The provisions of the ESI Act are not applicable to factories or establishments, run by the State Governments / Central Government, whose employees are, otherwise, in receipt of social security benefits substantially similar or superior to the benefits provided under the ESI Act. The case of each such Public Sector Undertaking, is decided on merit by comparing the quality and quantity of benefits being provided to the employees by the concerned managements, with those admissible under the ESI Act.

The "Appropriate Government", may grant or renew exemption under Section 87 of the ESI Act in respect of a Factory/Establishment or class of factories or establishments in any specified area from the operation of the Act for a period not exceeding one year at a time.

Exemption Under Section 88 of the Act is granted by the "Appropriate Government" to employees, or class of employees, who remain away from their Hqrs. for more than 7 months in a year, and those employees who are posted in non-implemented areas.

No exemption, under Section 87, or Section 88 can be granted unless a reasonable opportunity has been given to the Corporation to make any representation and the same is considered by the "appropriate Government".

Exemption Under Section 90 can be granted to a factory / establishment belonging to any local authority such as a Municipality / Corporation, etc. if employees in any such factory/establishment are otherwise in receipt of benefits substantially similar or superior to the benefit. provided under the Act.