New Delhi: India is considering the option of providing workers unemployment insurance through government-owned insurance companies, said Harish Rawat, minister of state for labour and employment said in an interview on Monday.
The move will insulate workers from the potentially crippling economic fallout of losing their jobs.
“The proposal is still at the idea stage and is aimed at protecting the Indian workforce against sudden job loss,” Rawat added. A concept note is being prepared by the ministry to see whether the idea is feasible, he said.
Cover drive: Minister of state for labour Harish Rawat.
India already has an insurance scheme in place for workers, but this hasn’t really made an impact in its four years of existence largely because most people are unaware of it.
Nearly half a million people lost their jobs in the country between October and January, according to the Labour Bureau. While the situation on employment has improved in the first quarter of this year, with the addition of 280,000 jobs, unemployment and job losses are still a matter of concern for the government.
The current unemployment insurance scheme, the Rajiv Gandhi Shramik Kalyan Yojana, for instance, applies only to those employees who contribute to the Employees’ State Insurance (ESI) scheme. Most of the 10.2 million members of the ESI scheme are blue-collar workers.
The Rajiv Gandhi Shramik Kalyan Yojana provides 50% of a year’s salary to workers in case of retrenchment or closure of factories. To be eligible for this benefit, the beneficiary must have contributed to the ESI plan regularly for at least five years.
Only 2,731 people had benefited from this scheme up to 31 March this year mostly due to lack of publicity, said an Employees’ State Insurance Corp. official, who did not want to be identified.
Rawat admitted that the current scheme needs improvement.
Meanwhile, he said, the Labour Bureau “has been assigned the work to collect information and data to find out how it has affected the Indian employee. The data would help us to find short-time and long-term solution to the problem of job loss.”
The new unemployment insurance plan being considered, he said, could see the public sector insurance company, workers, and employers sharing the premium burden. “For insurance companies to enter the jobless insurance market, the scheme needs to be a feasible one. No details have been worked out yet and it is too premature to speculate the final product,” Rawat added.
An expert said the most significant failing of this new plan, like the current scheme, is that it ignores the informal or unorganized sector which provides jobs for nine out of 10 employed Indians.
Even in the organized sector, a large number of workers lose out on benefits because they are hired on contract and companies often do not report retrenchment or closure, said Ravi S. Srivastava, a professor of economics at Jawaharlal Nehru University. Nor does the country have a system to “identify the unemployed even in the organized sector”, he added.
India’s biggest job scheme, the National Rural Employment Guarantee Scheme, pledges to find work for an unemployed rural worker within 15 days of this person applying for a job.
“While both the rural worker and ESI card holders have some form of insurance it’s those in-between, workers employed in factories with less than 20 workers, that lose out because there is no scheme for them. It will be a welcome move to see this category of workers get some government benefits,” said Narottam Vyas, a Supreme Court advocate and treasurer of the Social Security Association of India, a non-profit organization.
Workers at electrified factories employing at least 10 people and those at unelectrified factories employing at least 20 are eligible for the ESI plan.