EMPLOYEE MEDICAL BENEFITS IN THE CORPORATE SECTOR

Item

Title
EMPLOYEE MEDICAL BENEFITS
IN THE CORPORATE SECTOR
extracted text
EMPLOYEE MEDICAL BENEFITS
IN THE CORPORATE SECTOR

Ravi Duggal

November 1993

The Foundation for Research in Community Health
84_Af r.g. Thadani Marg, Worli, Bombay 400 018.

CONTENTS

1

I
«

1.

Acknowledgement

V

2.

Foreword

IX

3.

1ntroduction

1

4.

A Profile of the Companies

11

5.

Type of Medical Benefits

28

6.

Expenditure on Medical Benefits

41

7.

Conclusions and Issues

57

8.

References

62

ACKNOWLEDGEMENT

The present

funded by

study was

Council of Medical

Expenditure Studies’

of

the

’Health

Foundation

for

Research

Research (ICMR) as a part

project

of

(FRCH).

We thank ICMR for

the

the Indian

in

Community Health

support to

their continued

FRCH for

studies in the area of Health Economics and Financing.

The

the

present

researchers

without

whom

undertaken.

Thanks to

data

for

study

the

Sunil Nandraj,

Kiran Kaul for their excellent effort
together all

collected by a team of

were

study

not

would

have

been

Saraswathy Ananthram and
in collecting

and putting

the data from the companies1in the sample.

I would

also like to acknowledge their help in the initial stages of data
analysis.

Thanks

also

to

processing of the data
drafts of

the present

Rao

going

for

Shetty for handling the entire computer

Sahana

Maria Pinto

and to

publication.

the many

A special thanks to Nagmani

manuscript,

the

through

for typing

preparing

it

for

publication and handling the printing of the document.

And most

importantly thanks

to

whose continuous encouragement and

Dr. N.H.

Antia, our Director,

support has

helped us launch

into uncharted areas of health services research.

Finally, we
to

our

would like

questionnaires

to thank all the companies who responded
interviewing

and

possible .

V

and

made

this study

We thank the following companies who have responded to this study:
* Acrow India Ltd., Bombay.
* Air India, Bombay.
* Albright, Morarjee & Pandit Ltd., Bombay.
* Asian Paints (India) Ltd., Bombay.
* Automotive Axles Ltd., Mysore.
* Avery India Ltd., Calcutta.
* Bombay Suburban Electric Supply Ltd., Bombay.
* Bakelite Hylam Ltd., Secunderabad.
* Bengal Chemicals & Pharmaceuticals Ltd., Calcutta.
* Bengal Ferro Alloy & Steel Ltd., Calcutta.
* Bengal Potteries Ltd., Calcutta.
* Bihar Caustic & Chemicals Ltd., Dist. Palaman, Bihar.
* Blue Star Ltd., Bombay.
* Bombay Mercantile Co-op Bank Ltd., Bombay.
* Brooke Bond India Ltd., Bangalore.
* Burn Standard Co. Ltd., Calcutta.
* Cable Corporation of India, Bombay.
* Cadbury India Ltd., Bombay.
* Cemindia Company Ltd., Bombay.
* Central Cottage Industries Corporation,
New Delhi.
* Chemicals & Plastics India Ltd., Madras.
* Cibatul , Dist. Valsad, Gujarat.
* Consolidated Coffee Ltd., Kodagu, Karnataka.
* Coromandel Agro Products & Oils Ltd., Guntur, Andhra Pradesh.
* D&H Secheron Electrodes Ltd., Indore.
* David Brown Greaves Ltd., Bombay.
* Drillco Metal Carbides Ltd., Ahmednagar, Maharashtra.
* Elecon Engineering Co. Ltd., Vallabh Vidyanagar, Gujarat.
* Essel Packaging Ltd., Bombay.
* Gohak Mills, Bombay.
* Grob Tea Co. Ltd., Calcutta.
* Gujarat Alkalies & Chemicals Ltd., Baroda.
* Haryana Petro Chemicals Ltd., New Delhi.
* Hercules Hoists Ltd., Bombay.
* Hindustan Paper Corporation, Calcutta.
* Hindustan Petroleum Corporation Ltd., Bombay.
* Hindustan Times, New Delhi.
* Hindustan Vegetable Oil Corporation, Delhi.
* Howrah Mills Co. Ltd., Calcutta.
* Hyderabad Industries Ltd., Hyderabad.
* ICI India Ltd., Calcutta.
* Indian Express Newspapers (Bom) Pvt. Ltd., Bombay.
* Industrial Credit & Investment Corporation of India Ltd., Bombay.
* Instrumentation Ltd., Kota, Rajasthan.
* ITC Ltd., Calcutta.
* Jessop
Co., Calcutta.
* Kerala Spinners Ltd., Alleppey, Kerala.
* Khaitan (India) Ltd., Calcutta.
* Khatare Spinning Mills Ltd., Solapur, Maharashtra.
* Kinetic Honda, Dist. Dhar, Madhya Pradesh.
* Krishak Bharati Cooperative Ltd., New Delhi.
* Larsen'S Toubro, Bombay.
* Loyal Textile Mills Ltd., Madras.
* Lyka Labs Ltd., Bombay.
* M. M. Rubber Company Ltd., Madras.
* Madhya Pradesh Electricals Ltd., Bhopal.
* Mahalaxmi Fibres & Industries Ltd., Calcutta.
* Maharashtra Electronics Corporation Ltd., Bombay.
VI

* Mahindra 6. Mahindra Ltd., Bombay.
* Malabar Bldg. Products Ltd., Trichur, Kerala.
* Maruti Udyog Ltd., New Delhi.
* May & Baker Ltd., Bombay.
* Mipco Seamless Rings (Gujarat) Ltd., Bombay.
* Mukand Ltd., Bombay.
* Munjal Showa Ltd., Gurgaon, Haryana
* Murugappa Electronics Ltd., Madras.
* Mysore Sales International Ltd., Bangalore.
* National Organic Chemicals Industries Ltd., Bombay.
* National Fertilisers Ltd., Delhi.
* National Textile Corporation (South Maharashtra) Ltd., Bombay.
* Nepa Ltd., Nepa Nagar, Madhya Pradesh.
* New Phaltan Sugar Works Ltd., Dist. Satara, Maharashtra.
* Nirlon Ltd., Bombay.
* Nizam Sugar Factory Ltd., Hyderabad.
* Octavius Steel & Co. Ltd., Calcutta.
* Orissa Cement Ltd., Dist. Sundargarh, Orissa
* Otis Elevators Co. (India) Ltd., Bombay.
* Paharpur Cooling Towers Ltd., Calcutta.
* Parke Davis (India) Ltd., Bombay.
* Parle Products Ltd., Bombay.
* Phoenix Mills Ltd., Bombay.
* Pieco Electronics & Electricals Ltd., Bombay.
* Piramal Spinning
Weaving Mills Ltd., Bombay.
* Polyolefins Industries Ltd., Bombay.
* Priyadarshini Spinning Mills Ltd., Hyderabad.
* Proctor & Gamble India Ltd., Bombay.
* Projects & Developments India Ltd., Dist. Dhanbad, Bihar.
* Quest International India Ltd., Bombay.
* Rallis India Ltd., Bombay.
* Rashtriya Chemicals & Fertilisers Ltd., Bombay.
* Rashtriya Ispat Nigam Ltd., Visakhapattanam.
* Rasoi Ltd., Calcutta.
* Reliance Chemotex Industries Ltd., Bombay.
* Reliance Industries Ltd., Bombay.
* Rhone Poulene, Bombay.
* Roche Products Ltd., Bombay.
* Roplas (India) Ltd., Pune.
* S.N.Sunderson (Minerals) Ltd., Calcutta.
* Saraspur Mills Ltd., Ahmedabad.
* Shri Rajendra Mills Ltd., Salem.
* Silver Cotton Mills, Ahmedabad.
* Sir Shadi Lal Enterprises Ltd., Dist. Muzaffarnagar, U.P.
* Sri Chamundeshwari Sugars Ltd., Bangalore.
* Standard Batteries Ltd., Bombay.
* Standard Chartered, Bombay.
* Synbiotics Ltd., Baroda.
* Tamil Nadu Chromates & Chemicals Ltd., Madras.
* Tata Exports Ltd., Bombay.
* Tata Tea Ltd., Calcutta.
* Tata Yodogawa Ltd., Jamshedpur.
* Telangana Paper, Hyderabad.
* The Associated Cement Companies Ltd., Bombay.
* The Bombay Electric Supply & Transport Undertaking, Bombay.
* The Bombay Oil Industries Ltd., Bombay.
* The Cotton Corporation of India Ltd., Bombay.
* The Dhampur Sugar Mills Ltd., Dist. Bijnor, Uttar Pradesh.
* The East India Hotels Ltd., Calcutta.
* The Fertilisers & Chemicals Travancore Ltd., Kerala.
VII

* The Great Eastern Shipping Co. Ltd., Bombay.
* The Indian Hotels Co. Ltd., Bombay.
* The Morarjee Gokuldas Spinning & Weaving Co. Ltd., Bombay.
* The Mysore Lamp Works Ltd., Bangalore.
* The Tata Electric Companies, Bombay.
* The Travancore-Cochin Chemicals Ltd., Ernakulam, Kerala
* The Zandu Pharmaceutical Works Ltd., Bombay.
* Travancore Electro Chemical Industries Ltd., Kottayam, Kerala.
* Travancore Titanium Products Ltd., Trivandrum, Kerala.
* Universal Paper Mills Ltd., Calcutta.
* Varun Shipping Co. Ltd., Bombay.
* Vijayeshwari Textiles Ltd., Coimbatore Dist., Tamil Nadu.
* Voltas Ltd., Bombay.
* Western India Enterprises Ltd., Pune.
* Weston Components Ltd., New Delhi.
*****

VIII

FOREWORD

Council of Medical Research (ICMR) in 1986 approved a

The Indian

series of studies to be undertaken by the Foundation for Research

in

Community

Financing
studies

Health

and
was

The

Expenditure.

to

fill

the areas of Health Economics,

in

(FRCH)

the

larger

of these

objectives

in knowledge of this important

gaps

subsector of health.

the above ICMR

The present study is the last

of the

supported research

It is an exploratory study looking

into the medical

program.

care

studies in

provided

benefits

by

companies

of the

organized industrial sector to their employees.

The organized

sector, though proportionately small in the Indian

context, is large numerically.

million including

about 110
sector.

have

It

accounts for

a population of

family members of employees of this

Being politically a group that can carry its

gained

substantial

benefits

voice they

from employers through their

struggles.

Medical Care Schemes and Allowances are one such

set of benefits

that give these workers and their families additional resource in

cash or kind to manage their struggle for survival a

comfortably than

little more

the masses, especially the rural poor, who live

at or below the subsistence level.

IX

The present study was restricted in its scope to look at only the

type of medical benefits and the volume of

expenditure on

companies because of constraints of time and resources.

definitely like to go beyond this study and look at

from the

point of

view of

the workers

it by

We would

the benefits

and their unions in the

near future.

However , we are happy that this study has filled an important gap

in the

knowledge of

health expenditure in the country.

that other researchers will get enthused through the

We hope

findings of

this study to take the lead to gather further information in this

important area of health services research.

Dr. N.H. Antia.

X

INTRODUCTION

BACKGROUND AND STUDY DESIGN

The Background

sector work-force in any country is not only vocal

The organised

4

about its needs but is also an important balancing force
players of

power politics.

used by and uses, the

is both,

It

for the

power brokers for gains of each other.

in India

The organised sector as a ratio to the total work-force

may be

a small proportion (only 10%), but in terms of numbers it

is huge, constituting the

,

a

the

is a force in which vests the potential

radical

change

in

political economy.

the

to bring about
But the dominant

trade unions serve less the interest of the workers and

machinations

to the

lower-middle

This work-force, presently numbering about 26.5

middle classes.

million,

from

range

of

leaders.

political

As

more the

a

consequence

is

that,

this

I

potential remains suppressed.

The result of

capitalist

advanced

I

such

a

political

the

countries,

make very major gains in

its

economy

working

unlike the

working class is unable to
conditions

and benefits.

India, unlike the advanced capitalist countries, is not a welfare

state.

It

only

presents

a

facade

of

welfarism

through its

socialistic proclamations and innumerable development programs

1

(that invariably fail) for various sections of the society.

While the historical basis for welfare or social security in the

west

rooted

is

in

Bismarckan

the

model, most underdeveloped

countries have not been able to muster that kind of state inter­

vention for workers’ or peopled welfare.

Indian case,

best, like

At

the efforts have been marginal, serving ruling class

interests by providing the minimum appeasement
the class

in the

struggle from

necessary to keep

as well as to hold the

going overboard

existing scheme of things intact.

Our concern in the present

benefits

medical

that

is

study

the

privilege

of

approximately

term it a privilege, not in

to

looking at

sector

(both public and

In India

such benefits are

corporate

private) provides to its employees.

the

restricted

half the organised sector.

terms of

We

any special consideration,

but relative to the fact that the vast majority of the population
has access to a grossly inadequate and a

health system

on the

for-profit health

difficult access public

one hand, and on the other an unaffordable
system

care

whose

reach

is

widespread but

quality highly questionable.

We

view

wages

and

medical

benefits,

salaries)

strictest sense

as

like all other benefits (other than

social

are benefits

wages

(social

in kind).

viewed as something which are the result of
employer.

wages

in

the

Benefits are not to be

the goodness

of the

They are provided for from the value created by labour

2

power

and

the

include

generally

families

workers'

as

beneficiaries also.

In business economics (atleast in India) the term used is “fringe

benefits" .

These include "benefits paid by employers which

materially

add

to

of employees either during the

welfare

the

tenure of their service or after retirement, and
on employees

not form

which do

for

time

not

worked

education, medical,

profit and other bonuses,

(leave),

legally required payments on

social

their normal wages and

benefits include payments

Thus fringe

allowances’ (EFI, 1972).

made

part of

the expenditure

security

schemes, housing,

energy (fuel and light), water, food,

recreation etc. (either subsidised or free of cost).

In India, given the limited bargaining power of the workers, most

of the

benefits provided,

especially by the private sector, are

only those mandated by law.

It is

the public

sector which more

beyond the legal framework and provides benefits that

often goes

are not statutory.

The

first

step

security in

towards

India was

provision

through the

for

health

related social

Factories Act (Amendment) of

1922, which, for the first time, provided parameters

for working

conditions whereby, the employer was fined for an offence causing

injury or death to a
followed

in

1923

The

worker.

as

a

Workmen’s

comprehensive

measure

Compensation Act
to provide for

employment - injury compensation to industrial workers.

3

Similar

exist

legislations

Employees State
industrial

Plantations

for

Insurance Act

workers.

benefits for

maternity related

In 1948 the

health insurance to

provided for

Maternity

The

Mines.

and

of 1961 provides for

Act

in the organised

women employed

sector .

emphasise here that these Acts cover only the organised

One must

sector i.e. those organisations which come either under the
Factories Act or the Shops and

earlier this

is only a small proportion of the total work-force.
and audit machinery

Further , because of an inadequate monitoring

of

the

As indicated

Establishment Act.

only

State,

about

half

of

such workers are actually

covered by these provisions.

Data on medical benefits provided to
come

This

by.

is

collate such data.

obtain

because

all benefits

companies’

balance

benefits and salaries separately.

publish

their

difficult to

because there is no statutory provision to

Data on

the

employees are

accounts

(Annual

are less
sheets

Hence,

for

Reports),

difficult to
have

to

show

companies which

this information is

available.

However it is an exceptional company

its medical

benefits separately,

that would show

except for ESIS contributions,

which are a statutory requirement.

The only data available consistently on employee medical benefits
are

those

published

by

Plantations,

ESIC,

Mines

and

Beedi

Workers’ Welfare Funds etc. i.e. the statutory benefits covered

4

under

various

Labour

across

such

information

Acts.

Ocassionally one would also come

public

from

sector

undertakings and

the Railways, and the Post and Telegraph

departments, especially
Department.

The only comprehensive studies are a
the Employers’

two carried

out by

India, for the years 1960 and 1969

Federation of

(EFI, 1962 and EFI, 1972).

set of

Both

these

studies

at the

looked

entire range of "fringe benefits" as defined earlier (EFI, 1972).

The benefits that these

studies identified

are as

and analysed

follows : (i) Profit and other Bonuses; (ii ) Payment for time not

worked; (iii) Gratuity and pension payments; (iv) ESIS;

(v) EPF;

(vi)

Maternity

Retrenchment

benefit,

workmen’s

statutory] (viii)
(ix) Medical

or

lay

off

compensation;

compensation

etc;

[(iii)

(vii)

(vii)

to

are

"Voluntary" PF, gratuity and pensions;

assistance;

(x)

Workmen’s

compensation

and life

insurance premia;

(xi) Canteen; (xii) Housing; (xiii) Education;

(xiv) Recreation,

culture,

cooperative

societies,

payments in

kind etc .

The 1960 survey showed that all these benefits amounted to 21.30%
of the wage bill.

In the 1969 survey this

had improved slightly

to 27.11%, but as the study points out, most of this increase was
due

to

additions

expenditure by

in

statutory

employers.

benefits

and

not “voluntary"

However, the study noted significant

differences between the mining

and

plantation

hand and the manufacturing sector on the other.

5

industry

The former

on one

recorded a

sharp rise

in "voluntary"

payments/benefits but the

latter’s increase was mostly in statutory payments.
fringe

benefit

in

rupee

value

worked

out

The average

Rs.896.30 per

to

employee in 1969 in comparison to Rs.287.30 per employee in 1960.

We have also identified a study on Health Financing by the Indian

Institute

Management,

of

Development Bank.

sent to

the

for

Asian

As part of this study 2000 questionnaires were

various small, medium and large companies in Maharashtra

and 150 to companies in West
poor -

done

Ahmedabad,

126 from

Bengal , but

Maharashtra and

the response

Bengal.

27 from

was very

For the year

1985-86 their findings showed that for medical benefits the small
companies in

spending Rs.

Maharashtra were

532.30 per employee

and the medium and larger ones Rs. 454.10 per employee (only
employer share).

In Bengal

expenditure

this

was

Rs.

470 per

employee in the same year (IIM, 1987).

The Study and its Methodology

series of

studies on health

financing and expenditure which seek to look at

the entire gamut

country.

In this study we

study is

The present

of

health

care

explore the types

a part

financing

of

of a

in

medical

the

benefits

that

employees

get in

exchange for their labour power.

A preliminary

exploration of a few companies regarding provision

of medical benefits to their employees showed four major types of

i

non-ESI

benefit

(i)

schemes

against

claims

bills with upper

limits, (ii) fixed lumpsum payments ( iii ) group health insurances

and

facilities.
earning

or

in-house

(iv)

ESI

scheme

Rs.1600

per

The

upto

retained

is

hospital or other medical care

compulsory

for

all employees

month (presently this limit is being

raised to Rs.2500) wherever it has been made applicable.

We will

discuss the details in a later section.

We began

very ambitious

on a

this study

sample we decided to

companies listed

use the

To select our

plane.

in the

May 1989

volume of the Centre for Monitoring Indian Economy’s (CMIE) 'Data
The CMIE report covers companies with

on Larger Business Units’.

a sales turnover of Rs.50 million and above.

For each company it

provides information from its balance sheet

and profit

account, that
reports.

we

is, most

data published in company annual

of the

The May 1989 volume lists 1872

selected

775

for

randomly

questionnaire to 641 of these

and loss

companies out

our

study.

companies

and

We
the

of which

the

mailed

remaining 134

sub-sample was selected on a stratified random basis for personal

contact by us because

we anticipated

a high

non-response rate.

The stratification

was done to give proportionate representation

to broad

groups,

industry

regional

distribution

and

type of

ownership.

The initial
reminder

response to

did

significantly.

not

help

the mailed questionnaire was dismal.

in

improving

the

response

Finally, by our final deadline, only 75

7

A

very

adequately completed questionnaires reached us in response to the
mailed questionnaire, making the response rate
personal visits

to the

134 companies

out

of

134

companies

44%.

or

of

the

sector

public

was

Our

better response :

This helped us achieve a

17.29%.

disappointing total response rate of only

rate

12%.

located in Bombay, Thane,

Calcutta and the Delhi region yielded a little

59

a mere

twice

The response

as much as that of the

private sector (see Table A-l).

Table A-l = Response Profile of the Sample
Universe = 1872 companies; sample selected = 775Mailed
Questionnaire

All

Public

Companies

Total
Sample

All
Public
Companies Sector

Companies Sector

All

Public

Sample Size

641

76

134

22

775

98

Responses

75

15

59

16

134

31

11-70

19-74

44-03

72-73

17-29

31-63

Response Rate %

The data collection

frustrating as
in a

Personally
Canvassed

full

personally

experience

of

the

researchers

was fairly

the vast travelling and time spent did not result

response

contacted.

from

even

rate

Companies,

sector, either did not want to
to be a sheer waste of time.

the

companies

especially

reveal information

in

that were

the private

or thought it

Persuasion was rewarded a little

8

better

public

in

sector

executives in the public sector units

and

other

of the usually

were proud

benefit schemes

egalitarian medical

Personnel

companies.

they provided to employees,

and were most willing to share this information with us.

Almost as a contrast,
sense of

showed no

sector executives

most private

pride in their medical benefit schemes.

achievement or

On the whole, with few exceptions, private sector

companies were

to part with information required as answers to our

less willing
questions.

In our initial ambitious enthusiasm we
study

the

role

trade

of

had also

ventured out to

unions in this context.

attempt was abandoned because of a

lack

of

time,

Later, this

and

a quick

glance at a few trade union agreements showed the relatively less
importance paid

benefits, except

to medical

annual payments to monthly payments.

changing them from

We hope to pursue this part

of the study in the near future.

The

study

present

expenditures on
of industry,

seeks

to

analyse

the

volume

of

medical benefits in terms of variables like type

profitability, sales

added, capital
the context

then,

employed etc.

of public

considerations the

All these variables are viewed in

/ private

study was

turnover, productivity, value

ownership.

To examine equity

also to disaggregate variations in

medical benefits between management, staff and workers.

9

Unfortunately this

entire range

been possible because of

especially

from

the

the

private

of analysis

severe
sector,

we planned has not

limitations
and

of

also because of the

reduced sample size due to the high non-response rate.

IO

the data,

A PROFILE OF THE COMPANIES

The

companies

in

the

the

represent

sample

upper

crust

of

corporate enterprise in India, as they represent those which have
turnover of over Rs. 50 million in the 1987-1989 period.

a sales

As mentioned earlier, this list included 1872 companies, of which

public

sector.

turnover of Rs. 1,632,736

million

263

were

the

in

public sector),

These companies had a sales

(52.2%

of

872 million

averaging Rs.

this

was

in the

per company, and net

assets worth Rs. 1,921,540 million (64.5% in the

public sector),

averaging Rs. 1026 million per company (CMIE, 1989).

It has been

estimated by CMIE that

these

60%

of the

gross value

the factory sector in India (ibid).

Also,

added of

companies

constitute

the total sales and assets of these companies amounted to 50% and
60% of the GDP, respectively.

In the

original sample of 775 companies selected randomly by us,

the sales turnover was Rs. 490,498 million or an average of

Rs. 632.90

million per

was 36%).

Out of these 775 companies, 134 which responded, had a

sales turnover

(the share of the public sector

company

of Rs. 270,603 million or Rs. 2097.70 per company

(the public sector’s share being 46%).
of our

final sample

is three

Thus

the average company

times larger in terms of sales as

compared to the original sample and over twice as larger than the

average of the universe from which the sample was selected.
is because of two reasons.

Firstly, the much higher propor-

11

This

tionate

of

the

public sector companies, which on any

larger,

on

the

response

count is much

comparison

in

the fact

relatively smaller companies, perhaps due to

do not

have very

significant benefits to show.

that they

While the first

reason holds true, the second is only a conjecture, and

there is

way of proving it for the non-responders.

no significant

to the

secondly, the higher non-response from the

And

private sector.

average,

In the

case of the responders there is a positive correlation (Pearson’s
r =

.32 with

.001 level)

significance at

between per employee

sales turnover and medical expenditure).

our final

The 134 companies in

sample (31

of which

are in the

constitute 7.16% of the universe and 17.3% of the

public sector)

original sample, which was

randomly selected

from the universe.

While the sample appears to be small in terms of our expectation,

it

is

fairly

consider the

adequate

for

an

public sector).

work-force

analysis

when we

fact that we have covered a large work-force of the

organised sector - as many as

in the

exploratory

per

453,725 employees

(186,740 or 41%

works out

to an

average of 3396

the

public

sector), hence,

This

company

in

(6024

clearly representative

of upper crust of the larger companies in

the organised sector .

The management constituted 9% of the total

employees

(13%

in

the

public

annualised and mostly refers

sector).

to the

The data presented is

fiscal year 1988-89/1989-90

(98.5% of companies gave data for 1988-89/1989-90).

12

General Profile (Table B.l)

Location of

sample are from western India and
Bombay itself.

for

the

original

the

of

80%

are from

latter

true for both the public

concentration is

This

sector and private sector.
good

half of the companies in the

More than

Companies:

The same pattern, more or less, holds
of 775 companies wherein 42% of

sample

companies are in western India.

that we

This is due to the fact

are covering the larger companies of the organised sector, a very
substantial chunk of which is in and around Bombay.

Incorporation Year :

sample may

majority of

A large

be regarded

prior

in the

the companies

Seventy—nine percent of the

as "old".

companies were established

,

to

Exactly

1975.

the same

percentage distribution is true for the original sample.

Industry

Group

reported

sample

The

:

is

largest group of industry in the

single

the

chemicals

engineering and durable goods group.

like food

products,

petroleum)

and

textiles,

services

group,

little from

the

However, other major groups

minerals

(including

represented in relatively large numbers.
vary a

by

followed

and

metals (including

financial)

are

also

This distribution does

the original sample of 775 companies.

Table

B.2 shows that the difference in the two distributions has arisen
due to

a very

good response by the minerals and metals group as

also the chemicals

group

of

industries,

whereas

that

of the

textiles, engineering and durable goods, and services sector was

13

Table B.l: Soae Characteristics of Saaple Coapanies

(figures are nuaber of coapanies)

Public Sector

Private Sector

All Sectors

Location

Boabay

10

33.3*

45

43.7*

55

North India

7

23.3*

12

11.7*

19

14.3*

Calcutta 4 East

4

13.3*

17

16.5*

21

15.8*

West India

2

6.7*

12

11.7*

14

10.5*

South India

7

23.3*

17

16.5*

24

18.0*

21

70.0*

80

81.6*

101

78.9*

9

30.0*

18

18.4*

27

21.1*

Non-MRTP/non-FERA

27

87.1*

57

55.3*

84

62.7*

FERA 4 HRTP

1

3.2*

14

13.6*

15

11.2*

HRTP only

3

9.7*

32

31.1*

35

26.1*

41.4*

Incorporation
pre-1975
1975 i later

Type of Coapany

Industry group
Food Products

2

6.5*

14

13.6*

16

11.9*

Textiles

2

6.5*

16

15.5*

18

13.4*

Minerals 4 Metals

2

6.5*

16

15.5*

18

13.4*

Cheaicals

7

22.6*

17

16.5*

24

17.9*

Engineering 4 Durables

5

16.1*

16

15.5*

21

15.7*

Services

6

19.4*

12

11.7*

18

13.4*

Diversified

2

6.5*

7

6.8*

9

6.7*

Others

5

16.1*

5

4.9*

10

7.5*

Profitability Group

Negative

6

20.0*

16

16.5*

22

17.3*

Low

12

40.0*

29

29.9*

41

32.3*

Average
High

9

30.0*

43

44.3*

52

40.9*

3

10.0*

9

9.3*

12

9.4*

Returnability Group

Negative

5

17.9*

13

14.0*

18

14.9*

Low

12

42.9*

28

30.1*

40

33.1*

Average

4

14.3*

34

36.6*

38

31.4*

High

7

25.0*

18

19.4*

25

20.7*

Poor

7

25.0*

18

21.2*

25

22.1*

Low

10

35.7*

35

41.2*

45

39.8*

Average

7

25.0*

26

30.6*

33

29.2*

High

4

14.3*

6

7.1*

10

8.8*

Vai.Add. Group

14

relatively poor.

: In

MRTP/FERA Companies

the public sector there is no question

of either MRTP or FERA companies but since we have put the joint­

sector companies under public sector there are 4 companies out of
31 which fall under this category.

In the private sector 31% are

Being MRTP and FERA

MRTP and another 14% are both FERA and MRTP.

is important from the present
generally

that

believed

study’s

these

viewpoint
are

companies

because

it is

not

good

only

performers but they also take good care of their employees.

Profitability and Productivity :

variables

that

have been

the

basis

of

their

performance are: (i) Profitability (Profit Before Tax (PBT)

as %

used

to

of Sales

the

categorise

Turnover)

The

companies

(ii) Return

on

(PBT as

% of Gross Block) and

(iii) value added group (value added as % of Gross Block).

As expected, the public

sector has

a higher

proportion of loss

makers, and low productivity and low profitability companies.
the same time, in the high profit group, the public

sector has a

larger proportion

of companies than the private sector.

the private sector

companies

productivity and

are

concentrated

profitability range,

is mostly in the low or very high range.

15

in

At

Hence,

the average

whereas the public sector

of Industry Group Ole-trlbutlon
in reported and original eanple.
( Percentages )
Industry Group

Reported Sanple
C134 companies )

Original Sample
< 775 companies )

11-9
13-4
13-4
18-0
15-7

10.6
17-8

3.9
14-7
21.3

13.4

20.9

6.7
7-5

5.6
5-2

Food
Textiles
Minerals & Metals
Chemicals
Engineering and
Durable goods
Services

Diversified
Other

Financial Profile (Table$B.3 and B.4)

In this

present an overall financial analysis of the

section we

B.4 give

results as averages

and per employee, respectively.

This brief analysis

sample companies.
per company

Tables

will form the context

medical benefits

B.3 and

against which

we will

be looking

provided by the various companies.

at the

We will not

go into the minute details of Table B.4.

The

results are self —

revealing

not

necessary.

The

sample

companies

is Rs.

and

therefore

aggregate sales turnover
270,603 million

(for 129

per company. As mentioned
amongst companies

comments
of

all

the

are

companies), averaging Rs. 2098 million

earlier our

which had

annum and our sample is more

a sales

sample was

of over Rs. 50 million per

representative of

this group of companies.

16

selected from

the larger among

Table B.3: Financial Profile of Saiple Companies
(figures in rupees Billion total 4 per coapany)

Sector

All Sectors

Public

Private

Sector

Sector

Total

123966.74

146636.10

270602.83

Mean

3998.93

1496.29

2097.70

Total

116002.68

101563.53

217566.21

Mean

4142.95

1092.08

1798.07

Total

5883.93

24525.80

30409.72

Mean

189.80

242.83

230.38

Total

643.85

2949.53

3593.38

Mean

20.77

28.64

26.82

Total

7260.07

9738.44

16998.51

Mean

234.20

96.42

128.78

Total

1471.21

1626.48

3097.69

Mean

47.46

16.10

23.47

Total

420.37

335.16

755.53

Hean

13.56

3.25

5.64

Total

21631.95

42952.56

64584.51

Mean

721.07

482.61

542.73

Total

186740

266985

453725

Mean

6024

2643

3437

Sales Turnover

Gross Block

Profit Before Tax

Dividend Paid

Salary t Benefits

Total Benefits

All Medical Benefits

Value Added

Nuober of Euployees

17

Table 8.4= Per Employee Financial Profile of Saaple Cospanies
(figures in rupees per Eiployee)

Gross Block per Eip.

Sales per E»p.

All Sectors

Sector

PBT per Eup.

All Sectors

Sector

All Sectors

Sector

Public

Private

Public

Private

Public

Private

Sector

Sector

Sector

Sector

Sector

Sector

Boabay
North India
Calcutta I East

986156.83
860325.71

727932.22
947424.96

840472.96
881843.35

486203.82
742387.43

589041.54

89220.54

345794.03

287060.02

West India

564603.81
186853.51

283982.13
323035.39

327141.38
233517.85

326058.52

650821.95

452591.65

726028.07

Non-MRTP/non-FERA

672801.39

FERA 1 MRTP
MRTP only

184800.00

Location
543833.69
930933.85
125872.67

48734.17
29591.25

159790.92
148350.34

111389.62
66193.45

149389.72

1505586.9
119743.55

65.34

125440.22

242400.75

1791763.7

171275.13

1175181.8

38856.57
16512.15

23818.50
10138.79

18381.00

1862767.7

517728.26

377924.31

445055.12

418523.63

16718.57

512362.98

1337543.7

921319.18

1246555.8

26986.92

112872.25
109154.47

442925.63

609390.56

672261.23

362564.96

585958.18

31017.52

40384.84

33669.85

648408.35

616165.05

53087.50

379491.45

356790.52

23081.25

33102.01

32405.08

628881.39

552271.87

553526.07

709440.03

393884.47

399062.50

77527.14

131636.15

130750.32

Industry group
Food Products
Textiles

442772.58
53344.94

143541.09
540465.84

172570.40

156840.00
24044.49

29446.02

345290.30

767657.23

33309.15
477409.46

17303.40
-13546.18

18563.64
400209.47

18443.58
234429.31

Minerals A Metals

2675964.7

569828.26

1553852.1

2390606.4

340559.69

1298377.4

109106.95

727934.39

890973.15

803160.70

1234556.5

830876.92

1050715.8

64279.32

53498.00
122319.99

79159.57

CheaicaIs
Engineering A
Durables

910617.09

440706.85

616362.64

255452.31

144699.97

186099.99

35431.17

9136.54

18888.49

Services

450029.98

889144.95

582993.30

397969.08

844260.03

533105.29

29520.93

71982.61

42378.26

Diversified

109213.68

937765.86

664776.24

41212.99

392481.19

276746.09

-1310.53

38222.13

25196.99

Others

81953.11

342647.49

138887.95

376195.77

309182.54

359130.96

-2900.28

32347.68

4797.76

Negative

94449.27

317294.91

141386.48

67332.20

148339.38

83640.19

-8379.36

-15282.63

-9833.37

Low
Average
High

1425155.2
900556.24

564256.79

1008947.4

808703.72

203809.25

490777.68

53814.06

15656.80

35366.65

697763.04

735954.34

959740.44

374720.62

486783.20

110686.75

60264.05

69759.97

340689.10

352003.64

351619.80

193729.23

602126.87

588271.93

107255.78

242547.83

237958.03

Negative

94214.72

326659.88

141009.50

67332.20

148339.38

83640.19

-8355.40

-16053.37

Low

456100.78

531951.75

495749.20

1305282.9

520785.63

27013.55

32072.37

-9905.12
29657.87

Average
High

4584470.5
1271535.1

657846.11
504119.87

1359037.2
581478.91

999894.87
358096.35

366669.70
333069.57

895214.61
479746.94
335592.39

183271.25
178362.99

65921.14
188538.54

86876.76
187512.79

384639.08

798521.42

541959.35

1661471.7

1181174.0

1478906.4

26222.87

76066.33

45168.80

267252.00

396244.01

65578.67

43813.48

52999.03

South India

16552.16

14555.55
16525.86

Incorporation
pre-1975
1975 1 later

73740.25
45254.03

Type of Coapany

91059.36

Profitability Group

Returnability Group

Vai.Add. Group

Poor
Low

1377654.5

636988.67

949571.34

572899.05

Average
High

153798.68

387105.25

307436.30

44637.03

297355.95

211058.12

-1181.14

152080.94

99745.38

500650.85

528347.59

518959.25

47632.31

48205.35

48011.11

43709.58

50308.53

48071.69

All Sectors

663846.72

539254.13

590980.85

661496.54

383591.32

495716.06

31508.66

91188.47

66550.79

(continued)

18

Table 8.4: Per Enployee Financial Profile of Saiple Companies

(figures in rupees per Employee)

Dividend per Enp.
All Sectors

Sector

Vai.Add per Eip.

Sal t Ben per Eip.

Sector

Sector

All Sectors

All Sectors

Public

Private

Public

Private

Public

Private

Sector

Sector

Sector

Sector

Sector

Sector

location
Bonbay

3717.11

12995.15

8976.71

158743.46

292067.56

230435.67

46022.68

51740.57

49264.08

North India

10058.13

38363.19

131558.87

379974.01
57605.61

192929.18
55724.10

40542.07
26655.25

30355.18
20707.40

23355.07
640.03

6973.17
10497.31
3817.55

18781.90
5376.89

63794.39
74287.75

83085.12
59855.21

37121.36
27958.52

26354.57
28885.70

37402.42
22068.96
28010.49

219253.77
236788.07

166243.40

42035.24
27879.10

43923.80

43158.43

24436.50

27113.76

Calcutta i East

West India
South India

12474.82
1728.85

48969.75
185817.45
52331.71

28276.23

Incorporation
pre-1975
1975 4 later

2977.71
3822.67

11276.70
37876.04

7913.42

11393.25

95724.02
108009.41

136159.54

Type of Coopany

Non-MRTP/non-FERA

3271.09

10572.77

5367.09

117031.21

132030.76

120760.42

38434.41

31385.53

36410.98

FERA 4 HRTP
HRTP only

1584.38

11691.47

10988.53

90462.50

135224.46

132111.33

62534.38

45854.06

47014.15

18521.31

10828.06

10954.01

236183.48

207260.94

207765.08

40702.94

36273.96

36346.47

Industry group
Food Products

16924.29

4141.47
20084.78

5353.83

47626.84

23580.05

16534.59

17202.80

16008.83

38629.03
735222.57

39520.48

12037.38

378661.99

19500.75

30987.22

26384.92

Textiles
Minerals 4 Metals

3501.65

5712.54

4692.30

211852.26

157252.86

183175.54

32619.63

48700.63

41279.81

Chemicals

7214.91

28896.53

17218.84

204661.45

284736.85

241608.35

35396.66

59039.57

46305.53

Engineering 4
Durables
Services

5720.82

2689.42
7169.38

3813.68

139106.48

45949.42

49058.62

47905.51

139493.41

101284.60
143104.75

115422.68

4277.49

140461.52

59928.23

48138.72

56258.81

17162.55

11507.87

69181.33

32454.78
21591.27

48257.50

192.73

128153.18
105113.39

97822.06

882.50

36095.05
60302.24

29134.43

43050.85
23238.67 '

2970.66

Diversified

Others
Profitability Group

Negative

1104.57

232.65

24405.84

68546.84

33219.35

24560.26

42663.72

28373.33

Low

4615.78

8434.98

202402.19

84750.72

143954.25

62074.70

45082.01

53859.45

Average

13465.39

10311.01

6462.20
10905.06

256943.62

147829.77

171544.17

32338.42

40241.94

38753.50

High

1430.89

17791.71

17236.67

180676.94

319393.42

314687.45

43708.96

21874.25

22615.00

1188.03

239.17

24579.29

71817.35

33550.35

24664.66

44680.46

28694.14

Low

2652.02

7664.81

5272.28

151780.27

120199.62

48561.35

8998.70

14016.79

13120.70

385439.97

167438.18

55828.08
43583.39

41926.17

Average
High

136368.77
209071.17

43339.92

43383.39

31105.26

14237.48

15937.84

284794.35

248838.56

252490.81

50957.12

26490.93

28957.23

Poor
Low
Average
High

2737.40
5124.06
2958.35

24659.42
9661.60
10330.44

11070.15
7746.63
7813.04

115750.63
193686.24
36115.21

232882.43
123793.34
218856.01

160273.44
153290.19
156454.14

28173.51
56913.42
28475.16

32566.55
41531.04

34896.41

29843.35
48022.86
32703.70

1139.69

14177.07

9757.80

154233.34

111136.34

125744.89

50214.58

47042.19

48117.53

All Sectors

3447.82

10896.81

7831.03

118206.09

176461.05

151460.00

38877.98

36475.60

37464.35

Returnability Group
Negative

Vai.Add. Group

(continue'

19

Table B.4: Per Employee Financial Profile of Saiple Coapanies

(figures in rupees per Eiployee)

Benefits per Eip.

Medical Ben. per Eap.

Sector

Sector

All Sectors

All Sectors

Public

Private

Public

Private

Sector

Sector

Sector

Sector

Boabay

11437.28

9956.01

10597.57

2051.17

1844.04

1933.75

North India

7895.37

1847.38

6031.34

5756.14

929.90

4268.66

Calcutta & East

4024.37

2301.63

2695.99

704.00

548.15

583.83

Uest India

9172.53

3553.01

4417.28

1008.02

837.30

863.56

South India

1118.96

4466.74

2266.12

1940.84

1161.90

1673.92

pre-1975

8794.15

8132.61

8400.71

2347.42

1450.89

1814.22

1975 4 later

3285.85

1883.48

2974.08

1777.01

803.31

1560.54

Location

Incorporation

Type of Coapany
Non-MRTP/non-FERA

7851.70

4204.52

6804.75

2269.23

1104.14

1934.78

FERA 4 MRTP

6903.12

11430.72

11115.83'

■1318.75

1473.45

1462.69

MRTP only

11036.54

5490.66

5581.45

2132.64

1213.73

1228.78

544.42

554.96

Industry group
Food Products

2358.13

1037.77

1163.00

Textiles

3099.16

4765.85

4098.06

655.53
582.66

Minerals 4 Metals

6751.92

7374.35

7087.12

Chemicals

5033.50

10403.68



884.90

763.80

2226.68

1167.56

1656.31

7511.31

5675.89

2065.96

4010.27

Engineering 4

Durables

7382.86

8302.02

7961.13

2382.46

971.68

1494.90

15360.06

6163.26

12497.61

2480.06

3999.72

2953.05

Diversified

4825.33

12965.40

10283.43

630.34

1113.11

954.05

Others

3051.62

396.54

2471.76

1878.80

169.25

1505.44

Services

Profitability Group

Negative

2128.57

6730.35

3097.83

1609.75

1208.92

1525.32

Low

18078.63

7330.77

12882.49

3046.44

1333.98

2218.54

Average
High

3955.48

8232.61

7427.11

2493.17

1124.86

1382.55

9169.03

1604.66

1861.29

3186.06

1295.95

1360.07

Returnability Group

Negative

2162.69

7238.90

3184.61

1620.47

1241.92

1544.26

Low

14484.46

9840.94

12057.23

3194.20

2071.21

2607.20

Average

12294.58

6081.26

7190.80

2735.89

1234.25

1502.40

High

9127.68

3214.90

3810.94

1793.37

539.50

665.90

Vai .Add. Group
Poor

2647.07

11732.90

6100.67

4001.30

3000.89

3621.04

Low

15605.02

6488.06

10335.69

2655.96

1223.68

1828.14

Average

4582.27

4757.24

4697.49

772.42

856.28

827.64

High

4889.88

6943.10

6247.12

1564.59

800.12

1059.25

All Sectors

7878.39

6092.04

6827.25

2251.10

1225.46

1647.58

20

Of all companies those situated in Bombay and North India (mainly
around Delhi) had the highest average sales turnover

sales.

per employee

in terms of

The pattern is more or less similar between

the public and private sector companies, where sales

by location

is concerned.

However overall, the public sector’s average sales turnover (both
the private sector.

per company and per employee) is higher than

Infact the

public sector’s

their proportion

46%, twice that of
mean

the

that

share of the total sales turnover is

public

sector’s

in the

Does this

sample.

performance in marketing their

products is far better than that of the private sector?

look at

When we

the sales turnover per employee this proposition is well

substantiated - the public

contributes a higher

sector employee

value of sales in comparison to the private sector employee.

However,

above

the

strength is reduced substan­

proposition ’s

tially when

we consider

generate that

volume of

of gross

block employed to

The public

sector uses nearly

the volume

sales.

twice the amount of capital per employee to arrive at

the higher

sales turnover.

Hence if we take the ratio of sales turnover to

gross block

then

the

employed is

much better

sales

performance

in the

terms

of capital

for the private sector - for every unit

of capital per employee the sales

sector whereas

in

is 1.44

times in

the private

public sector it is nearly equal to unity

at 1.06 times .

21

in profits and value added.

gets reflected

This also

The total

profits (before tax) of the sample companies (132 reported) is
Rs. 30,410

The public

million.

sector’s share in this case is

only 19%; as a consequence profitability (PBT as

lower

much

that

than

terms the profits in
that

sector are

the private

public

capital

and

sector

employed

On per employee

the private sector.

3 1/2 times than that of

nearly

on

the

of

of

as

(PBT

sales) is

% of

nearly three times

the former’s profitability is

Similarly, return

the latter.

% of gross block) is nearly five

times higher in the private sector.

The above pattern is

added

value

significantly

(interest

+

PBT

Though

the

public

company

per

disaggregated in
added is

than

the

private

larger

per employee

one and

terms as a ratio to
private sector

is

a half

capital

works out

of the
the

employed

to two

and a

Depreciation

+

sector’s value

sector , when

private sector’s value

terms the

times that

+

look at

we

when

payments

Remuneration to employees).
added

supported

public sector.

value

added

In

in the

that in the

half times

public sector .

Can one really conclude from the above that the private sector is

generating a

higher value

of goods

more efficient and cost-effective?
when one

looks at

and services

or that it is

On the face of it,

yes.

But

the political economy of this entire business

the conclusions cannot be so simple!

22

A fair

chunk of

the public

sector operates in an area which is

the state sector’s monopoly, and a large proportion of the public
is in what one would call basic industry and

sector’s investment

infrastructure, where the volume

needed is really

of investment

This is one factor which explains a higher sales turnover

huge.

and gross block in the public sector.

sample there

is only

(Please note

that in the

company which is matched in

one petroleum

size and assets by a few private sector companies, hence there is

no question of a single petroleum company skewing the results).

very

This

factor

explains

also

the

productivity

lower

The nature

profitability of the public sector.

and

of investment of

the public sector is such that it is directed at producing mostly
intermediate

products

enterprises

to

produce

policies

the

pricing

are

that

finished

consumed

largely

goods.

As a consequence of

of

value

output

by

private

enterprise

public

is

deliberately kept low (amounting to subsidisation) so that inputs
to the private sector are kept cheap.

This argument is substantiated

value added

when we

the profits and

It is clear from this disaggre­

group.

by industry

look at

gation that the public sector’s productivity and profitability is
much better in the "foods" and "engineering and durables" groups,

as

in

these

subsidisation
product.

In

industries

there

is

very

little,

because

most

cases

the

product

is an end­

group

the

the

in

“minerals

and

metals"

if

any,

better

performance of the public sector is due to its statutory monopoly

position in most cases.

23

In

the

“chemicals"

and

"services"

sector *s stake is largely

to

group,

manufacture

the

where

public

intermediate products

consumers)

and infrastructure

provision, the public sector’s performance is

relatively poorer.

(where

In

manufacturing

the

case

units

"textiles”

of

public sector textile mills
units

had

that

become

are

there

is an exception because the

are mostly

and

"sick"

erstwhile private sector

taken

were

over

by

the

gover nment.

Thus,

private

sector’s performance,

the

public

sector’s

and

efficiency,

etc.

cannot

compared on the same plane because

be

making a loss or having a lower value of production in the public

sector is

not due

to poor

productivity or inefficiency; on the

contrary, it is for reasons embedded in political
in

most

cases,

that

the

economy alone,

value of labour in the public sector

appears lower than in the private sector.

Out of this value added through labour power, what accrues to the

contributors of

labour?

Under capitalism,

for the market, the total value
accrue

to

subsistence.
share.

the

producer.

The providers

added by

Labour
of

where production is

labour power

does not

gets a share enough for its

capital

appropriate

the larger

From among the components of value added labour gets only

remuneration (wages + benefits, part of

whereas the

capitalists get

which are

social wages)

interest, profits and depreciation.

The state gets taxes, most of which, in India, are

ploughed back

for the development of capitalism and very little for social

24

capital

social

and

appropriate,

capitalists

lavish

The

surplus

labour

besides

providing

for

the

latter’s

the

source

for

further

wages.

life-style,

becomes

also

that

value

expropriation of surplus value.

In our sample companies the total remuneration that employees get

staff + management, excluding directors) is Rs.16,998

(workers +

million.

This is only 6.3% of sales turnover and

In the public sector the proportion

added on per employee basis.

only

21%

in

private

the

employees in the public
value of

added is

to value

of salaries + benefits

sector get
than in

33% in

a much

larger share

of the

sector .

In the

the private

public sector the average annual remuneration
employee, whereas

comparison to

This clearly shows that the

sector.

their production

24.7% of value

is Rs.

38,878 per

private sector it is a little lower at

in the

Rs. 36,476 per employee (all companies Rs. 37,464

per employee).

It is interesting to note that in the private sector remuneration
to employees declines with rise in profits (Pearson’s

and

in

higher

the

profit

-

group

companies the average

of

remuneration is twice higher in the public sector,

value added

for this

public sector.

r = -0.58)

even when the

same set of companies is much lower in the

On the basis of location and type

of company the

Bombay based and the FERA group of companies have a significantly
higher pay-packet as compared

to others.

the

we

data

by

Industry

“engineering" group in

group

the

public

find

When

we disaggregate

that the -services" and

sector

and

the "chemicals"

group in the private sector give the highest remuneration to

25

The worst in each of the sectors is “textiles"

their employees.

and "Food Products", respectively.

When we look at the benefit or social wage component

specially

benefits,

public

the

performance

sector’s

The public sector employees get much

better.

private sector

comparison to

(of Rs.

3098 million)

per

employee

private sector.

the board.

is 48% and of medical benefits 56%.

annually,

in

contrast

The

total benefits

companies of

works out

the total benefit package in the public sector
7878

is even

higher benefits in

employees, across

public sector’s share in the sample

and medical

Thus

to Rs.

Rs. 6092 in the

to

This amount is 20% and 16%, respectively, of the

The

total remuneration.

gap is

benefits wherein public sector

much wider

employees

in case of medical

average

Rs.

2251 per

year against Rs. 1225 in the private sector.

This finding

wages are
follows

It is well established that social

is as expected.

much better

statutory

and

because the latter

in the

public sector

other

legal provisions more stringently

than the private sector.

Infact,

the public

sector often goes

beyond the legal provisions and extends a wider variety of social
wages or benefits to its employees than does

the private sector.

The salary component is adequate only for the employees ’ family’s

wage

makes

his/her life

subsistence but the

social

qualitatively better

because they include benefits (like medical

care,

housing,

education,

component

recreation, etc.)

that

would

eat

substantially into cash incomes of employees if the latter had to

26

provide for it on their own, especially considering the fact that

prices of most of these needs are dependent

on the

market forces and are prone to high inflation.

27

whims of the

TYPE OF MEDICAL BENEFITS

We have

seen in

discussion that the organised sector

the above

employees, besides getting their
certain social

fringe benefits.

wages or

one prominent benefit.

and

salaries

wages,

also get

Medical Benefits are

In the present study this is

our central

concern, hence we will not look at other social wages.

We

have

also

otherwise, are
there are

seen

that

statutory

some
or

of

benefits,

the

mandated

by

medical

or

legislation, whereas

others which the Employers Federation of India prefers

to term "voluntary".

However, while one does not deny that there

are a few exceptions, most of such "voluntary" benefits have been

obtained after workers’ struggles and negotiations.

As discussed earlier the study’s

many

details

about

scope

was

while

available through

available

for

some

data

official
the

for

As regards statutory

the entire organised sector are

documents,

non-statutory

no

medical

therefore in the latter that our efforts were

success.

limited and

various statutory and non-statutory medical

benefits have not been possible to collect.

benefits

fairly

such

information is

benefits.

It

is

directed with some

We have also gathered information on ESI benefits - the

employer’s and employees contributions.

28

Before

we

go

the

into

details

our findings some data on

of

statutory benefits need to be highlighted.

(Labour

Bureau 1986

and 1990 ) .

a)

Under

the

Compensation

Workmen’s

Act, which provides for

compensation due to death or injury,

injuries

and

were

with Rs. 15.92 million, in

compensated

1976 43,088 with Rs. 13.43 million, in 1981
34.26

and

million

57,346 deaths

in 1971

33,031 with Rs.

1986 24,990 with Rs. 38.80 million.

in

This worked out to a mere

Rs. 278,

Rs. 1,037 and

Rs. 312,

Rs. 1553 per death or injury in the respective years.

b)

Under the

Maternity Benefit Act in 1982 42,502 confinements

were covered for women working in factories, plantations and

mines.

The total amount paid to them was Rs. 32.61 million

or

767.26

Rs.

confinements,

per

confinement.

40.6

Rs.

In

for

1987

26,832

was spent under this Act,

million

making for Rs. 1513.12 per confinement.

c)

Under the various Mine

Iron, Manganese,

Labour

Welfare

Chrome, Limestone

expenditure was

spent on

maternity benefits

are covered

29

medical care.

Rs. 42.99 million .

Rs. 9.93 million was

Act.

(Coal, Mica,

and Dolomite) in 1986 a

total of Rs. 46.81 million was spent for

1989 this

Funds

water supply

In

In addition

in 1986.

The

under the Maternity Benefit

d)

Under

the

Beedi

Welfare

Workers

in 1986 Rs. 15.59

Fund

million were spent on medical care of the Beedi workers.

e)

Under the Plantation Act

in 1982

27.46 million

were paid

for 5,92,280 employees (Rs. 46 per

employee) and

maternity benefit

for

confinements

21,194

sickness benefits

of Rs.

(Rs.

of Rs.

12.11 million paid

confinement).

per

571

Information on medical care is not available.

f)

The Employees State Insurance Act provides

benefits.

There are

cash benefits

sickness,

maternity

and

temporary), on

the one

medical care

provided for
In 1989

families.

range of

a wide

for sickness, extended

disablement

(permanent

and

hand, and on the other there is the

employees and their

the insured

6.8 million insured workers

there were

with beneficiaries (their families included) totalling 26.41
million.

The total number of cases treated during that year

was 36.55 million (0.32 million hospitalisation) or 5375 per

1000

The

insured.

Corporation

for

was

Rs.

benefits Rs. 404.10 million;

36.52

million;

these

providing

costs)

administrative

expenditure

million;

maternity

depreciation

other

provision

of

benefits

2972.14

benefit

million;

the

ESI

(including

million (sickness
benefit Rs.

31.27

million;

medical

care Rs.

3.38

million;

Rs.

benefits

Rs.

Rs.

231.63

administration costs Rs. 427.15 million).

30

by

extended sickness

disablement benefits Rs. 455.39

1382.70

incurred

million

and

This expenditure

beneficiary.

was Rs.

per

insured

employee

The income

of the

ESIC during

437

Rs.

averaged

from

dividends

113 per

the same year

and of this the contribution from

4212.68 million,

employers and employees was Rs. 3313.37
that

Rs.

or

and

million (78.6%) and

a fantastic Rs. 642.29

interest

million (mostly invested in securities)

g)

Those in

government

in

services,

various

ministries and

get statutory medical benefits.

About 3.5

million beneficiaries (0.77 million employees) in

1988 were

departments also

the Central

covered under

Government Health Scheme (CGHS ) .

The CGHS hospitals and dispensaries in the same year treated

cases, that

15.32 million

times that of ESIS

is 19,896 per 1000 employees. (3

through its

The CGHS,

beneficiaries).

262 dispensaries, spent Rs. 295.70 million in 1984-85, which

worked out

to Rs.

93.28 per

beneficiary or

Rs. 18.69 per

Similarly, employees in the Railways, Post &

case treated.

Telecommunications, Defense services
special medical

schemes.

In 1987-88

and

many

others have

the Railways covered

8.61 million beneficiaries with an expenditure of

Rs. 1271.71

million or

Dept, spent Rs.

243.40

Rs. 148

per beneficiary.

The P&T

million

on

medical

for its

care

employees in 1989-90. (CBHI, 1989).

h)

Under

group

health

insurance plans (non-statutory) of the

four General Insurance Companies,

corporate enterprises can

insure their employees for benefits with specified upper

limits.

insurance companies do not publish such

Since the

data (because this is

an insignificant

insurance

nor

business)

difficult to get

compile

information

any

proportion of their

them

centrally, it is

an

All-India basis.

on

However, the IIM Study referred to earlier has compiled this

250

information from Maharashtra for

the

New

Assurance

India

covered by

companies

Company.

1986, for 57,521

In

insured employees the companies paid Rs. 10.3 million during
the year

i.e. Rs. 179 per employee. During the

as premium,

same year the insurance

or an

company reimbursed

Rs. 160

average of

Rs. 9.2 million

per employee as claims, both for

hospitalization and domiciliary benefits. (IIM, 1987).

In the present study,

mainly

to

medical

broken

the

down

expenditure

care

because

benefits, especially the statutory ones, were

majority of

the companies.

medical benefits.

benefits refer

medical

details of other
not provided

These are however included in total

The ESI benefits refer only

to the employer’s

contributions towards the ESI scheme paid to the ESIC.
benefits, compensation for injuries

“other" and

included in

by a

/ deaths

Maternity

etc. are

shown as

the total, as details were not provided

by most companies.

As mentioned earlier, besides the ESI
there

are

other

company to another.

schemes

benefits for

medical care

offered to employees varying from one

Usually, in each company it is a mix

to three schemes offered to employees.

32

of two

Table C.l gives a count

of

the

companies

providing

Though ESIS is

employees.

medical benefits to their

various

statutory

a

scheme

it

is

not the

single largest group because of the fact that it is restricted to
employees drawing salaries less than Rs. 1600 per

for the

month, whereas

the mean monthly salary is much higher

sample companies

at Rs. 2445 per month; hence there are many companies that do not
earning less than Rs. 1600 per month.

have employees

of the companies had atleast one type of
ESIS; of

Infact 91%

medical benefit besides

9% (12 companies), all had only the ESIS

the remaining

scheme .

The single largest group of
public

sector

and

private

bills with upper limits0
medical benefit

47% of

the companies

public sector).
care for

this case 37% companies

public

sector).

health insurance

short).

important provision

had

the

such

important

form

private

sector,

of

is

In

in

case of

giving

medical

through group

the General Insurance Corporations.

covered

but in

the private

the

companies.

of

(52%

facilities

through such

32%

for medical

through owned hospitals and clinics.

the

by

type of

the sample companies (77% in

Twenty-seven percent of

were opted for

This

had employees enrolled (45% in case of the

schemes of

a scheme,

by'both

This was followed by ESIS, in whose case

Another

benefits, especially in

for

61% of

The third most

employees was

provided

benefits

sector companies is “claims against

(claims,

existed in

case of public sector).

medical

companies

their employees

sector such schemes

Giving

a lumpsum

(allowance) amount as medical benefit is more popular in the

33

Table C-l - Employees Covered under each Health Scheme of Companies by SectorPRIVATE SECTOR

PUBLIC SECTOR

ALL SECTORS

Co’s

Workers

Mgt.

Total

Co’s

Workers

Mgt.

Total

All
Co’s

ESIS

14

38381

8

38389

49

41735

0

41735

63

80124

Insurance

4

6864

3202

10056

33

27311

12187

39498

37

49564

24

69773

11371

81144

58

69393

9785

79178

82

16032?

Lumpsum

4

8936

2752

11688

16

30684

1729

32413

20

44101

Owned Hosp.

16

53884

11893

65777

33

137473

8288

145671

49

211448

4

-

-

-

8

-

-

-

12

-

2

-

-

16

9

-

-

2717

11

2733

31

161708

25032

186740

101

24SO91

21894

266985

132

453725

All
Emp-

& Clinics
Retained
Facility

No facility
for section
of employees

No of companies
& employees in
the sample

Note = Please note that the sum of all companies or employees will always be greater than
the actual number (last row) because of multiple benefits provided-

34

than in

private sector

sector; but

the public

medical care.

companies used such a method of payment for

9% of

only 15% of the

Only

the companies had a retained facility i.e. hired against a

capitation fee or reserved for a fee.

single

largest

type

coverage was through "owned

in

terms

of

hospitals and

clinics" , even though

such facilities it was only the

third largest category of benefit (Table
for such

The

in terms of employee

having

companies

?

benefit

medical

of

employees

amongst

distributed

How were these benefits

C.l).

The main reason

a distribution is that when a hospital or clinic of the

company exists it is generally accessible to all employees of the
company;

ofcourse

discrimination does exist as to how different

In contrast

employees are treated.

other schemes are

to this,

more discriminatory between workers, staff and management.

For

the

workers

in

both

the

pattern in the provision of

similar.

Besides access

public

medical

and private sector, the
is

benefits

more

or less

to own facility of the company, claims

cover the largest number of workers in both the sectors

- 43% of

workers in the public sector and 28% in the private sector.

This

is followed by ESIS - 24% of all

employees in

and 17%

In case of the lumpsum scheme 6%

in the private sector.

the public sector

of the public sector and 12% of the private sector
covered.

Similarly, a

public sector is

also

employees are

major difference between the private and
noted

in

the

case

of

group insurance

medical scheme which covers only 4% of workers in the public

35

sector but

in the private sector accounts for benefits to 11% of

the workers.

In case of the managerial employees the pattern is very different
in the

public and

private sectors

workers of the

respective

covered under

ESI which

sectors.

Management

In the public sector 47%

covered through

owned facilities

45% are entitled to claims against bills.

in

contrast,

56%

of

the

through

contrast are

public

available to

covered

and

sector

managers.

For private

and

important scheme

medical

lumpsum

for medical

through claims and

insurance

benefits in

of management

staff in the

Group

only 13%

of management

In the private sector,

is

management

facilities.

owned

is not

of the companies and

benefits through group insurance schemes, 45%

38%

staff

of the major statutory benefits

is one

accruing to the workers.

staff is

as also in comparison to the

allowance

sector managers’

11%

to

lumpsum is

covers only 8% of them.

of the

a much less

The coverage for

retained facilities was not made available by most

companies but

it was clearly indicated that it was generally for the management

and senior staff.

Two important sets of findings come out of

distribution.

In

pattern of

Firstly, the majority of workers are covered only

scheme, especially

by one type of medical benefit

sector.

the above

the

entitled to two or

case

of

management

more different

staff

in the public

the majority are

medical benefits.

Secondly,

the differences between the benefits that accrue to workers and

36

Table C.2: Coibination of Type of Medical Benefits
Provided to Eiployees

(figures are nuiber of companies)

Insurance

ESIS

Claiis

Luipsui

Own
Hospital 1

Retained

Facility

Clinic
Public Sector

2

ESIS

14

2

12

2

5

Insurance

2

3

2

1

1

Claiis

12

'2

24

4

11

Luipsui

2

1

4

4

1

Own Hospital $ Clinic

5

1

11

1

16

3

Retained Facility

2

3

4

3

3

Private Sector
ESIS

49

12

31

3

12

1

Insurance

12

32

16

5

9

5

Claiis

31

16

55

7

14

7

Luipsui

3

5

7

15

6

1

Own Hospital 4 Clinic

12

9

14

6

32

5

Retained Facility

1

5

7

1

5

8

37

Table C.3: Type of Medical Benefits Provided to Employees

by Selected Characteristics of Companies
(figures ara number of companies)

ESIS

Insurance

Claims

Luipsui

Own

Retained

Hospital 4

Facility

Clinic

Public Sector

14

3

24

4

16

4

Private Sector

49

32

55

15

32

8

All Sectors

63

35

79

19

48

12

Boabay

20

23

37

10

20

9

North India

6

8

2

11

Calcutta 1 East

12

4

12

2

7

West India

5

3

6

4

3

South India

20

5

16

1

6

16

50

12

28

4

7

9

1

5

4

Location

3

Type of Company
Non-MRTP/non-FERA

45

FERA 1 MRTP

6

MRTP only

12

• 12

20

6

15

4

pre-1975

47

29

58

18

36

10

1975 4 later

13

5

15

1

9

2

Food Products

6

4

6

4 .

11

2

Textiles

15

3

12

2

5

2

Minerals 4 Metals

8

4

9

2

6

,

Incorporation

Industry group

Chemicals

9

5

20

5

7

2

Engineering 4 Durables

10

10

9

2

7

2

Services

6

7

15

3

4

2

Diversified

5

2

4

1

3

2

Others

4

5

4

Profitability Group
Negative

13

6

6

3

Low

25

8

29

7

9

2

Average

22

17

34

8

23

9

High

2

2

7

1

7

1

8

Returnability Group

Negative

11

6

4

2

6

Low

21

10

26

6

15

Average
High

18

12

24

7

13

3

8'

5

19

3

10

4

5

Vai.Add. Group

Poor

11

5

10

2

10

3

Low

21

13

30

9

19

3

Average

17

10

21

3

7

4

High

4

2

8

2

3

1

38

management

personnel

is

sharp

less

in

the

public sector as

compared to the private sector.

As regards combinations of types of medical benefits

employees in

the public

and claims, and hospital/

sector, ESIS

clinic and claims are the

main

combinations.

claims

is

the

sector ,

ESIS

and

most

In

the private

important

combination

followed by group insurance and claims and hospital

claims.

(see Table C.2).

When we

disaggregate the

various schemes

get the following scenario.

i)

like claims

Calcutta,

medical benefit

is the least important

- clinic and

by other variables we

(Table C.3)

South India, followed by
most important

provided to

have

ESIS

provided, whereas this

where other schemes

in Bombay,

are more important.

and Insurance

as the

In the

the single most

north, owned hospitals and clinics are

important medical benefit provided, followed by claims.

ii)

For the

non-MRTP / non-FERA group of companies as well

as the FERA and

MRTP companies,

important type

of benefit provided but the second most

claims form

important type of medical benefit is

3 groups.

the most

different for the

For the first group it is ESIS, for the FERA

and MRTP group it

is insurance

and for

group, it is owned Hospitals and clinics.

39

the MRTP-only

the single-largest type of benefit provided in

iii) ESIS is

the textile group

of

industries

and

the diversified

group.

In both these groups it is closely followed by

claims.

In the

metals group

are

claims form

the largest

In the engineering group

provided.

equally

important,

whereas

owned

hospitals

and

group

and minerals and

chemicals, services

type of benefit

ESIS and Insurance

in the Food products

clinics

are

the

most

important.

iv)

With regard

to Profitability and Return on capital the

average and high profit making and productive companies

tend to

have a

much higher

medical benefits, whereas the

groups

have

a

tendency

proportion of the non-ESI
negative and

towards

statutory benefits.

40

providing

low profit
only the

EXPENDITURE ON MEDICAL BENEFITS

In the

preceding discussion

we have overviewed both the general

profile of the companies covered in the study as well as explored
the

types

various

of

medical

benefits which employees get in

different companies.

In this concluding section we will make a

brief analysis

of the

cost of these benefits provided to employees.

Though medical

benefits are

an important item of expenditure in

many companies, the information

not

available

in

any

on this

published source.

reports and accounts do not show
separate one.

ESIS

expenditure is

The companies* annual

this item

of expenditure

as a

It is clubbed along with all "benefits* which are

required by law to be shown
Only

item of

expenditure

is

separately from

shown

separately

salaries and wages.
because

it

is a

gratuity and

statutory requirement.

Sometimes, provident funds,

bonus

given separately, but other benefits like

paid

are

also

medical, housing, education etc.

are

rarely

listed separately.

The public sector gives the latter figures separately to a larger
extent.

As mentioned in a preceding section there is no significant study
available on

corporate sector’s

expenditure on medical benefits

for their employees, except for the EFI and IIM studies referred

41

The EFI study of 1969 showed that the expenditure on

to earlier.

medical care (including statutory benefits like

workmen’s

compensation

for

employee remuneration and 12.58%

out to

Rs. 112.72

of all

530

per

(IIM,1987).

This worked

benefits.

In the IIM

per employee in 1969 (EFI, 1972).

study in 1985-86 medical expenditure varied
Rs.

was 3.41% of total

etc.)

injuries

ESIS, maternity,

employee

small,

for

450 and

between Rs.

medium

and large companies

The study has also reported information for selected

companies as case studies (Ibid).

The only

other data

on medical care and related expenditure for

the organized sector employees available in a published

form are

about the statutory expenditure under the various Labour Acts and

those by some public sector undertakings.

These are published in

the annual reports of the agencies responsible for implementation
of these Acts, as well as in a compiled form
of the

in the publications

Labour Bureau of the Ministry of Labour Welfare.

This we

have already discussed in the preceding section.

In the

sample

companies

expenditure works

out to

the

Rs. 755.53

works out to Rs. 5.64 million

1647.58 per

employee per

total

per

medical

and related

care

million (Table D.l).

This

(Table

or Rs.

company

year (Table

B.3)

we assume an

D.2(a)). If

average family size of 4.5 persons for the organized sector, then
the medical

expenditure by the corporate sector works out to

Rs. 366 per capita per year

(at

1990

prices).

If

we exclude

“other medical benefits" (Which is mostly maternity benefits,

42

Table 0.1

Expenditure on Various Medical Benefits in Public and Private Sector Companies
PUBLIC SECTOR

Type of Benefit

PRIVATE SECTOR

ALL SECTORS

Expenditure

Percent

Expenditure

Percent

Expenditure

Percent

(Rs.million)

Share

(Rs.million)

Share

(Rs.million)

Share

1.

ESI (Employer Contribution)

26.13

6-22

27.10

8.09

53-23

7.04

2-

Group Insurance Scheme

13.07

3-30

22-57

6.73

36.44

4.82

3.

Claims / Reimbursements

151-65

36-08

141-47

42-21

293-12

38.80

4-

Lumpsum Allowance

26-15

6-22

14.94

4-46

41.09

5.44

5-

Own Hospital / Clinic

69-74

16-59

59.29

17-69

129.03

17.08

6.

Retained Facility

0-51

0-12

0.97

0-29

1-48

0.20

7.

Other Medical Benefits *

132.32

31.47

68.82

20.53

201.14

26.62

335-16

100-00

755-53

100.00

ALL MEDICAL BENEFITS

420-37

100-00

Note : * This includes special medical benefits for c:atastrophic illness and other statutory
CAjnv'viicni etctin iiw
were
LM?I Rf 1 1 CVi 1 1 KV Illd l_e Fill t-X UJf 1 Rf 1 1 W « aCC ILWHCS aiiu
not available separately for most companies hence we have had to club them asi “others"-

43

etc.) and

injury/death compensation

the

care

medical

expenditure

the ESIS contribution, then

works

to

out

Rs.

1086.96 per

employee per year or Rs. 241.55 per capita per year.

There is

a wide difference between the public sector and private

expenditure

sector in medical care
average,

public

each

by

company

sector

the

companies.

On an

in the sample spends Rs.

13.56 million per year (1.88% of value added) in contrast to only
million per

Rs. 3.25

year (0.67% of value added) in the case of

the private sector company.

For the public sector employee this medical expenditure works out

to Rs.

2251.10 per

employee annually (Table D.2(b)) whereas for

private sector employees it is much lower at

Rs. 1225.46 yearly,

per such employee (Table D.2(c)).

How is

distributed amongst the various medical

this expenditure

schemes we discussed in the last section ?

Table

account

D.l

shows

for

the

single

expenditure in both the

’other

medical

as

that,

expected,

largest

public and

benefits’,

claims

category

/ reimbursements

of

medical

private sectors.

care

Excluding

next major type of medical care

the

expenditure is ’owned hospital and clinic’, which, in proportion,
is half

that of

claims.

’Claims’ and ’owned hospitals’ account

for 56% of the medical expenditure of the

companies (60%

in the

private sector) and ’other medical benefits’ for over one-fourth

44

of total medical expenditure.

The

differences

same as

between

discussed in

Thus, group

the

twice

on type

the section

insurance medical

costs are both

private and public sector are the

higher

of medical benefits.

expenditure and retained facility
as

a

proportion

in

the private

sector .

Tables D.2 (a),(b),(c) give the broken down cost for each benefit
as an average per employee, across selected differentials and for
each sector

separately.

cost per recipient of
gives the

And Table D.3 gives the actual average

the said

medical benefit

scheme; it also

proportion that this benefit is of total emoluments of

employees receiving the respective medical benefits.

DISAGGREGATED MEDICAL EXPENDITURE

Overall Medical Expenditures

The foregoing analysis shows that the public sector spends nearly

twice the amount on an average, for medical care of its employees
in comparison to the
expenditure

across

also confirms this.
MRTP /

private
other

sector.

variables

Thus, North

Disaggregation

of this

(Table D.2 (a)(b ) and (c))

Indian companies

and the non-

non-FERA group of companies, which have a high proportion

of public sector companies, have significantly higher average

45

Table 0.2(a): Expenditure on Medical Benefits - All Sectors

by Selected Characteristics of Companies

(figures are rupees per eiployee)

ESI per
Eip.

All Sectors

Insur.

Cialis

Luipsui

per Eip. per Eip. per Eip.

117.31

80.33

8o*bay

125.00

139.17

North India

17.98

628.43

90.56

Own

Retain

Other

Medical

per Eip. Medical Ben. per
Benefits
per Eip.
Eip.
Hosp.

284.37

3.27

2.72

443.31

1647.58

Location
784.63

49.52

194.74

2041.72

766.28

610.36

637.98

1933.75

832.32

4268.66

Calcutta A East

102.66

13.39

86.42

28.79

206.85

139.14

583.83

West India

274.57

83.61

221.88

71.73

161.20

50.56

863.56

South India

151.53

52.19

643.87

25.66

596.73

203.94

1673.92

6.58

Type of Coipany
Non-MRTP/non-FE

RA

152.99

83.80

665.61

105.43

294.44

1.69

630.82

1934.78

FERA A MRTP

72.38

38.31

642.74

82.59

133.88

3.26

489.53

1462.69

MRTP only

71.86

87.17

562.77

68.40

312.78

5.88

119.92

1228.78

137.01

67.59

747.08

124.28

205.80

3.56

528.90

1814.22

122.57

6.54

495.85

2.14

621.12

5.53

306.80

1560.54

Incorporation

pre-1975
1975 4 later
Industry group

Food Products

4.94

8.56

26.47

45.37

366.47

8.77

94.36

554.96

505.65

35.78

30.66

3.89

73.99

1.57

112.26

763.80

Metals

60.57

321.55

423.10

2.65

560.68

287.76

1656.31

Cheiicals

56.17

62.38

2132.31

564.20

629.18

6.74

559.29

4010.27

Textiles
Minerals &

Engineering A
Durables

54.81

92.37

404.43

39.11

351.09

3.18

549.91

1494.90

Services

68.75

75.61

1495.60

57.82

54.82

.75

1199.70

2953.05

Diversified

114.64

79.13

364.11

64.70

87.07

1.27

243.13

954.05

Others

30.63

728.17

1505.44

152.60

594.04

Profitability
Group
Negative

247.21

20.10

87.07

7.13

117.85

1045.96

1525.32

Low

88.70

191.13

1070.12

259.74

181.94

6.82

420.08

2218.54

Average
High

122.50

64.78

544.35

56.03

386.10

4.16

204.62

1382.55

2.61

15.04

818.58

1.65

428.04

.92

93.23

1360.07

Returnability

Group
Negative

243.35

20.66

87.10

6.43

114.72

Low

127.54

66.60

1403.38

215.00

453.55

Average
High

87.04

259.09

576.48

50.29

12.47

14.67

176.27

43.43

1071.99

1544.26

8.23

332.91

2607.20

178.55

.58

350.38

1502.40

283.91

2.21

132.94

665.90

Vai.Add. Group
Poor

63.97

26.06

1760.41

337.68

794.18

15.70

623.04

3621.04

Low

82.68

120.36

648.53

58.29

138.88

.50

778.91

1828.14

Average

147.92

60.60

249.82

4.61

233.17

.89

130.63

827.64

High

66.10

10.12

450.15

224.47

5.30

4.82

298.30

1059.25

46

Table 0.2(b): Expenditure on Medical Benefits - Public Sector
by Selected Characteristics of Cospanies
(figures are rupees per employee)

ESI per

Emp.

Lumpsum

Own

Retain

Other

Medical

per Emp. per Emp. per Emp.

Hosp.

per Emp. Medical

Ben. per

Insur.

Claims

per Emp.

Public Sector

139.92

74.29

173.06

143.38

812.09

140.03

373.44

2.73

4.67

Benefits

Emp.

708.59

2251.10

925.60

2051.17

1124.75

5756.14

Location

Bombay

608.68

8.92

186.86

6.46

2751.89

1107.68

765.36

Calcutta 4 East

205.81

225.41

West India

338.25

516.55

South India

71.16

1.63

138.46

76.34

North India

270.82

704.00

5.02

148.21

1008.02

198.03

1940.84

2269.23

1.96

774.73

39.04

856.26

809.66

137.39

379.99

2.26

725.11

9.38

31.25

21.88

1318.75

393.17

2132.64

Type of Conpany

Non-MRTP/non-FE

RA

FERA 4 HRTP

153.13

HRTP only

227.69

21.18

616.89

508.34

365.37

pre-1975

157.29

.40

918.66

195.74

238.45

1.57

835.31

2347.42

1975 4 later

117.33

.46

491.40

795.60

6.88

365.35

1777.01

584 .08

8.27

655.53

.40-

26.14

582.66

432.19

2226.68

715.04

5675.89

1103.12

Incorporation

Industry group
Food Products

15.80

13.54

Textiles

547.21

8.91

33.85

Minerals 4
Metals

Chemicals

608.60
60.53

552.59

633.30

2823.02

956.74

1108.47

12.11

Engineering 4

Durables

91.44

926.29

101.48

922.86

7.93

326.65

2382.46

Services

63.96

872.12

15.63

.73

.91

1526.72

2480.06

Diversified

259.96

271.56

2.58

96.25

630.34

Others

16.89

190.51

925.55

1878.80

5.81

745.85

Profitability
Group

Negative

261.38

Low

44.91

212.84

1669.46

Average

81.22

.79

High

12.16

91.56

136.10

1120.71

1609.75

307.07

.92

409.49

3046.44

1010.54

1054.63

17.83

328.15

2493.17

2047.02

393.19

733.68

3186.06

401.76

Returnability
Group

90.26

Negative

257.09

Low

57.07

.76

1651.82

Average
High

5.84

896.82

64.33

138.16

1134.96

1620.47

5.13

430.80

3194.20

510.71

2735.89

108.19

14.62

356.03

1793.37

531.52

1080.97

6.73

771.16

4001.30

18.77

79.03

.73

1360.46

2655.96

356.24

692.38

1010.38

55.81

256.33

1220.97

29.24

1588.50

929.16

Vai.Add. Group

Poor

22.42

Low

64.41

Average

348.02

167.89

5.40

196.89

1.08

53.14

772.42

High

69.63

1079.60

122.21

11.37

14.21

267.57

1564.59

203.41

47

Table 0.2(c): Expenditure on Medical Benefits - Private Sector

by Selected Characteristics of Coapanies
(figures are rupees per eaployee)

ESI per
Eap.

Claias

Luapsua

Own

Retain

Other

Medical

per Eap. per Eap. per Eap.

Hosp.

per Eap. Medical

Ben. per

Insur.

per Eap.
Private Sector

Benefits

Eap.

101.50

84.55

499.97

55.96

222.08

3.65

257.76

1225.46

135.95

919.06

80.54

200.76

1.23

418.23

1844.04

175.94

929.90

Location
Boabay

88.28

North India

43.84

Calcutta I East

72.03

17.36

45.16

37.34

268.26

West India

262.99

98.81

168.32

84.77

South India

305.71

149.18

392.85

189.06

102.31

307.84

26.07

81.96

.27

396.62

1104.14

66.34

41.17

608.33

88.76

143.19

1.17

524.49

1473.45

69.26

88.27

561.87

61.08

311.90

5.98

115.38

1213.73

pre-1975

123.20

113.37

630.16

75.59

183.55

4.92

320.10

1450.89

1975 J later

140.89

27.82

■511.41

9.63

10.78

.80

101.98

803.31

3.81

9.46

27.82

46.58

343.67

9.69

103.38

544.42

477.87

59.70

45.21

6.50

123.18

2.62

169.83

884.90

447.69

262.43

7.95

100.05

548.15

189.59

32.82

837.30

98.87

215.29

1161.90

Type of Coapany

Non-HRTP/non-FE

RA

FERA S MRTP
MRTP only
Incorporation

Industry group

Food Products
Textiles
Minerals 4

Metals

112.48

75.58

312.15

4.91

498.45

163.99

1167.56

Cheaicals

51.09

135.19

1326.03

105.98

69.71

.47

377.49

2065.96

Engineering 4
Durables

33.22

143.39

96.79

2.34

14.03

.37

681.53

971.68

Services

79.35

242.93

2875.32

151.19

174.51

.40

476.03

3999.72

Diversified

43.23

118.01

409.59

96.49

129.85

.63

315.31

1113.11

Others

79.79

21.76

169.25

16.92

50.77

Profitability
Group
Negative

194.13

95.43

70.25

33.85

49.43

765.82

1208.92

Low

135.47

167.94

429.77

108.01

48.26

13.13

431.38

1333.98

Average

132.08

79.62

436.18

69.03

230.99

.99

175.96

1124.86

2.28

15.56

775.45

1.71

429.26

.95

70.74

1295.95

Negative

188.85

102.64

74.56

31.92

21.75

822.19

1241.92

Low

191.88

126.71

1176.53

86.04

235.47

11.06

243.52

2071.21

Average
High

104.69

120.45

482.15

49.09

161.65

.71

315.52

1234.25

6.66

16.32

59.16

45.02

303.61

.82

107.93

539.50

Poor

131.73

68.55

2040.76

21.57

326.47

30.34

381.47

3000.89

Low

96.02

59.72

443.62

87.15

182.58

.32

354.27

1223.68

Average
High

44.16

92.02

292.30

4.20

251.99

.79

170.82

856.28

64.29

15.30

127.38

276.91

2.19

314.06

800.12

High
Returnability

Group

Vai.Add. Group

48

expenditures on

the

companies,

of

and services groups

companies and

For the same reason the chemical

medical care.

the poor

and return

profit

low

value added companies have significantly

higher expenditure on medical care. (Table D.2(b)).

In

case

the

private

the

of

interesting to

note that

and poor

added

value

medical care.

This

doing so

(c))

it is

companies with low profits and returns
have

also

highest

the

clear indicator

is a

appropriate higher profits and show
added are

D.2

(Table

sector

at the

that companies which

higher

a

expenditures on

return

and value

cost of the employees i.e. by paying

lower wages and benefits.

This is further substantiated
D.4 where

by the

ratios presented

in Table

we clearly see that medical expenditure is much higher

in the public sector as a proportion to all the crucial variables

like sales

turnover, profits, value added and dividend payments.

Infact, the

gap between

highest where

the public

profits and dividends are concerned because in the

private sector profit appropriation (before tax)

of the

the

value added

public

sectors is the

and private

sector

maximizing profits,

takes away half

in comparison

to only one-fourth in case of

companies.

Thus,

with

the

objective of

the private sector companies, on an average,

tend to keep benefits (including medical

benefits) for employees

at a very low level as compared to the public sector companies.

49

ESIS

In the

sample companies the expenditure by companies (employer’s

share) for premia to
million or

the ESI

all types

7% of

a total

Corporation is

medical expenditures.

have

seen

earlier

that

the

actual

of the

thus, for

(Table C.l);

beneficiary, the employer’s contribution works

ESIS

out to an average
only 2%

only 17.6% of the employees in the

under ESIS

sample companies are covered

(Table D.2)

(Table D.2(a)).

This is a mere Rs. 117.31 per employee annually.

We

of Rs. 53

such employee

664.34 per

of Rs.

and this is

total emoluments of these employees (Table D.3).

For the public sector employees the latter proportion is 2.5* and
for the private sector employee much lower at 1.6% of emoluments.

ESIS, by

its definition

of coverage, is applicable to employees

with wages at the lower end of the

group of

industries which

have low wages on the average, have a

higher coverage

under this

scheme as

premium payout

per employee.

The

companies

and

those

having

However,

this

is

expected

an

Thus, the textile

spectrum.

a

well as

true of loss making

same is

return

negative

result

a higher average

because

on
it

capital .

is

more a

consequence of statute than of company policy.

The other medical benefits discussed below

are not

statutory in

nature but a consequence of negotiations and labour struggles.

50

Group Health Insurance

too

This

negotiates

is

based medical benefit which the company

premia

a

General

the

with

There are no specific standards set by the

sector institutions).

Insurance company for premia and amount

It

is

an

tailoi—made

entirely

and

agreement between the

company

often, the

premium is

amount of

volume of other insurance
the number

of employees.

of coverage permissible.

scheme

through

the

Insurance

dictated by

a

bilateral

firm.

Most

two factors - the

the company

business that

offers and

Larger the insurance business and the

number of employees, lower is the

per employee.

(all public

Companies

Insurance

premium that

the company pays

There may be different rates of premia and extent

of coverage (upper

limits

number

and

different grades of employees.

of

family

members) for

The ultimate cost of medical care

(within the confines of upper limits

specified) is

borne by the

insurance company, through reimbursements.

As we have seen earlier, in our sample this scheme is provided in

The total expenditure on this scheme

very few companies.
sample

companies

is

Rs.

36.44

medical expenditure of companies.
scheme

in

total

private sector.

is the

medical
(Table D.l)

single largest

by the

million or only 4.82% of total
However,

the

is

twice

expenditure
Infact, in

share

of this

larger in the

the private

sector, it

scheme for managerial employees, covering

56% of them. (Table C.l).

medical care expenditure.

A total

293.12 million was spent by the sample companies

of Rs.

on claims / reimbursements

to employees

for medical

care.

The

public sector accounted for 52% of this expenditure.

The overall expenditure on this scheme among the sample companies
was Rs. 628.43 per employee - Rs. 812.09 in the public sector and

499.97 in

only Rs.

the private

sector.

(Table D.2 ( a )( b )( c ) ) .

For employees actually receiving

these benefits

the

narrows.

private

sector

employee covered by this

scheme

public

and

against Rs.
D.3)

claimed

the gap between

The

public sector

1786.73 by an employee in the private sector. (Table

For the private sector

lucrative one,

atleast in

the employers the most
public sector

it is

employees this

terms of

the money received, and for

expensive scheme

the second

sector (except

the most

scheme is

to administer.

In the

most expensive scheme.

A point

worth noting here is that the gap between the various
the public

per year

1868.90

Rs.

is very

for ESIS)

private sector claims/reimbursement stand

schemes in

small; but in the

apart

from

the other

medical benefit schemes whose expenditure levels are more or less
similar - the former averages three times the

latter.

expenditure of the

(Table D.3).

Since the payout to the employee in this scheme is the highest as

compared to all

other

schemes

it

is

expected

that

the poor

performing companies do not have th s scheme as the dominant one.

52

Table 0-3 = Expenditure per Actual Covered Employee under Various Medical Schemes and as
Percent of Total Emoluments
PUBLIC SECTOR

Medical Benefit Scheme

(Rs-)* (Percent of

PRIVATE SECTOR

(Rs)* (Percent of

ALL SECTORS
(Rs)* Percent of

Emoluments)*

Emoluments)*

Emolument )•
ESI3 (Employer ©hare)

680.66

2-5

649-33

1.6

664.34

2.0

Group Health Insurance

1377.91

3.2

S71.42

1.1

73S.21

l.S

Claims / Reimbursements

1868.90

4.2

1786-73

5-1

1828.32

4-7

Lumpsum

2237-34

5-3

460.93

1-1

931.72

2.2

Own Hospital/Clinic

1060-25

3.1

407-01

1-4

610-22

1-8

*

Figures are Rs. per actual employer recipient of each benefit. It must be also
noted that in many <^ases an employee received more then one type of benefit.

0

Figures are percent that the preceding column is of average per employee emoluments
in companies with th* relevant medical schemes-

Table 0.4 : Selected Ratios of Medical Care Expenditures

Disparity

Public

Private

All
.joc tors

1

2

3

(Times)
1-2

1. Sales Turnover

0.34

0.23

0.28

1.48

2- Value Added

1-90

0-69

1.09

2.7S

3- Profits before Tax

7-14

1-34

2-48

5-33

4- Total Emoluments

5-79

3-36

4-40

1-72

5- All Benefits

28-57

20-12

24-13

1-42

6. Dividend Paid

65.29

11-24

21.04

5.81

Medical Expenditure as Percent of (on per employee basis)

53

Also companies in the North of country (mainly around Delhi) have

than

their own hospital more often

“Claims",

and

companies in

South India have ESIS more often than "Claims" .

Lumpsum Payment

Paying a

fixed medical allowance as part of emoluments is one of

the least common schemes, especially in
an average,

private employer

what the

also one of the lowest per employee.

sector , where
group

scheme has

too the

insurance,

beneficiary of

the

per

this scheme

On

spends on this scheme is
in the public

In contrast,

the lowest coverage alongwith
payout

employee

is the

highest.

for the public sector employer this is the
while for

sector.

the private

the

actual

(Table D.3)

Thus,

to

most expensive scheme

sector employer the cheapest, aggregating

the private

5.3% and 1.1% of emoluments, respectively (Table D.3).

Own Hospital/Clinic

Companies which on the average have
find

it

economical

to

have

their

a larger

own

employee strength,

health care facility.
becomes the

Consequently, on the whole,

having such

a facility

cheapest form

health care

to employees and their

dependents.

of delivering
This is generally

true

for

the

companies

sample and more so for the private sector companies.

54

in our

On

the

the

whole,

per

employee

expenditure on hospitals and

clinics by the sample companies is Rs. 284.37 - Rs. 373.44 in the

- (Table D.2(a)(b)) but the actual cost of running

public sector

a hospital / clinic for providing health care
employee in

a company

is Rs.

610.22 per

which has this facility (Table D.3).

The

costing in the private and public sectors is very different.

In the

private

sector

through

their

own

those

facility

companies
have

benefit, a mere Rs. 407 per employee.

the

providing

health care

cost of medical

lowest

In the public sector it is

the second

lowest cost

(after ESIS) medical benefit scheme, but

compared to

the private

sector the

amount spent

(Rs. 1060 per

employee) is much larger (Table D.3)

Retained Facility

The total expenditure for such a facility by the sample companies
is merely 0.2% of all

medical

benefit

senior

managerial

is

medical

expenditure.

directly

borne by the company for selected

employees,

directors,

This

etc..

category of

None

of the

companies gave any details about coverage of employees under this
scheme though 9% of the companies stated having

Interestingly 75%

of these companies were

the rest in Calcutta.

55

such a facility.

located in Bombay and

Other Medical Benefits

This is a large category of expenditure constituting 27% of total

medical expenditure - 20% in the private sector
public sector.

A

total of

benefits, which are mostly

various

Acts

such

as

Compensation Act etc..

the

Rs. 201

Most of

nature, covered

Benefit

the companies

by the

Act,

Workmen’s

did not

give any

details about these expenditures and the beneficiaries.

56

in the

million was spent on these

statutory in
Maternity

and 31%

CONCLUSIONS AND ISSUES

The foregoing

exploration of medical care benefits for the work­

force in the organised sector may

general population

indicate that

relative to the

this segment is perhaps privileged in getting

wages and benefits with minimum decent levels of protection.

The Factories

Act

and

other

associated

protect about

only 10%

of the

work-force.

Acts,

we

have seen,

The remaining 90%,

mostly in rural areas and small towns, has no legal protection at

are entirely

all; they

condemned to

various

at the

types

of

mercy of

their employers or are

unremunerative self-employment.

Even from among the 10% protected work-force only about half gets

complete

protection,

the

balance

because

the

audit

and monitoring machinery of the

under various

Acts is in .itself deficient and

protection,

state constituted

getting

nil

inadequate

or

inadequate.

In the

present economic

“small mercies" enjoyed by
threatened.

scenario of structural adjustment these

this

small

work-force

is generally

In the last one and a half decade employment in the

factory sector has stagnated, infact declined in real

to the

economic policies

pursued by

the government, especially

those with regard to liberalisation and privatisation.

57

terms, due

be noted that the decline in organised sector employment

It must

is not due

to

organised

sector

economic

has

recession,
grown

largely due to shifts in the structure of
the

putting-out

system

segment, and it is

both due

this which

production.

In India

has always been a large

is replacing

factory production,

increase of ancillarisation and miniaturisation

to the

of technology.

production

of

The decline is

rapidly.

fairly

in the

investment

because

To support these processes the legal framework is

being altered to narrow the focus of the factory-sector .

consequence

going

of

all

this

and

decline

in

wages,

adversely

affected

are

social

benefits.

With unions totally immersed in issues of unemployment

and wages,

the small increase achieved in awareness about social

A

major

unemployment

is

but

wages,

to

what

in

be

rise

will

be

more

health

care

including

wages amongst workers is going to plunge.

It is

in this

context that

one must

view the

findings of the

present study.

We

have

seen

that

medical

companies’ is merely one

percent of

emoluments.

the

care

expenditure

of

percent of

their value

added and four

About one-third of the value of medical

care benefits are statutory and the remaining two-thirds

result of

larger

are the

negotiations and struggles. Ofcourse what is statutory

today was also a consequence of labour struggles in the past.

58

Relative to the resources that the general population can command

for access to medical care the organised sector

workers (who get

are better off in the sense that they get some

medical benefits)

additional

support

(especially

so

if

to

meet

they

health

their

get

direct

care

requirements

services) beyond what the

government provides for the population as a whole.

However, this additional resource at the command of these workers

is

in

used

mostly

private health care, which, as we

availing

know, gives placebo, unnecessary or inappropriate
to

70%

the

of

time.

resource goes waste.

Thus

a

treatments 60%

fair chunk of this additional

Besides, it also contributes

to escalation

in the cost of health care.

Since we

have not

looked at the actual availing of medical care

by workers it is difficult to comment any

the

resources

provides

a

at

service

their

disposal,

(clinic

diredly

further on

the use of

except that if the employer

or

hospital)

the

then

expenditure indicated is an acutal expenditure on medical care by

the employer.

produced as

All other payments, except where bills have

in the

reimbursements against insurance or

case of

employers’ provision (these too

the

employer

for

medical

used for medical care but

to be

are often

manipulated), made by

care may not necessarily be actually
for

more

urgent

needs

(quite often

nutrition itself because of the generally low level of wages).

59

While these

very important,

issues are

exploratory in nature has
workers

who

receive

acquire

an

analytical

the present study being

Interviews of

not

addressed

them.

medical

benefits

need to be conducted to

understanding

of

medical

actual

care

benefits and expenditures.

We would

like to

saying that medical care benefits

conclude by

given to employees are given by employers more as a supplement to
wages

which

are

barely

subsistence

above

another number to the list of allowances.
not

at

all

a

adequately

In most

cases, it is

thought out system of benefits which gives

wel)

Only where companies run well-equipped

actual relief to workers.

and

and to add

levels

and hospitals do workers get a

clinics

staffed

real benefit as they are not dependent on buying an expensive and

a doubtful quality of health care in the market place.

And finally, under the present structural adjustment changes, the
organised sector

employment
union

is

(declining

organisation

increases,

rising

vigourous

under

now

(changes

prices

a

for

in

Acts which

freeze

Act),

declining

last, but not the least, the changes (against

labour protection

with

threats to

decade in real terms), trade
the

with

attack,

on

wage

purchasing power and

labour ) in various

provide different

benefits to the

wor ker.

To counter this,

workers

have

to

review

their organisational

policies and demands, because a one point battle of protecting

60

employment and

wages (though

very important) dilutes the larger

social security issues in the demand agenda of
struggles.

the working class

The latter are very important for long term stability

and only

with

their

struggles

of

the

firm

working

establishment
class

of

the

as

a

right

organised sector get

extended to the large mass of the non-formal sector.

61

can the

REFERENCES

CBHI , 1989:

India 1989, Ministry of Health

Health Information

and Family Welfare, Central

Bureau of

Health Intelligence,

Govt, of India, New Delhi.

:

.

(j i
a

CMIE , 1989 : Data on Larger Business Units, Centre for Monitoring

Indian Economy, Bombay.

EFI, 1962 : Fringe

India. Employers’

benefits in

Federation of

India , Bombay.

EFI, 1972 : Fringe Benefits in Indian Industry ■ A Report of the
2nd

IIM,

1987

Survey, Employers’ Federation of India, Bombay.

:

Study

of

Health

Care Financing in India, Indian

V

Institute of Management, Ahmedabad.

Labour-Bureau 1986 and 1990 :

Indian Labour

Year Book, Ministry

of Labour, Labour Bureau, Shimla.

' &

EMPLOYEE MEDICAL BENEFITS IN THE CORPORATE SECTOR

This is one of a series of studies on Health Expenditure carried out by FRCH with ICMR grants.
As an exploratory study looking into the medical care benefits provided to the employees in the organ­
ised industrial sector (both public and private) it looks at employee medical benefits as 'social wages'
and not as benefits provided due to the 'goodness of the employer'. The author takes a detailed look
at the companies studied (about 143 in all), discusses various types of medical benefits and
analyses disaggregated costs. In the concluding section, the author comments on the limited out­
reach of the corporate medical benefit schemes and discusses the threat of structural readjustment.
He states that there is a shift in production structure supporting greater ancillarisatlon and miniatur­
isation of technology and alteration of legal framework to support these processes. This will have an
adverse effect on social wages including health care. He thus throws a challenge to trade unions
to raise broader social security issues that used to be prioritised on the agenda of working class
struggles.
The monograph contains detailed tables (totally numbering 11) in each analytical section of the
study.
ABOUT THE FOUNDATION

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rural areas, to gain a better understanding of the socio-economic and cultural factors which affect
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Development at Malshiras in Purandar taluka of Maharashtra. Major research studies are currently
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public awareness.
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