Editorial Notes

[Editorial Notes] How ESI can bolster health infrastructure?

India can avail itself of better healthcare facilities by focusing on and improving the Employee State Insurance (ESI) infrastructure.
By IASToppers
July 23, 2020


  • Introduction
  • Employees’ State Insurance
  • Recent Positive Changes
  • Changes during COVID-19 pandemic
  • Way Forward
  • Conclusion

How ESI can bolster health infrastructure?

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Healthcare is a top priority for voters across the world, including in India. Successive governments in India have tried to bolster the healthcare infrastructure but much remains to be done. While some may recommend revamping the entire structure, India can avail itself of better healthcare facilities by focusing on and improving the Employee State Insurance (ESI) infrastructure.

Employees’ State Insurance:

  • Employees’ State Insurance Corporation is a statutory corporate body set up under the ESI Act 1948.
  • The Act was promulgated to ensure social security and health insurance for workers in India.
  • ESI scheme is a self-financed comprehensive social security scheme devised to protect the employees covered under the scheme against financial distress.
  • ESI ensures medical benefit, sickness benefit, maternity benefit, disablement benefit, dependents benefit, funeral expenses, and rehabilitation allowance for all employees and contract labours earning Rs 21,000 or less in wages per month.
  • It takes care of not only the employees but also their dependent family members.
  • While there are lacunae in how the scheme is being implemented, the recent positive changes introduced by the government give hope to more than 13 crore beneficiaries covered under the Act.

Recent Positive Changes:

1. Wage limit:

  • December 22, 2016: To increase the number of beneficiaries and the country’s formal workforce, the Ministry of Labour and Employment notified that the wage limit of coverage would be increased from Rs 16,000 to Rs 21,000 per month with effect from January 1, 2017.
  • Inclusion of more beneficiaries under this scheme is better for the entire society.

2. Contribution rate:

  • To reduce the burden of employers and increase the take-home salary of the employees, the overall contribution rate was reduced from 6.5 % to 4 %.
  • The employer’s contribution was reduced from 4.75 % to 3.25 %, while employee’s contribution was reduced from 1.75 % to 0.75 %.
  • This put more money in the hands of employees and even India Inc.
  • However, the trade unions condemned the move stating that reduction benefitted the employers more and may create difficulty on the part of the ESIC to serve the increasing number of beneficiaries.

3. Income limit of dependents:

  • Government decided to enhance the income limit of dependent parents of an insured person covered under ESI Scheme from the existing Rs 5,000 per month from all sources to Rs 9,000 per month.
  • This would bring the dependent parents of more subscribers under the ambit of ESI.

4. Cost of implementation:

  • In 2019, for improving medical service delivery in states, ESIC decided to bear the full cost of implementing the scheme.
  • Previously, 1/8th of the cost was borne by states while ESIC bore the rest.
  • Simplifying the financing part would have a positive impact on the quality of services delivered by reducing red tape and increasing the overall accountability of the ESIC.

Changes during COVID-19 pandemic:

  • To overcome the challenges in the healthcare sector, Finance Minister in May, made further announcements to help extend ESI coverage to a greater number of people.
  • To increase coverage, ESI facilities would be available even for those firms that employ less than 10 people.
  • While for most firms, it would be voluntary, for firms in the hazardous industries, it would be mandatory.
  • Currently, ESI Coverage is restricted only to notified areas. After the requisite amendments to the Act, ESI coverage would be extended to all areas.
  • This means ESI coverage is given to employees who are working in the notified areas only and not to those who are working in the same organisation but posted in a non-notified area.
  • This proposed change promises to end this unreasonable segregation and provide the facility to more employees and their dependents.

Way Forward:

  • Much more can be done and to make ESIC a model organisation for countries around the world.
  • The income of ESIC far exceeds its expenses. As on March 31, 2019, the reserve funds stood at a massive Rs 91,447 crore, which is contrary to what the ethos of any government scheme.
  • Instead of accumulating surplus funds, those funds should be invested aggressively to establish new medical infrastructure, up-gradation and improving the services provided to the increasing number of beneficiaries.
  • If ESI coverage has to be extended all over India, we would require at least one ESI dispensary per district and several model ESIC hospitals in every state.
  • For example, in entire Northeast India, there are only ten ESIC dispensaries and only one ESIC Model Hospital in Guwahati, Assam.
  • ESIC has tie-ups with private hospitals for super-speciality services. The beneficiaries avail themselves of this cashless benefit.
  • ESIC should look into options to strengthen the tie-ups by ensuring that the private hospital bills are settled promptly so that the ESI beneficiaries can continue to get hassle-free service.
  • ESIC should look into the workforce question and strive to provide an adequate number of qualified doctors, nurses, and other administrative personnel to achieve the desired impact.


ESIC is successfully serving millions of subscribers and their family members, but currently, its expenses are far lower than its income, because of which it has been able to accumulate a staggering reserve of Rs 91,447 crore by the end of FY2019. This reserve money should not be used for any other purpose other than fortifying the healthcare infrastructure of the country.

Only after more hospitals and dispensaries are built, and more workforce is recruited, then we can think of extending this facility to all citizens of this country building a model universal health-care system. India does not need to bring in new schemes but ensure that the current schemes are scaled up and implemented to the best of their promise and potential.

Mains 2020 Editorial Notes

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