Mr. K.V. Ramana Murthy, former D.D,on the Benefit Rates

(Mr. K. V. Ramana Murthy has given comprehensive reply to the Post titled ‘Enigmatic Amendment of 2011 that affects the Benefits’. His response is displayed here as a separate Post)

The amendment was based on the recommendations of the Venkatesh Committee  on ” Simplification of forms and procedures”, which reads as follows:Sub: – Simplification of Forms and Procedures- Suggestion for replacing the   “Standard Benefit Rate table’ in Rule 54 of the ESI (Central) Rules, 1950”

With simple procedure for calculation of ‘Daily rate’ of Cash benefit.

Present Position:  At present, for calculation of daily rate of cash benefit based on the return of contributions, the following cumbersome procedure is followed.

Step 1: The total wages of an insured person in the Return of contribution is to be divided by the number of days for which such wages were paid/payable, to arrive at the average daily wages.

Step 2: These average daily wages are  to be enhanced to one hundred and fifteen percent as provided under Rule 2 (1-A) of the Central Rules.

Step 3: Then, the enhanced average daily wages are to be fitted in to the ‘Average daily wages slab’ in the ‘Standard Benefit Rate table’ in Rule 54, to arrive at the ‘Standard Benefit Rate.

Step 4:  Then the Standard Benefit rate so arrived at is to be enhanced by one hundred and twenty percent for ‘Sickness Benefit’, one hundred and fifty percent for Disablement and Dependants’ Benefit and two hundred percent for ‘Maternity Benefit.

If the Disablement/Dependants Benefit/Extended Sickness Benefit, is to be worked out on the basis of ESIC-32, it is based on ‘notional wages’, i.e. had the insured person worked for all the working days in the complete wage period, divided by 26 if he is monthly rated, 13 if he is fortnightly rated, 6if he is weekly rated, and 1 if he is daily rated as provided under Rule 2(1-B) of the Central rules.

This is in place of Step1 above. After this exercise, all the other steps from 2 to 4 above are to be followed.

Though, the ‘Ready Reckoner’ charts are prepared and supplied to the Dealing Assistants in the Branch Offices, this procedure is cumbersome, and not understood by the beneficiaries. The beneficiaries are not aware that a weightage of 15% is added to their average daily wages, before arriving at their daily rate of benefit. Therefore there is need to simplify this procedure.

Let us see at present, what is the percentage of the cash benefit under the present procedure, before going for the new procedure.

AverageDaily wages  in RC. Adding 15% Daily wage slab number StandardBenefitrate Daily rate of SB Daily rate of TDB/DB Daily rate of MB Percentage
50 57.5 7 30 36 45 60 72/90/120
100 115 15 58 69.6 87 116 69.6/87/116
150 172.5 21 88 105.6 132 176 70.4/88/117.3
206 236.9 28 125 150 187.5 250 72.8/91/121.4
255 293 33 150 180 225 300 70.6/88/117.6

It may be seen from the above table that the Cash benefit in any category is not at uniform percentage to all. Sickness benefit rate is around 70% of the average daily wages, Disablement 88.8% and MB 118%.

The Daily rate in the Standard Benefit table in the first schedule to the Act, at the beginning, was based on 50% of the lower slab.

In the amendment Act 1968, it was made 50% of the mean average. i.e average of lower slab plus higher wage slab. In the next amendment, it was 50% of the higher wage slab.

In the 1989 amendment, the first schedule was omitted (wef.1-2-91) and Rule 54 brought in to force from 01-2-1991.

In this table, the Standard benefit rate is ensured at 50%of the higher slab in all cases. If 15% weightage is added to it, it works out to 57..5%.

Suggestion: The existing Rule 54 and the table thereof may be substituted as follows:

“Rule 54: The standard benefit rate for the purpose of calculation of the daily rate of all the cash benefits shall be 60 (sixty) percent of the average daily wages in the corresponding contribution period”.

With this amendment, the calculation of all the benefits, become easier.

Sickness benefit: 72% of the average daily wages (120% of the standard benefit rate).

Disablement Benefit rate/full rate of DB: 90% of the average daily wages (150 of the standard benefit rate)

Maternity benefit rate: 120% of the average daily wages (Double the standard benefit rate).

If the above proposal for replacement of Rule 54 and table thereof, is approved, with a fixed percentage of the average daily wages in the Return of contribution in the  corresponding contribution period, as the Standard Benefit Rate, the definition of ‘Average daily wages’ in Rule 2(1-A) need to be amended as follows.

Rule 2(1-A):- “Average daily wages of an insured person during a contribution period for the purpose of ‘Standard benefit rate’ under Rule 54 for all ‘cash benefits’ shall be the aggregate amount of wages payable to him during that period, divided by the number of days (including the paid holidays and leave days) for which such wages were payable”

There is no need to change the ‘average daily wages during a wage period’ prescribed under Rule 2(1-B).

However, the ESIC has retained the standard benefit rate at average daily wages, and the sickness benefit rate restricted to 70 % thereof, while  the committee recommended 72 % so that there may not be any reduction in the existing benefit. Similarly, th committee recommended maternity benefit at 120 percent of the average daily wages, but ESIC restricted it to only full average daily wages (100%).  This resulted in reduction of both sickness and Maternity benefit  at the rates prior to 30-6-2011. The Venkatesh Committee brought out these deficiencies to the ESIC for rectification.



Filed under Amendments 2010, Benefits

2 responses to “Mr. K.V. Ramana Murthy, former D.D,on the Benefit Rates

  1. But, the questions remain.

    We understand the pains taken by Mr. K.V. Ramana Murthy in preparing his exhaustive reply which is commendable, indeed. But, the fact is that the reduction in the quantum of benefits continue for more than a year from 01.07.2011.

    While increase in the benefit rates can be made, without prior notice to anybody, to make it as a pleasant surprise, reduction cannot be made without assigning specific reasons for it and without prior knowledge of the beneficiaries to react, especially when it is claimed that there is huge surplus funds in the ESI Corporation.

    Besides, there does not appear to have existed any pressing need for the alleged simplification of the definition of the term ‘Average Daily Wages’ for beneifts purposes in Rule 2 (1-A) , when there was no overwhelming demand from any employees forum and, more so, when the ESIC has resorted to computerization for calculation of rates and preparation of dockets in the Branch Offices.

    Matters of opinions of individuals cannot be cited as reason for an amendment and its unintended results in the form of reduction of benefits, unless there is specific demand through the appropriate forum like Local Committees, Regional Boards, etc.,

    Moreover, the core issue is that in view of Sec. 61, the benefits provided under the ESI Act should never be less than what is provided under the Maternity Benefit Act, as explained in the Powerpoint presentation in the Post ‘Enigmatic Amendment 2011 that affects the Benefits’

    If these observations are wrong, we will be happy to publish, in public interest, the facts, if any, reported by readers.

  2. SYAM

    I will be very happy and it is welcoming, if the forum raises the issues of lacking of dedicatedness and raising the awareness about the What Regional Board and Local Committee are supposed to do for the improvement of the Image of the Organisation……….As the Dispensaries and ESI Hospitals are the primary locations where the Insured Persons will enter for their basic medical needs…. It is pitiable to see the status of the affairs going on both on Staff Attitude and amenities being providing to the Insured Persons, whom we say IP is VIP.

    There is no checks on these points and no powers to Corporation to intervene in the facilities being made by the State Government at these levels. Without changing these vital areas, whatever Crores of Money you spend either on computerisation or building Superspeciality Hospital will not change the image of the Organisation…..

    Its still a Hundred Million Dollar question…….Y ESIC never thought of revive these situations……..Its high time to rethink on these issues as ESIC is going to plan for increase the Wage Ceiling from Rs.15,000 to Rs. 20k or 25k……..

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