After a long 22 years, the government on Thursday cut the mandatory contribution to the ESI medical care scheme for relatively low-wage earners to 4% from 6.5%, but this is a case of ‘too little, too late’.
With its income far exceeding expenses, the Employees State Insurance Corporation (ESIC) has over the years accumulated huge amounts as reserve funds — at the end of FY18, this was a staggering `74,348 crore, 70% of which not earmarked for any purpose and therefore, free.
While the surplus for FY19 was estimated at `9,351 crore — this would take the size of reserves to about `84,000 crore by the end of that fiscal —, it could have been still higher.
This is tantamount to profiteering, unbecoming of a government body like ESIC which is tasked with giving insurance cover and free medical care to those earning monthly wages of up to `21,000.
According to Thursday’s labour ministry release, effective July 1, an employee will pay just 0.75% of wage towards the ESI kitty, against 1.75% now, while the employer will contribute 3.25% (4.75%). This will help factories/businesses and workers to save `10,000-12,000 crore annually, but ESIC could still be generating surpluses.
A part of the ESI surplus funds are being used to create medical colleges and similar other infrastructure (but most remain invested in fixed income instruments) but this barely justifies the overburdening of workers and firms — the take-home income of over 3.6 workers entitled to the ESI benefits are hit by high ESI contribution.
The massive reserve fund of ESI is invested in fixed income instruments:
59,857 crore in bank fixed deposits and14,491 crore in special deposits with the central government as at the end of March, 2018.
The surplus generated in FY18 was close to
15,000 crore. The ESIC has projected a lower surplus for FY19 because it saw the cost of medical benefits to jump 84% in the year to12,643 crore from `6,868 crore in FY18.
The government had, with effect from January 2017, enhanced the threshold limit of mandatory coverage under the ESI scheme to a monthly wage of
21,000 from15,000 earlier.