By TV Mohandas Pai & Nisha Holla
The Employee State Insurance (ESI) Corporation’s financial accounts for FY23 (the latest available) indicate the statutory body is retaining significant surpluses. FY23 collections totalled Rs 17,403 crore, whereas interest on surplus capital was Rs 6,745 crore. Along with other smaller income items, ESI’s income totalled Rs 24,683 crore. Total expenditure, including benefits paid and administrative expenses, was Rs 15,736 crore. The difference is a significant Rs 8,947 crore. In FY22, this surplus was Rs 4,787 crore. Budget estimates for FY24 indicate the surplus will be around Rs 7,059 crore with higher budgeted expenses.
Every year, ESI collects surplus contributions from subscribers and employers and deposits them with the bank or invests them, where this money is of no benefit to the ESI subscriber base. In FY22, the ESI fund held fixed deposits of Rs 40 crore with scheduled commercial banks, investments of Rs 1,05,709 crore with portfolio managers, and a special deposit of Rs 19,473 crore with the central government — totalling Rs 1,25,222 crore. In FY23, these numbers stood at Rs 41 crore (banks), Rs 1,15,101 crore (portfolio managers), and Rs 20,855 crore (central government) — totalling Rs 1,35,997 crore. Of this, earmarked reserve funds stood at Rs 36,912 crore, and non-earmarked reserve funds stood at Rs 99,085 crore — clearly, the latter indicates the amount of surpluses ESI carries.
The government must examine why a statutory organisation established for the benefit of Indian workers can keep overcharging and building surpluses. Instead, the excess capital must benefit subscribers. A two-pronged strategy is suggested here: expanding hospital bed capacity and reducing subscription costs.
ESI can allocate Rs 1,00,000 crore over three years towards setting up 100,000 more hospital beds nationwide. While ESI already has some ongoing projects to achieve this, it must be mindful that India only has 0.6 public hospital beds per 1,000 people. When private hospital beds are added, the number increases to 1.3 beds/ 1,000 population against the recommended number of 3 — a shortfall of over 24 lakh beds. If ESI spends Rs 1,00,000 crore over three years to add 1,00,000 beds, it will make a significant difference in healthcare access for its subscribers and the public. These beds can be handed over to the various state governments for management.
Due to the significant surpluses built up, ESI can also reprieve subscribers by reducing employer and employee contributions. Currently, total contributions are at 4%, of which 0.75% is the employee’s share and 3.25% is the employer’s share. If they reduce the share of employees to 0.5% and employers to 1% to a total of 1.5%, the following savings can be provided: For FY23 estimates, savings will amount to Rs 10,876 crore (Rs 17,403 crore x 2.5/4). For FY24 BE, savings will amount to Rs 11,962 crore (Rs 19,140 crore x 2.5/4).
These are significant sums of money that are currently going into ESI surpluses. If returned to employers and employees, they can accrue a lot of benefits by being able to spend on expanding businesses or making their own investments. This move will also spur greater formalisation of employment as costs will reduce. Employees will get more money in hand, and employers lower operating costs.
Any shortfall to ESI from the above two suggestions will be made up by revenue growth, which is now growing at 11.8% annually, and interest income. ESI is well capitalised as they have Rs 36,912 crore of earmarked reserve funds for liabilities. Moreover, the spend of Rs 1,00,000 crore towards building hospital bed capacity over three years can be managed with existing revenue and interest income.
It is crucial to ensure that subscribers see the benefits of social security wherever social security benefits are collected. The Employee State Insurance must use its surpluses to provide the benefits it was created for and use the accumulated reserves to give the subscribers a break. This will allow them to choose how to use their incomes instead of letting them accumulate in an account or investment portfolio where they see no benefit. The government must support the citizens who elected it and give them control over their incomes, increase their take-home wages, reduce formalisation costs for employers, and avoid overcharging captive subscribers who have no choice. We need to put an end to ineffective social security, high costs of living, and employment.
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(Pai is chairman, 3one4 Capital, and Holla is research fellow, 3one4 Capital)
