A good businessman is one who will have you part with your money for a product or service and then have you believe that he gave you something worth a lot more than the money you’ve paid. Gujaratis have business in their veins and Prime Minister Narendra Modi is no exception. He is in fact a champion who can sell you a ping-pong ball and make most believe it’s a football!
On May 8, he launched three new “social security” schemes. The schemes — which include accident insurance, life insurance and a pension plan — supposedly target people from the economically deprived and unorganised sections, people who are neither covered by any form of insurance nor get any. But there is a catch. Only people who have a bank account can avail them. Out of a population of 1.2 billion, only 150 million have bank accounts, and of these a good one-third don’t have any credit balance.
Pointing out the necessity for such schemes, Mr Modi in his address said, “The journey to development will be incomplete if the poor do not share its fruits… Banks were nationalised for the poor but did we see the poor in the banks? Eighty to 90 per cent of the people do not have access to pension and insurance… But all the troubles happen to the poor, not the rich… They sleep on footpaths, they have to die...” Since 80 to 90 per cent of the population does not have bank accounts, the Prime Minister’s new “social security” schemes do not apply to them. So what is he talking about?
The Pradhan Mantri Suraksha Bima Yojana (PMSBY) will offer a renewable accidental death-cum-disability cover of Rs 2 lakh for a premium of Rs 12 per annum. The Pradhan Mantri Jeevan Jyoti Yojana (PMJJY) will offer a renewable one year life cover of Rs 2 lakh for a premium of Rs 330 a year.
The Atal Pension Yojana (APY) will focus on the unorganised sector and provide subscribers a fixed minimum pension of Rs 1,000, 2,000, 3,000, 4,000 or 5,000 per month, starting at the age of 60, depending on the contribution option exercised between 18 and 40 years of age. The period of contribution by any subscriber under APY would be 20 years or more. Very simply put, this means that you will get back what you invest. One cannot say you will get back more than you invest because in all such schemes you will get only a part of what your money would amount to after interest is factored in.
This is where the element of fraud comes in. These three schemes do not receive any government input nor is there any budgetary support provided. The Union finance minister’s 2015 Budget speech did not have a word on these. From the sketchy details provided on these three schemes, it is clear that they are meant only for those with bank accounts, for those with money in their accounts and those willing to part with their money for any or all of these. The schemes by themselves are quite good, but neither are they new nor is there any budgetary input from the government. It is your money that will be returned to you. Then how can the government and the Prime Minister claim ownership of these schemes?
One can understand the Prime Minister naming a scheme after himself or any of his mentors, when the government provides the financial support for it. The previous UPA government had the unhealthy habit of announcing government-funded schemes named after Jawaharlal Nehru, Indira Gandhi, Rajiv Gandhi and sometimes even after lesser members of the family like Motilal Nehru, Kamala Nehru and even Sanjay Gandhi. It made an exception for its flagship program, the National Rural Employment Guarantee Act, which was named after Mahatma Gandhi.
The National Democratic Alliance government during its previous term in office had introduced the Varishtha Pension Bima Yojana (VPBY) as a pension scheme for senior citizens. Under the scheme 3.16 lakh annuitants are being benefited and the corpus amounts to Rs 6,095 crore.
The finance minister in his Budget speech proposed to revive the scheme for a limited period from August 15, 2014, to August 14, 2015, for the benefit of citizens aged 60 and above, and an appropriate provision was made for this. But none of the schemes launched with so much fanfare on May 8 are government funded. Nowhere in his 253 paragraphs long Budget speech did the finance minister make any mention of these three “new” schemes.
Let us take each one of these three schemes one by one. The PMSBY entails an annual premium of Rs 12 to provide a cover of Rs 2 lakh in case of accidental death, and fraction of it for various disabilities. Since as much as a third of the 15 crore bank accounts opened after the advent of the Jan Dhan Yojna have no balance in them, this scheme is clearly meant for the 10 crore who have bank accounts and money in their accounts. This still leaves 110 crore Indians outside its net. Now, if the government were to provide the premiums to cover all Indians, it will entail an annual commitment of Rs 1,440 crore — not an outlandishly large sum for a nation with the world’s third largest GDP based on purchasing power parity. The government doesn’t provide even a single paisa but it claims ownership of the schemes. That, to me, is a fraud. Similarly, the other two schemes over which the Prime Minister claims ownership are just a case of old wine in new bottles. These kinds of schemes already exist.
Given that the total life expectancy in India is just 65.5 years, the policyholder will, on an average, benefit for only 5.5 years from what he pays for over his complete working age, which could be anywhere between 30 and 40 years.
Any actuarial life table — a table that shows for each age what the probability is that a person of that age will die before his or her next birthday or the probability of death — will give the insurer a pretty good idea of how many in an age cohort, who take out insurance on their lives, will survive. Usually the number of people who take out policies will by far exceed the number of policyholders who die, thereby giving the insurer a handsome profit.
Insurance is not about charity. It’s a business to earn money. And the government benefits from a bigger insurance business. More than the taxes on profits earned, insurance funds, which by their very nature are long term funds, are very useful for government infrastructure projects. Thus, while the policyholder sleeps assured of his or her family’s security in the event of death, the government benefits hugely from his contribution. Clearly, the more the number of those insured, the greater the state’s benefits.
Mr Modi is habituated to claiming what is not his, as his as his claim over Sardar Patel, a man who abhorred the Rashtriya Swayamsevak Sangh all his life and even banned it, shows. The government is giving nothing to us but wants us to believe that what we give is theirs to give.
The writer held senior positions in government and industry, and is a policy analyst studying economic and security issues.
He also specialises in the Chinese economy.
