Effective July 1, employer and employee contributions under the Employees' State Insurance (ESI), which includes medical benefits for insured workers, will be reduced, the Center said Thursday.

The total contribution to ESI was reduced from 6.5% of an employee's salary to 4%, with the employer's share reduced to 4.25% by 4.75% and the employee's contribution reduced to 1.75% of salary, 1.75%, announced the government.

"This would benefit 3.6 crore employees and 12.85 lakh employers," said the Ministry of Labor and Employment in a statement. "The reduced contribution rate will bring substantial relief to workers under the ESI scheme and bring more and more workers into the formal sector," he added.

Financial accountability to employers would also be reduced, which would improve the viability of institutions, facilitate business and improve compliance, said the government, adding that the rates in effect had been in force since 1 January 1997. However, a member of the Permanent Committee of the Salaried Employees' Insurance Corporation, and a representative of Bharatiya Mazdoor Sanghh, an affiliate of the RSS, V. Radhakrishnan, stated that the reduction of contribution rates was a cause for concern.

"BMS strongly protests against that," Radhakrishnan said. "ESIC is an autonomous agency and these rates have not been discussed. If the government proposes even lower rates at the next meeting of the ESIC Board, we will oppose it. We want to increase the benefits granted to employees, not reduce the contribution as much, "he added.

An official of the Ministry of Labor and Employment, however, described the critics as "simple apprehensions".

"We will be able to ensure greater compliance and encourage institutions to involve more people in this program," said the official, speaking on condition of anonymity. "It will be in the greatest good of employees," added the manager.

The number of people insured under this scheme increased from Rs. 2.1 million in 2015-2016 to Rs. 3.6 million in 2018-19, and the total contribution received was Rs 22,279 crores against Rs. 11,455 crores of rupees, according to government data. The number of employers participating in this program increased from 7.83 lakh in 2015-2016 to 8.98 lakh in 2016-2017, then to 10.33 lakh in 2017-2018 and 12.85 lakh in 2018-2019. .