This post is the third in a series on Social Security for the Indian Unorganised Sector. The series will look at the challenges in the current implementation of social security schemes in India, and aim to provide a comprehensive framework for effective design, ownership, governance and delivery. This series is based on the report “Comprehensive Social Security for the Indian Unorganised Sector: Recommendations on Design and Implementation” authored by IFMR Research – Centre for Microfinance & IFMR Finance Foundation.
The first post of this series identified several key issues in the design and implementation of social security schemes in India including fragmented ownership structure of social security schemes; the lack of coordination between different agencies precluding product innovation, development, and learning; multiple window architecture for accessing benefits; and problems with targeting and identification of beneficiaries. In this post, we propose principles and design elements for building a robust ownership and governance structure for social security programs in India.
Design Principles for an Effective Ownership and Governance Structure
There are three key design elements that will be essential in a well-functioning ownership and governance structure for CSS:
i. A unified agency to own schemes so as to ensure convergence,
ii. A degree of separation between the political set up and implementation, and
iii. Active coordination between the central implementing agency and states
The Unorganised Workers’ Social Security Act, 2008 (UWSSA) appears to have tried to address the issues mentioned above when it envisaged the creation of a National Social Security Board (NSSB) to own all social security schemes in the country and State Social Security Boards (SSSBs) in each state to ensure coordination. However, the implementation of the NSSB and SSSBs have been fraught with difficulty with only a handful of states having formed SSSBs and states like Tamil Nadu declining to create such an entity. This can be partially attributed to the one aspect that the UWSSA does not address – i.e. the separation between the political set up and implementation. This is not uncommon in traditional models that have always relied on the purchaser and the provider being the same entity. For instance, the Ministry of Health in most countries is provided the funding as well as the mandate for delivering public health services. Many countries have found that this yields sub-optimal results like inefficient delivery of health services, and have therefore moved towards separating the purchaser and provider of such public services. As a consequence, countries such as Thailand and the UK have moved towards creating a ‘Trust’ structure which creates a distinction between the purchaser and the provider of public services. These countries have found that the organisational and governance efficiencies provided by this structure have resulted in improved outcomes for citizens.
For example, in Thailand the National Health Security Office (NHSO) oversees the implementation of the Universal Coverage Scheme (UCS), a universal health coverage scheme that offers both curative and preventive care. The NHSO consists of two governing national boards, the National Health Security Board (NHSB) and a standards and quality control board. The NHSB is chaired by the Minister of Public Health and consists of a wide range of members and experts from various public and private organisations. This structure enabled a degree of separation from the political set up and the involvement of a wider range of agencies and stakeholders in decision-making processes which improved the efficiency, transparency, responsiveness and accountability of the scheme. Further, by acting as the purchaser on behalf of UCS, the NHSO ensured that the Ministry of Public Health no longer wielded control over government spending on health-care services.
In a similar vein, social security schemes in India must be governed by The National Social Security Administration, a special purpose vehicle (SPV) set up as a Trust. The Board of Trustees should be chaired by the Prime Minister, and the Board itself should be comprised of the Ministers (or other senior representatives) who head the Ministries relevant to social security schemes. The NSSA should aim to bring together a wide range of stakeholders as members of the Board, like independent experts on life insurance, health insurance and public health, and pensions; representatives of insurance companies, pension fund managers, distributors; a representative from Aadhaar; and representatives of unorganised sector workers such as from labour unions and welfare boards. The NSSA will act as a controlling vehicle and not an operating vehicle governing the social security schemes. It will act as a point of convergence for the scheme, provide clarity on the roles and responsibilities of various entities, monitor and evaluate progress, and seek to bring in innovation in design and delivery through robust data collection, and research and development.
Further, each state should constitute independent State Social Security Administrations (SSSA) or its equivalent that will own and govern the implementation of the scheme at the state level. Each State should have an independent SSSA or an equivalent entity responsible establishing the target beneficiaries, awareness creation and marketing, mobilising resources for enrolment, and grievance redress and monitoring.
Open Architecture & Universal Coverage
It is desirable that social security programs are not discriminatory in nature and are available to all citizens, so that a minimum level of protection is provided for all. Currently, social security schemes like Aam Aadmi Bima Yojana (AABY) and National Pension Scheme (NPS) are targeted to the heads of households. This is fundamentally inequitable and over time could result in outcomes such as discrimination against women in the provision of social security.
As a principle, therefore, we propose that the CSS must aspire to create an open architecture that aims at universal coverage. Since CSS is meant to provide minimal levels of social security, it is only appropriate that it be made available to all citizens of India. While budgetary resources will determine the extent of subsidy available under the program – and this subsidy should be used only for vulnerable poor households or graded for the entire unorganised sector – it is essential that an unsubsidised version of the program be available to all citizens, in the spirit of universal coverage under social security.
Identification of Beneficiaries through Self-Reporting
While the legal definition provides a broad sense of an ‘unorganised worker’1, the true challenge on the ground will revolve around the identification of these unorganised sector workers. There is no clear, fool-proof mechanism available to identify and separate organised sector and unorganised sector workers today. The principle for identifying unorganised sector workers should be based on self-reporting by individuals (as recommended under the UWSSA) but not at the district administration; instead self-reporting can be done by beneficiaries. This is the strategy that has been adopted by the PFRDA for the NPS-S currently. Beneficiaries under NPS-Swavalamban directly self-report with the aggregator that they are employed in the unorganised sector and are not covered under the Employee Provident Fund (EPF) scheme.
Additionally, the design of the CSS and the extent of protection offered provide a natural disincentive for middle and high income citizens from registering for CSS. For instance, consider the Rs. 30,000 quantum of life insurance cover available under the AABY – this works out to 0.5% and 1.17% of the human capitals of a 20-year old in the fifth and fourth income quintiles respectively. It is not at all apparent that middle and high income individuals will seek to enter into these schemes and this has been borne out by the experience of the NPS-S. Translating this self-reporting mechanism to the social security program can be an effective and cost efficient strategy for identification of unorganised sector workers.
1 – As per the Unorganised Workers’ Social Security Act (UWSSA) 2008, an unorganised worker is defined as: “a home based worker, self-employed worker, or a wage worker in the unorganised sector and includes a worker in the organised sector who is not covered by any of the Acts mentioned in Schedule II of this Act”. The Acts under Schedule II are: The Workmen’s Compensation Act, The Industrial Disputes Act, The Employees State Insurance Act, The Employees Provident Fund and Miscellaneous Provisions Act, The Maternity Benefit Act and The Payment of Gratuity Act.