The Finance Minister Arun Jaitley’s announcement of three insurance schemes for the poor is a classical case of old wine in new bottle. It is pertinently more a case of oversight of plethora of existing schemes and similar announcements made by his predecessors including two stalwarts from Atal Bihari Vajpayee Government.
Instead of consolidating diverse social security schemes, Mr. Jaitley added three more to the existing basket of social security schemes.
One can group Government-funded Social security insurance schemes into three categories – health insurance, life insurance and pension insurance.
As many as 10 statutory insurance schemes from each of these categories are already operating under the Unorganised Workers’ Social Security Act 2008. These include Rashtriya Swasthya Bima Yojana (RSBY), Aam Aadmi Bima Yojna (AABY), National Family Benefit Scheme and Indira Gandhi National Old Age Pension Scheme (IGNOAPS).
The flagship scheme RSBY has ironically got a raw deal in the 2015-16 Budget through name change as well as massive cut in funds allocation.
Moreover, in his anxiety to play the social welfare card to outwit UPA, Mr. Jaitley overlooked the urgency for the much-delayed bank and non-banking deposit insurance reforms. These are urgently needed to shore up public savings and to strengthen the stability of the non-performing assets-strained financial system.
To decode social security-centric political rhetoric in the country, start with Mr. Jaitley’s budget speech. He stated: “A large proportion of India’s population is without insurance of any kind - health, accidental or life. Worryingly, as our young population ages, it is also going to be pension-less.
“Encouraged by the success of the Pradhan Mantri Jan DhanYojana, I propose to work towards creating a universal social security system for all Indians, specially the poor and the underprivileged.
“The soon-to-be-launched Pradhan Mantri Suraksha BimaYojna will cover accidental death risk of Rs 2 lakh for a premium of just Rs12 per year. Similarly, we will also launch the Atal Pension Yojana, which will provide a defined pension, depending on the contribution, and its period. To encourage people to join this scheme, the Government will contribute 50% of the beneficiaries’ premium limited to Rs1,000 each year, for five years, in the new accounts opened before 31st December, 2015.”
Mr. Jaitley continued: “The third Social Security Scheme that I wish to announce is the Pradhan Mantri Jeevan Jyoti Bima Yojana which covers both natural and accidental death risk of Rs 2 lakhs. The premium will be Rs 330 per year, or less than one rupee per day, for the age group 18-50.”
A reader would get a familiar ring after comparing Mr. Jaitley’s announcements with the ones made by Jaswant Singh in his budget speech for 2003-04.
Mr. Singh stated: “For a large majority of our less advantaged citizens, easy access to good health services is just not there. In order to correct this and offer health protection, of some choice, the public sector general insurance companies have been encouraged to design a community-based universal health insurance scheme (UHIS) during 2003-04.
Under this scheme, a premium equivalent to Re.1 per day (or Rs.365 per year) for an individual, Rs.1.50 per day for a family of five, and Rs.2 per day for a family of seven, will entitle eligibility to get reimbursement of medical expenses up to Rs.30,000 towards hospitalisation, a cover for death due to accident for Rs.25,000, and compensation due to loss of earning at the rate of Rs.50 per day up to a maximum of 15 days. To make the scheme affordable to BPL families, the Government has decided to contribute Rs.100 per year towards their annual premium. Full details will be publicized shortly.”
He added: “I request Hon’ble Members to give this scheme the widest possible coverage in their constituencies. The benefits Sir, are real.”
He also announced insurance pension scheme named Varishtha Pension Bima Yojana for any citizen about the age of 55 years, apart from bring all powerloom workers under the Special Insurance Scheme, which will provide them insurance cover against death, accident and disability.
Mr. Singh’s predecessor Yashwant Sinha, had, similarly, announced Janashree Bima Yojana for the poor.
In his budget speech for 2000-01, Mr. Sinha stated: “More than one third of our population still lives below the poverty line. There is an imperative need to extend some social security cover to the poorest sections of our society. I have decided to introduce a new scheme of group insurance, “Janashree Bima Yojana”, under which beneficiaries will have insurance cover of Rs.20,000 in case of natural death, Rs.50,000 in case of accidental death or total permanent disability and Rs.25,000 for partial permanent disability due to accident.”
He added: “This scheme will lay a firm foundation for insurance cover to the poorest in our country.”
In January 2013, the firm foundation got knocked when Janashree Bima Yojana was merged with AABY. The latter scheme was announced by P. Chidambaram in his budget speech for 2007-08.
In the budget speech for subsequent year 2008-09, Mr. Chidambaram stated: “The Unorganised Sector Workers' Social Security Bill, 2007 is before Parliament. In anticipation of the Bill being made into law, Government has introduced three schemes that are designed to provide social security to workers in the unorganised sector in a phased manner.
These are: AABY, RSBY and IGNOAPS. The last one was enlarged with effect from November 19, 2007 to include all persons over 65 years falling under the BPL category.
Of all schemes launched with political élan over the years, the one that is popular and has received recognition is RSBY. It covers Below Poverty Line population. Its ambit is now lately being widened to cover informal sector workers such street vendors, domestic workers and the workers who have worked for more than 15 days under MGNREGS.
According to an official RSBY evaluation committee, the scheme is being implemented in 24 states in India today, with a total of 3.75 crore card holders, providing coverage to a total of 11.25 crore beneficiaries at an average premium of approximately Rs. 400. A total of 25 lakh beneficiaries have availed hospitalization services at an average claim payout of approximately Rs. 5000 in 2013-14.
RSBY is smart card-based cashless health insurance scheme. The Centre pays 75% of the cost (premium) of the scheme with the balance 25% borne by the States. The Centre’s share of the cost is 90% in case of Jammu & Kashmir and North Eastern States. It provides annual hospitalization cover up to Rs. 30,000 for a family of five members through health insurance companies. A family has to pay only Rs 30 as registration fee to get the RSBY smart card.
It is not clear what has prompted Modi Government to rename RSBY as Social Security for Unorganised Sector Workers and prune down drastically the allocation of funds.
According to the Expenditure Budget Volume 2 of the 2015-16 Budget, “Erstwhile RSBY is now divided into two distinct components namely social security card for unorganized workers and provision for health services. As per the Government decision, the card would be provided by Ministry of Labour and Employment and health services would be provided by Ministry of Health and Family Welfare.”
The total allocation of funds for RSBY in 2015-16 budget is Rs 130 crore. Of this Rs. 30 crore is provided under Labour Ministry and the balance Rs 100 crore under Health Ministry.
The revised allocation for this scheme for 2014-15 is Rs 20 crore under the former ministry and nil under the latter ministry. UPA Government had spent Rs 887.55 crore on this scheme 2013-14.
The Budget stance on RSBY is at various strong backing and recent initiatives, notwithstanding the scheme’s deficiencies.
RSBY committee, for instance, in its draft final report submitted in September 2014 concluded: “Given that RSBY is a very significant intervention in the field of healthcare and if that intervention is to achieve positive results, it should be governed by norms which promote good health practices. The writing on the wall is clear enough. But do we have the will to act upon it that remains to be seen.”
The High Level Expert Group (HLEG) Report on Universal Health Coverage for India also pitched for upgradation of RSBY in its report released in November 2011.
HLEG recommended: “All government funded insurance schemes should, over time, be integrated with the UHC system. All health insurance cards should, in due course, be replaced by National Health Entitlement Cards. The technical and other capacities developed by the Ministry of Labour for the RSBY should be leveraged as the core of UHC operations – and transferred to the Ministry of Health and Family Welfare.”
Mr. Jaitley has steered cleared of visionary recommendations of HLEG that cover all aspects of healthcare including targeted increase in allocations for health sector in the annual budgets.
There also several non-statutory insurance schemes which provide for compensation to accident victims. The Department of Commerce, for instance, operates Personal Accident Insurance Scheme (PAIS) for growers who cultivate plantations. Similarly, The Kisan Credit Card issued by public sector banks is bundled with PAIS, health insurance and assets insurance.
As regards the health insurance schemes conceived and implemented by the States, the notable ones are Karantaka’s Vajpayee Arogya Shree scheme, Andhra’s and Telangana’s Rajiv Aarogyasri Community Health Insurance Scheme and Tamilnadu Chief Minister's Comprehensive Health Insurance Scheme.
States also are implementing several other social security insurance schemes with or without any linkage with insurance. Haryana’s list of social security schemes, for instance, include Old Age Samman Allowance Scheme and one for Dwarfs and Eunuch. Under the 2nd scheme, Dwarfs and Eunuch are given allowance @ Rs 500/- per month per beneficiary.
The bewildering range of insurance and non-insurance linked social security schemes in fact calls for serious study on their consolidation to optimize their cost as well as benefits.
As regards statutory bank deposits insurance limit, it has remained unchanged since May 1993 at Rs 1 lakh per deposit. This is the maximum amount a bank would pay to a depositor in case of its liquidation irrespective of the size of actual deposit.
RBI subsidiary, Deposit Insurance and Credit Guarantee Corporation (DICGC), provides deposits insurance by regularly collecting a tiny premium from the specified banks for the deposits of all types.
When the UPA was at the helm, Finance Ministry had approved DICGC’s proposal for increase in the deposit insurance coverage limit from Rs. 1 lakh to Rs. 2 lakh.
In a reply to question raised in Rajya Sabha in March 2013, the Ministry also disclosed that it had approved DICGC’s proposal to introduce risk-based premium for deposit insurance.
The approval was given with an advice to DICGC “to move to fully risk-based premium over a period of 3 years to moderate hike in the premium.”
This proposal has not been implemented till today as can be confirmed by visiting the websites of DICGC, RBI and the commercial banks.
A DICGC official, when contacted, pointed out that the deposit insurance cover can be hiked only when the Government amends DICGC Act and issues fresh rules. No gazette notification has been issued so far to implement approved DICGC proposals.
The middle class expected Mr. Jaitley to shed light on this crucial issue. The saving class expects him to unveil a proposal to extend insurance cover to all deposits collected by all entities from the public. He should have unveiled proposal to enact a depositors’ protection law on the lines of the ones enacted by 14States.
It here pertinent to quote report of the Working Group on ‘Resolution Regime for Financial Institutions’submitted in January 2014, “The deposit insurance framework existing at present has remained unchanged for a long time (as pointed out by several committees in the past). The Group recommends that along with setting up of a resolution framework, reforms in deposit insurance may also be taken up to bring the system on the lines expected by international benchmarks, viz., Core Principles for Deposit Insurance Systems.”
