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-ranging debate to redress the problems in providing social security in the country. This debate has thrown up various arguments on the efficacy of publicly managed social security schemes as 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 the mandatory schemes managed publicly. The challenge of closing the coverage gap in social security provisions has to be developed at two levels. The first level involves the re-engineering of the institutional arrangements to increase efficiency. The second level is to create an appropriate legislative and administrative framework for significant increase in the social security coverage especially in the unorganized sector. So far there has been little of public-private partnership (PPP) in delivery of social security in India. The public sector efforts have been largely orientated towards the organized 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 fashion would require a reorientation of planning and implementation processes in view of the sheer 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 quarters and 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 be allowed to mange the pension funds for the first three years. There is also opposition to the government proposal of parking pension funds in the stock market. They contend that there 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 fraud came to light in the Seamens Provident Fund, a retirement fund for the employees of the merchant navy, which has been set up under a special Act of the Parliament. Central Government Bonds of about Rs.93 crore (nearly 20 percent of the total corpus of the fund) 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 cooperative banks by failing to deliver securities for which payment had been received. The commissioner of the Seamens Provident Fund was removed on charges of negligence and suspected participation in the fraud. Investigations are continuing. Agitated seamen were 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. On the initiative of the Delhi government, private players are being roped in to construct and

maintain old-age homes. The aim is to provide better facilities to the senior citizens in such homes as well as reduce financial burden on the cash-starved government. Secondly, a wide variety of new delivery mechanisms with innovative and revolutionary approaches, including public-private partnerships, must be developed: use of digital devices, smart cards, the comparatively inexpensive RFID technology, mobile telephones for payments and claims, internet hubs in village internet kiosks, the eChoupals or the innovative employment of dabbawallahs and postmen in delivering bank services to the doorstep with hand-held devices. Given the dimensions of India, one must anticipate various technology revolutions skipping development stages experienced elsewhere and leapfrogging to new dimensions, also in the most remote rural areas, as the success stories of contract farming for high-value products and the marketing via Internet kiosks in villages clearly demonstrate. The Health Insurance Scheme for Below Poverty Level (BPL) workers will cover 60 million families progressively in the next 5 years. Ultimately, more than 300 million workers 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 health facilities will be utilized to provide medical services and there would be cashless transactions to ensure that there is no harassment of the beneficiaries. Commercial establishments and large enterprises (state run or private) provide social security for their workforce supplying primary health, housing and education for families and communities as well as taking responsibility for welfare functions and caring for 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 large enterprises setting up their own pension trusts (referred to as voluntary superannuation scheme) 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 workers unions from the state run PSUs especially from the oil & gas sector have taken recourse to litigation when results of the scheme have not been up to the projected figures.