different urban areas depending on the financial condition of the local government.  Some rich urban local governments do not get any financial assistance from the central government while some backward regions get 100 per cent Central financial assistance.  The urban di bao varies from around 300 to 320 Yuan per person per month in Guangzhu and Shenchuan to 150 to 180 Yuan in cities in poorer regions such as Huhehaote (Inner Mongolia), Taiyuan (Shanxi), Guiyang (Guizhou) and Lanzhou (Gansu).  This is approximately equivalent to Indian rupees 1,710 to 1825 and 855 to 1,025, respectively.  Apart from the cash component, the di bao also includes other benefits like preferential access to such services as healthcare and children’s education.


7.17    Ever since the introduction of the urban di bao as a national policy, there has been a steady increase in the number of beneficiaries in China.  By the end of 2003, this number was around 22 million, with a total expenditure of 15 billion Yuan being incurred on the programme.  The Central government’s share in the programme was 61 per cent while the local government contributed the remaining 39 per cent.  Most of the beneficiaries were workers including those currently employed,  laid-off workers, those who had  left their jobs (though were formally holding their posts), and the unemployed and dependents. 

Rural Social Security System in China

7.18    It must be mentioned at the outset that the incidence and intensity of poverty and human deprivation is far lower in China than in India.  The policies followed immediately after the 1949 socialist revolution as well as the growth-oriented policies followed in China since the early 1980s are jointly responsible for such a state of affairs.  The socialist period   brought about a ‘levelling up’ of the lower sections of the population in terms of employment, income, health and education. The population policies being followed since the late 1970s have helped reduce the population growth by limiting the number of children per couple to one or two.  The country is today on the verge of achieving population stabilisation.  This should be viewed along with China’s low Infant Mortality Rate of 30 in 2003 as against India’s corresponding rate of 63.  The incidence of absolute poverty is also low in China, even according to alternative estimates.   While the official estimate of absolute poverty was less than 3 per cent (28 million people) in 2002, according to the international poverty line (one dollar per capita per day), this figure was 17 per cent (in 2002-03) or around 200 million. In contrast,  the official estimate of the incidence of poverty in India was  26 per cent or 260 million (in 2000) whereas  as per the international poverty line, it stood at  35 per cent or 350 million in 2002 (UNDP, 2005). China’s poverty reduction programme is concentrated on 28 per cent of its county-level administrative districts.  But the limitations of an area-based programme, like the backward districts programme in India, is being realised there.  For instance, only 38 per cent of the total poor were found to be living in these counties.


7.19    Here China’s rural social security system is broadly divided into the promotional and protective schemes, with the objective of studying the coverage of both and examining whether the protective social security cover  corresponds to the proposed social security cover for  workers in the informal economy.


Old Age Pension


7.20    Counties in all provinces of China have some form of rural pensions.  The contributions come from beneficiaries, and the local governments as well as the Central government.  The amount of pension given is not available mainly because it varies across counties.  While various schemes are reported to be in operation, the main scheme was launched by the Ministry of Civil Assistance in 1991, and transferred to the Ministry of Labour and Social Security in 1997.  In 1997, it had 82.8 million subscribers on a voluntary basis.  However, the scheme is reported to have been stalled since 1999 when Central government support to it was reduced.  By 2003, only 54.3 million people were on the rolls of this programme.


7.21    In addition, to the above, the Town and Village Enterprises (TVEs) provide pension schemes to their workers through commercial insurers. In some rural areas, the TVE pension schemes have reportedly been gradually unified and merged with the state pension schemes.


7.22    In some provinces, “pensions” are provided to parents of the older child or two daughters as a non-contributory social assistance measure.


7.23    In view of the plethora of schemes that are operative with varying levels of benefits across counties in China, the Central government has been working on a scheme called rural di bao or Minimum Living Allowance (discussed later).


Disaster Relief


7.24    Another protective cover is designed to meet the contingency of natural disasters.  This is given to the affected population in the form of cash or kind and consists of: (a) a temporary home, (b) 7-10 days worth of food, (c) a minimum of two pairs of exchangeable clothes/garments, (d) a bed or cot, and (e) clean drinking water.  The expenditure incurred on this programme in 2003 was over 8 billion RMB.


‘Wubao’ or Five Guarantees Programme (Social Assistance to the Destitutes)


7.25    This should be considered as a protective social security programme as it is given to those who are unable to work and have no other source of income including family support.  The beneficiaries are provided with the five basic guarantees of food, clothing, housing, medical care, and funeral expenses. Educational expenses of orphans are also covered under the scheme.  The Wubao scheme aims to guarantee the beneficiaries a living standard that is equivalent to the local average.  Nearly 3 million people were covered under the scheme in 2002 with 84 per cent of the beneficiaries living in the community and the remaining in old age homes or in similar arrangements.


7.26    In view of the eligibility criteria and the nature of benefits offered by the scheme, it appears to be a sort of social assistance for destitutes.  In India, the equivalent of this scheme is the old age pension under the National Social Assistance Programme plus the Antyodaya Anna Yojana under which the chronically poor are given adequate foodgrains at a highly subsidised price.  However, the Wubao is more comprehensive in terms of meeting the basic requirements of the destitute poor.   Around 30 per cent of the rural people eligible for Wubao have reportedly not yet been brought under the ambit of the scheme.   Its per capita benefits have been estimated to be equivalent to one-half to two-thirds of the per capita average provincial rural income.


Health Insurance through Community Medical Schemes (CMS)


7.27    Until the commune system was disbanded,   rural healthcare in China was taken care of by the local institutions (communes, village and town bodies).  The public care system today has, by and large, given way to semi- or fully private systems.  While people buy health insurance products on a voluntary basis, that leaves out the relatively poor.  This problem is being tackled by the introduction of Community Medical schemes (CMS’) with the government providing a part of the contribution.  In fact, the contributions are in the nature of “10+10+10”, i.e. equal contributions of ten Yuan each by the beneficiary, the local government and the Central government.  The scheme is reportedly successful with the government seriously considering this risk-pooling mechanism.


7.28    It is a coincidence that the contribution under the CMS resembles our proposal for a national minimum social security for workers in the informal economy. This perhaps reflects the similarity of situations in the two countries and the risks associated with such a basic need as healthcare.


7.29    As in India, a number of other promotional social security measures aimed at reducing rural poverty are also operational in China but which are not being discussed here.  However, the emerging experiment of instituting a Minimum Living Allowance in rural areas or rural di bao (since urban areas have a similar and well-established social security system) is a positive step towards extending the coverage of protective social security. 

Rural Di Bao

7.30    Firstly, it needs to be noted that social security schemes in China vary across regions since they set the standards and often fund the schemes.  The benefits under the rural di bao scheme are a combination of: (a) monetary assistance, education fee waivers, additional educational subsidies, lower utility fees, lower medical fees, lower house rental fees, etc.  The system is broadly modelled on the urban di bao scheme, which has been implemented nationally since 1999.


7.31    The eligibility for the rural di bao scheme is determined through a set of tests to assess the income, assets and living conditions of the beneficiaries.   Rural households with a combined annual income of less than the regional di bao standards are eligible for di bao subsidies.  The selection of the beneficiaries is done by a local farmers’ committee, which has to be approved by the Ministry of Civil Assistance.


7.32    The floor level for the rural di bao has been set by the Central government at RMB 637 per annum per beneficiary and the provincial governments are encouraged to top it with their own contributions on the basis of their local fiscal capacities and economic conditions.  The variation in 2004 was between RMB 1000 and 3,120.  In Indian terms, this equals Rs. 6000/- to Rs. 18,720/- per annum or Rs. 500/- to Rs. 1560/- per month per beneficiary.  This is a valid comparison since the price differences for wage-goods in China are not very different from those in India.


7.33    The coverage under the rural di bao scheme  was reportedly  4.38 million beneficiaries by 2004, which  is equivalent to 4.4 per cent of the poor (as per the international poverty line) or 10 per cent of the poor (as per the official poverty line).


7.34    The stringent eligibility conditions and the coverage of the poor by the rural di bao scheme indicate the Chinese government’s objective of providing a minimum of social protection to the most vulnerable in the rural society.  The coverage under the scheme is expected to increase as more provinces increase their efforts to extend the di bao system for their resident populations.



The Current Indonesian Social Security System


7.35    As in most other developing countries, the social security system for workers in Indonesia mainly covers those in the organised/formal sector of the economy.  This covers only 10 to 15 per cent of the total workers in the country.  Although community schemes for health care were initiated in Indonesia, they did not succeed partly because their administration was left in the hands of the local governments.


7.36    The current thinking in Indonesia is veering towards a universal social security system for all workers including those in the informal sector.  While the market for various social security covers run by private agencies will continue for those who have the purchasing power, the proposed national social security will be a statutory one based on contributions.  As of now, the Commission understands, the proposal is in the stage of a draft bill, which is expected to be enacted soon.  The main features of this scheme are given below.

The Proposed Indonesian National Social Security Reform Bill

7.37    In view of the major drawbacks of the current social security system, Indonesia has come out with a National Social Security Reform Bill. This new Indonesian National Social Security System, called Jamsosnas, will be established in accordance with what is called ‘the three-pillar approach’.  These pillars are: (1) social Assistance for citizens who lack the financial means or access to their contingency needs (like natural disaster, social unrest, illness, old age or loss of employment). It will be financed by state budget or by community funds; (2) a compulsory social insurance scheme, financed by employers and employees; and (3) a voluntary private insurance, in which a person may opt for additional insurance.


7.38    The new scheme is based on the following principles:


a)     Mutual assistance: The wealthier participants will assist those who are less fortunate; those with low risks will help those with high risks and those who are healthier will help those who are not so healthy.


b)     Compulsory membership: All Indonesian residents will be required to participate in the Jamsosnas scheme, in various stages.


c)      Trust funds:  The funds collected from participants will be managed by the National Social Security Provider Agencies in a trust fund which will be used optimally for the welfare of all participants.


d)     Not-for-profit:  The management of this trust fund would not be profit- oriented and the funds would be used to meet the needs of all participants.


e)     Openness, risk aversion, accountability, efficiency and effectiveness:  These management principles will become the basis for the national social security programme.


f)        Portability: The participants will continue as members of the National Social Security Scheme regardless of their income and employment status, and will continue to receive benefits as long as they fulfill the eligibility criteria for receiving these benefits.


7.39    The scheme proposed by the Indonesian government is comprehensive and will consist of benefits pertaining to retirement, healthcare, death, and worker disability, that cover all Indonesian citizens, regardless of whether they are formal workers, informal workers or self- employed.  Although the official contribution rates for the different Jamsosnas schemes are still unknown, it is estimated that the total cost of the programme for formal sector workers will vary from 17.29 per cent to 18.80 per cent of the base salary. A National Social Security Board consisting of members of the government, employers’ organisations and labour organisations will be set up to oversee the programme. The scheme consists of: (a) The Old Age Pension Programme, (b) The Old Age Saving Programme and, (c) The National Health Insurance Scheme.


The Old Age Pension Programme


7.40    This is a long-term programme wherein the participants make regular contributions for availing of pensions for old age and disability, widow/widower pensions and child pension. The fixed minimum pension under the proposed old age and disability pension plan has been set at 70 per cent of the minimum wage; widows/widowers (until they re-marry or start working full-time) and children (until they start working full-time or reach 23 years of age) will receive a minimum pension of between 40 per cent to 60 per cent of the local minimum wage. A worker who has contributed for a minimum period of 15 years and a worker who dies before the retirement age (55 years) will receive a monthly pension; workers who retire before the 15 years contribution will be given only the accumulated amount and the investment returns, and not a monthly pension.


7.41    The contribution level for the pension programme will be different   from the contribution from formal sector workers, which will be shared with their employers on a 50:50 basis and will subsidise the pension received by informal sector workers. The latter will contribute a flat rate amount to be determined later. The government plans to cover pensions for those who are too poor to contribute to the scheme through subsidies from the State budget.


The Old Age Savings Programme


7.42    This is a long-term compulsory savings programme in which participants will be entitled to receive benefits before or upon reaching retirement age and will be run by a public social security agency. In the event of the death of a participant, his or her spouse, children or official inheritors will be entitled to receive the benefit. The benefits will be provided as a lump-sum payment (accumulated contribution plus the investment returns on the contribution) if a worker dies, becomes permanently disabled, or retires. At the earliest, workers may start withdrawing money from their accounts five years before they reach the retirement age and may even use a portion of the money saved in their accounts as a loan after they have made contributions for a given period. The contribution rate is the same as that of the Old Age Pension Programme.


The National Health Insurance Scheme


7.43    This scheme theoretically covers the health expenditure for all Indonesian residents, including upper income Indonesians and foreigners working in Indonesia.  Formal sector workers must pay a 6 per cent pay roll tax, split equally with their employers. Retired persons will also pay the 6 per cent tax, which will be deducted from their pension. The contribution rates of informal sector workers and the self-employed will be decided later. The Government will pay contributions for low-income groups and the unemployed. The programme will be implemented in stages, first for formal workers and then for informal and self-employed workers.


7.44    The programme is designed to provide comprehensive health benefits like primary health services, referral health services and in-patient services. These services will be delivered by both public and private hospitals and health clinics, as long as they agree to the terms and conditions stipulated in the service contracts that they sign with the National Health Insurance Provider Agency. The programme will be administered by the National Health Insurance Provider Agency, which will be supervised by the National Social Security Board. The agency’s management will be appointed for a period of five years at the agency’s shareholders’ meetings.



Development of Social Security in Tunisia

7.45    The experience of Tunisia in providing a modicum of social security to a great majority of its working population is not widely known needs to be highlighted.  A recent ILO study (Chaabana, 2002) has highlighted the main features and functioning of this system that should be counted as one of the best practices in developing countries.


7.46    After Tunisia gained independence, social assistance for the destitute and vulnerable classes was organised by the State within the framework of the social solidarity fund, which was financed, in part, by individual and corporate donations. In addition, a medical assistance system was established to provide care to the destitutes in public health establishments free of charge. The public sector came up with social security schemes such as provident society (1898) for civil servants and employees, family allowance (1918), supplementary benefit for single-income households (1944) and provident scheme (1951).


7.47    Until the 1960s, social security in the private sector in Tunisia was mainly confined to the formal sector in industry, trade and services.  However, major developments took place since the 1960s, resulting in extension of the coverage to larger groups of workers including agricultural labourers and the self-employed. The first scheme in the private sector was initiated in 1960 for employees in industry, trade and the services.  The scheme was extended to students in 1965 (with a healthcare and family allowance component), to full-time agricultural labourers in 1981, to self-employed agricultural and non-agricultural workers in 1982 and to Tunisian workers stationed abroad who had  not been covered by any social security agreement in 1989.

Current Social Security System

7.48    The current social security system in Tunisia is structured around two components: (1) social security, which is gaining importance and currently applies to 83[1] per cent of the employed population, and (2) social development schemes, which are intended for persons who do not have any social security coverage.


Social Security


7.49    The entitlement to benefits under these schemes is also open to the spouse and dependent children of the insured person in addition to the latter himself. As far as survivors’ pensions are concerned, benefits are paid in the event of death while healthcare benefits are offered to the dependent relatives in the ascending line, provided that they are not covered by any social security scheme and that they are effectively dependent on the employee. There are two funds under state supervision which manage the statutory social security schemes: the National Pension and Social Contingency Fund for the public sector and the National Social Security Fund for the private sector. The boards of administration of these funds are composed on a tripartite basis (the State, employers and employees).



Two Categories of Risk Covered

Core Benefits Found in All Schemes


7.50    The core benefits of the social security system are: (a) health insurance to cover sickness, (b) maternity cover, (c) old age pension, (d) life insurance, (e) disability cover, and (f) employment injury.


7.51    The sickness allowance in the public sector amounts to full pay during the first two months and half pay for the following periods; maternity benefit is granted at the full wage/salary rate for the first two months and can be complemented by four months post-natal leave on half pay.


7.52    In the private sector, sickness allowance amounts to two-thirds of the declared wage or income within the limit of the ceiling of twice the inter-trade minimum wage in most cases. Maternity benefit is granted for one month and can be renewed fortnightly on the basis of a doctor’s certificate. It is calculated on the same basis as the sickness allowance.


7.53    As regards benefits in kind, the social security schemes provide a full range of healthcare services for the insured person and dependent family members (non-insured spouse, dependent children and parents), including costly care such as haemodialysis, cardiovascular surgical operations or organ transplants. Insured persons in the public sector have the choice of  either receiving a refund of expenses incurred for healthcare (limited to long-term illness and surgery or extended to all illnesses), or receiving free care provided in hospitals and health institutions under the aegis  of the Ministry of Health. In the case of insured persons in the private sector, healthcare is provided in the hospital and health institutions under the aegis of the Ministry of Health or in the polyclinics of the National Social Security Fund.


7.54    The branch responsible for granting disability and old age pensions or survivors’ pensions in the event of the death of the insured persons involves certain qualifying ages and periods. These are determined according to the length of the periods since the insured persons have been paying contributions and the amount of declared wages or incomes, with a guaranteed subsistence minimum, as the case may be. The replacement rate varies from 35 per cent for 15 years to 90 per cent for 40 years of contributions in the public sector, and from 40 per cent for ten years to 80 per cent for 30 years of contributions in the private sector.


7.55    Employment injury and occupational disease insurance covers all categories of income earners without any restriction whatsoever, including those who are not covered by the other classes of insurance such as seasonal agricultural workers or domestic workers. It also covers other categories, which are not considered to be income earners such as students in technical and vocational training, and apprentices. Self-employed workers can subscribe to the employment injury insurance voluntarily. This system of compensation for employment injury and occupational diseases facilitates the grant of a number of benefits including healthcare, daily allowance for temporary incapacity, acquisition of artificial limbs, pension in the event of permanent incapacity or survivor’s benefit in the event of death.

Social Security Insurance with a Limited Scope

7.56    This category covers family allowances, which concern only public employees, income earners in the non-agricultural private sector, and income earners in the formal sector (agricultural enterprises and co-operatives- and large farms). Family allowances in particular, comprise the following:


a)     Allowances granted exclusively for the first three children: The amounts of these allowances are tapered on a sliding scale depending on the birth order of the child and ranging from 7,320 DT (1 DT = 0.7 US$) per month for the first child to 5,693 DT per month for the third child.


b)     Supplementary allowance for single-wage households (only one income from an occupational activity): The amount of this supplementary allowance varies according to the number of children qualifying for family allowances – from 3,125 DT per month for one child to 7,815 DT per month for three children.


c)       Death allowance: This is a non-recurrent benefit paid once to the eligible survivors of a deceased insured person and can amount to 30 times the monthly wage/salary. This benefit is provided for public employees, income earners in the non-agricultural private sector and self-employed workers.




7.57    The social security schemes are financed almost exclusively by the employers’ and workers’ contributions, whose rates vary from one sector to another depending on the consistency of the benefits guaranteed and the ability of the populations concerned to pay contributions. This rate thus amounts to 23.25 per cent of the wages/salaries in the case of income earners in the non-agricultural private sector, whereas it does not exceed 6.45 per cent of a flat-rate wage in the case of agricultural workers.


7.58    The contributions of workers and employers are paid by the employers.  In the case of self-employed workers, the contributions to the respective social security fund are made directly.  In the case of workers, the recovery rate for contributions has been reported at 90 per cent while for the self-employed, it ranges from 47 to 66 per cent.


7.59    The Tunisian social security system is still reportedly generating surpluses though a deficit is reported in the scheme for agricultural workers.


Social Development and Social Assistance Programmes


7.60    These programmes are intended for low-income categories and persons who are not covered by any other social security scheme; they are run essentially either by the State or by associative bodies. They are financed through the State budget and by donations. State intervention takes the following forms:


a)     A programme of aid for needy families, which targets families below the absolute poverty line (currently 109 DT) and provides  for the granting of permanent aid of 109 DT per quarter;


b)     A similar programme targeting the elderly and disabled persons in need;


c)      An allowance for  families who agree to take in an elderly person;


d)     Free medical assistance intended for under-privileged groups of the population who are not covered by any other social security system (old people without support, the unemployed, seasonal agricultural labourers, etc.) and which comprise the following two categories of aid:


                    i.            Free healthcare in the public health structures for needy families (150,000   beneficiaries), selected according to a poverty record drawn up on the basis of in-depth social surveys;


                  ii.            Healthcare at reduced rates in the same structures for families with limited incomes (a maximum of double the SMIG, depending on the composition of the family), which are not covered by any other social security scheme (500,000 beneficiaries).


7.61    In order to benefit from this form of assistance, applicants must meet two conditions.  One relates to a ceiling on family income and the other to the absence of membership in any social security scheme.


7.62    The beneficiaries will receive the full range of care provided by the health and hospital structures under the responsibility of the Ministry of Health. The public health system has a network of healthcare institutions at the national, regional, district and local levels.  It boasts of one basic (primary) healthcare centre for every 4,889 inhabitants that should be counted as a remarkable achievement.


Extension of Social Security

7.63    The number of persons liable to be covered under a social security scheme was estimated in 1999 as 83 per cent of the population in employment. The remaining employed population not yet covered by social security legislation includes casual and seasonal agricultural labourers, workers on development sites (unemployed persons employed in community work), domestic employees, home helpers, religious officials and the unemployed.


7.64    The two social security schemes governing the formal sector, i.e., the public sector scheme and a scheme for income earners in the non-agricultural private sector, have registered the best social coverage. However, coverage of other sectors such as the self-employed, agricultural and non-agricultural workers and agricultural labourers has not been equally successful. In order to increase coverage in these schemes, the following measures have been taken with varying degrees of success: inspection and compulsory affiliation procedures; free medical assistance subject to verification that the applicant was not insured under a social security scheme; and schemes being adapted to the needs of injured persons such as fishermen employed on small boats and self-employed fishermen.


7.65    The objective is to extend and improve coverage of social security by conducting studies and adapting schemes to the needs and financial capacities of the categories of persons; modifying the conditions for determining and recovering contributions taking into account the specific characteristics of the populations concerned; and consulting the representatives of the target population and of employers at all stages during the establishment of the system.

Table 7.1: Percentage of Workers Covered in Various Sectors   





Non-agricultural income earners



Agricultural labourers



Non-agricultural self-employed



Agriculture self-employed






Total private sector including agriculture



Total public sector



Total coverage of workers



Source: Chaabana, 2002.



7.66    Brazil is a middle-income country with a per capita income that was 2.7 times that of India in 2003 (7,790 in terms of PPP$) and a population of 165 million.  The country is characterised by one of the highest level of economic inequalities in the world. Democratic forces gained strength in the 1980s and resulted in a new constitution in 1988 with specific provision for social security.  A recent ILO study (Schwarzer and Querino, 2002) has observed that, despite labour market informality, Brazil has achieved remarkable benefit coverage among the elderly over the last decades.  The two elements of this success are the Rural Social Security programme and the Social Assistance Pensions, which are discussed here.


7.67    At the outset it must be mentioned that as in India and elsewhere, there is a well-established social security system for all workers in the organised/formal sector of the economy in Brazil.  In addition, there are private social security funds (as well as those by initiated by public enterprises), which have voluntary membership involving defined contributions or benefits.


7.68    Both the Rural Social Security Programme as well as the Social Assistance Pensions are covered under a general scheme called RGPS.  It is managed by the Social Insurance National Council which has a tripartite co-administration including representatives of the trade unions, employers and beneficiaries.  Its mandate is to provide social security for all residents in Brazil. By 2001, 30 million people including urban residents were covered under the RGPS.

Rural Social Security Programme

7.69    Although the rural pension scheme was started in the early 1970s, the Rural Social Security Programme has gone through profound changes with the issuance of the new Constitution of 1988.  The important changes are: (a) the right to an old-age pension has been extended to the spouse, (b) the age limit for old-age pension has been reduced by five years to 60 and 55 years for men and women, respectively (as against 65 and 60, respectively in urban areas), (c) the minimum benefit has been fixed at an amount equal to one official minimum wage, and (d) enhancement of widow’s pension.


7.70    Given the poverty and working conditions of rural workers, an innovative system for contribution was devised.  Under this, individual beneficiaries were not required to make any monetary contribution from their earned income but required the first purchaser of rural production to pay a contribution of 2.2 per cent of the primary value of the produce.  Another innovative feature  is that the beneficiaries were required to document only the years of work instead of years of contribution to fulfill the minimum insurance period to qualify for a pension.  It has been reported that this quantitative and qualitative enhancement of the rural scheme has had a deep social impact since the 1990s with several positive outcomes like poverty alleviation, provision of access to and substitution of social services, improvements in the quality of life symbolised by better housing facilities and reduced rural-urban migration.

Social Assistance Programme

7.71    During the early 1990s, new legislation enabled changes in social policy and principles to guide such social policy.  All the scattered government foundations were closed down in 1995 and the position of a Social Assistance Secretary was created at the Federal Social Security Ministry with the responsibility of co-ordinating the formulation and execution of policies.  Social assistance was to be decentralised, wherein the Federal, Regional and local levels would take part in a joint design of policies and co-financing, while different groups of civil society would participate through  the social assistance councils on the three Federal levels.  On each level, a basic document would be prepared to define social assistance policy, based upon a comprehensive diagnosis of local problems and needs.  Between 1995 and 1998, several instruments were introduced, such as the creation of a National Social Assistance Policy, and the issuance of Basic Operational   Norms to institute bipartite and tripartite administrative commissions, which were to promote dialogue among the three government levels, determine the scope of action of each level, settle financial issues, and implement the participative council scheme at the three levels.


7.72    Among the most important programmes are the “Continued Assistance Services” (SAC), which include different types of support.  These are: (a) home care for the aged and disabled, (b) social services for the disabled, (c) day care and nutrition for children, (d) cash transfer to send those children to school who were working earlier, and (e) social assistance pension for the aged.  The eligibility for all these social assistance programmes was determined for those whose per capita family income is below one-half of the official minimum wage. However, since 1996, the fastest growing programme has been the social assistance pension scheme.

Social Assistance Pension Scheme

7.73    The social assistance pension scheme, known as “Benefício de Prestacao Continuada” (BPC), has two target groups: (i) people aged 67 years or more, and (ii) disabled people, including those with genetic disability. In both cases, it is stipulated that the per capita family income of the benefit applicant should not surpass one-quarter of the legal minimum wage. No previous contribution to social security is needed to qualify for the BPC and the new disability definition includes a broader range of disabled persons, who had never been previously a target of specific public policies in Brazil. However, a BPC is only accorded to a person if in his/her family; no further member receives another social security benefit or is enrolled among the unemployment insurance beneficiaries.


7.74    The BPC is paid out by the Social Insurance National Council (called INSS) at the same dates and using the same payment channels (commercial banks and post offices) as for normal pensions. The most important source being used for the BPC since 1996 is the “Contribuicao para o Financiamento da Seguridade Social” (COFINS), one of the taxes earmarked by the 1988 Constitution to finance the social security budget. Due to the extreme difficulty in documenting the applicant’s income—which is informal or very irregular—the law requires that the BPC benefit candidate present  a declaration signed by an authority containing the information that the per capita family income of the candidate is within the allowed range. The applicant can submit his/her application directly to the INSS by using the standard application forms available at any INSS office or any post office. Once the reform of the social assistance pension came into force in 1996, a significant coverage extension was achieved. As of 2001, a total of 2.1 million people were covered under the social assistance pension scheme.


7.75    One of the major achievements of the new social security policy that is being implemented in Brazil since the early 1990s is the remarkable coverage of people with old age pensions.  The ILO study mentioned above reports that 77 per cent of persons aged 60 years and above collected a benefit from any one of the social security schemes as of 1999.

Concluding Remarks


7.76    The international experience that we have briefly reviewed here suggests that a country need not wait till it is fully industrialised with high levels of per capita income to extend social security to those who have so far been excluded from its ambit.


7.77    Each country has adopted the social security systems and means of financing dictated by its internal economic and political conditions.  There is no ‘one-size-that-fits-all’ remedy for extending social security cover to the population.


7.78    In countries that have decided to extend social security cover to their citizens, the initiative has come from the State in terms of the design of the scheme and methods of financing used.  This reiterates the critical role that the state will have to play in extending social security.


7.79    Large Asian countries such as China and Indonesia have extended the social security cover with significant initiatives.  While the efforts are still in the early stages, they provide important lessons for India and emphasise the need for extension of social security in an increasingly globalising world. India, therefore, cannot and should not wait to extend social security to those who have been excluded from its coverage so far.




Towards a Universal Social Security System


8.0       The effectiveness of a national minimum social sec