8/3/2019 Private Players in Social Security KARAN 13 14

1/2

PRIVATIZATION OF SOCIAL SECURITY: INDIAS STANDPOINT

Indias stand on private participation in social security

Currently, social security policy makers and administrators are engaged in a wide-rangingdebate to redress the problems in providing social security in the country. This debate hasthrown up various arguments on the efficacy of publicly managed social security schemesas opposed to privately managed schemes.

There is no standard model that can be adopted on this issue. In the Indian context the privately managed schemes can at best be considered as supplementary schemes after themandatory schemes managed publicly. The challenge of closing the coverage gap insocial security provisions has to be developed at two levels. The first level involves there-engineering of the institutional arrangements to increase efficiency. The second levelis to create an appropriate legislative and administrative framework for significantincrease in the social security coverage especially in the unorganized sector.

So far there has been little of public-private partnership (PPP) in delivery of socialsecurity in India. The public sector efforts have been largely orientated towards theorganized sector of employment which constitutes a small 8% of the total work force of about 400 million. Any attempt to cover the unorganized sector in a meaningful fashionwould require a reorientation of planning and implementation processes in view of thesheer numbers involved.

The UPA government intends to bring a bill this year (2011) in the winter session for private fund management of pension fund which is facing opposition from many quartersand especially the left parties. The left party leaders have also shot down the government

proposal that the public sector Life Insurance Corporation and State Bank of India beallowed to mange the pension funds for the first three years. There is also opposition tothe government proposal of parking pension funds in the stock market. They contend thatthere are too many risks involved in allowing private parties to manage such funds or even investing the corpus into the money / stock market. In a recent case, a serious fraudcame to light in the Seamens Provident Fund, a retirement fund for the employees of themerchant navy, which has been set up under a special Act of the Parliament. CentralGovernment Bonds of about Rs.93 crore (nearly 20 percent of the total corpus of thefund) were reported lost, not having been delivered by a broker from whom they were

bought. Police arrested the broker and his associates who had similarly duped several co-operative banks by failing to deliver securities for which payment had been received. Thecommissioner of the Seamens Provident Fund was removed on charges of negligenceand suspected participation in the fraud. Investigations are continuing. Agitated seamenwere assured by the government that their retirement savings would be protected,although how the losses would be made good has not been disclosed.

There have been certain developments in the PPP scenario in India in the recent past. Onthe initiative of the Delhi government, private players are being roped in to construct and

1

8/3/2019 Private Players in Social Security KARAN 13 14

2/2

maintain old-age homes. The aim is to provide better facilities to the senior citizens insuch homes as well as reduce financial burden on the cash-starved government.Secondly, a wide variety of new delivery mechanisms with innovative and revolutionaryapproaches, including public-private partnerships, must be developed: use of digitaldevices, smart cards, the comparatively inexpensive RFID technology, mobile telephones

for payments and claims, internet hubs in village internet kiosks, the eChoupals or theinnovative employment of dabbawallahs and postmen in delivering bank services to thedoorstep with hand-held devices. Given the dimensions of India, one must anticipatevarious technology revolutions skipping development stages experienced elsewhereand leapfrogging to new dimensions, also in the most remote rural areas, as the successstories of contract farming for high-value products and the marketing via Internet kiosksin villages clearly demonstrate.

The Health Insurance Scheme for Below Poverty Level (BPL) workers will cover 60million families progressively in the next 5 years. Ultimately, more than 300 millionworkers will benefit. A provision has been made for issuing a smart card, carrying a

unique identification number, to each of these families. Both public and private healthfacilities will be utilized to provide medical services and there would be cashlesstransactions to ensure that there is no harassment of the beneficiaries.

Commercial establishments and large enterprises (state run or private) provide socialsecurity for their workforce supplying primary health, housing and education for families and communities as well as taking responsibility for welfare functions and caringfor elderly ex-workers.

The project of implementation UID system (known as AADHAAR meaning 'support' or 'foundation') is one of the more visible PPP projects in India.

In a sense, the post-retirement benefits provided by the employers in the private sector made mandatory by state legislation amounts to public-private participation, as a part of the populations need of social security gets taken care of. There are instances of largeenterprises setting up their own pension trusts (referred to as voluntary superannuationscheme) with employee participation however realization of value of investment made by

participants is much less than would otherwise be possible in a well entrenched and professionally managed pension fund. There have been cases where certain workersunions from the state run PSUs especially from the oil & gas sector have taken recourseto litigation when results of the scheme have not been up to the projected figures.

2