old pension vs new pension, OPINION: Why the Modi government’s confusion on pension increased? Understand the difference between old and new scheme, what is the way – nps vs ops: why central government is in trouble on pension
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dilemma over pension
Finance Minister Nirmala Sitharaman had last month spoken of a fresh look at the NPS applicable to government employees. His ministry recently constituted a four-member committee under the chairmanship of the finance secretary for this.
The committee will suggest whether any changes are necessary in view of the existing structure of NPS applicable to government employees? It will be seen how to improve the pension benefits of government employees, but the financial strength of the government should not be affected.
It is possible that the panel constituted by the government may try to give the benefits of OPS within the ambit of NPS.
Despite this, one thing is certain that it is difficult to increase profits without taking any contribution from the employees. Andhra Pradesh has a model for this. There the employees get guaranteed fixed pension, but they also have to invest in the same proportion.
existing pension system
NPS is for pension of employees joining government service after January 2004. It was not implemented in the army.
In NPS, the employee has to invest on his behalf for pension, but it is not decided what the benefits will be. The pension will be received according to the returns received from the market.
OPS is the opposite. Retired government employees are sure to get 50 per cent of their last pay as monthly pension. The amount of pension keeps increasing with the increase in dearness allowance. The employee does not have to make any investment for this benefit. Pension has been paid by the government, but no separate fund is kept for it. The tax collected from the rest of the workers is used to give benefits to the government employees.
why the ruckus started
Five opposition-ruled state governments have decided to adopt OPS. After this decision of Himachal Pradesh, Punjab, Rajasthan, Chhattisgarh and Jharkhand, the pressure on BJP has increased.
Assembly elections are going to be held in many states including Karnataka this year. There are Lok Sabha elections next year. Earlier the demand for implementation of OPS has assumed the shape of a political issue.
Leaders within BJP are also demanding OPS in Karnataka. Seeing the critical situation, the BJP-Shiv Sena (Shinde faction) government in Maharashtra also gave its in-principle approval on giving benefits of OPS under NPS.
It is often said that the OPS model is not sustainable for the economy. This increases the burden on the exchequer. In January, the Reserve Bank cautioned states against reverting to OPS. Raghuram Rajan, who was the governor of the Reserve Bank during the UPA tenure, has also said that the state governments will increase their liabilities in future by bringing the old pension scheme. According to Montek Singh Ahluwalia, former chairman of the Planning Commission, this is a recipe for financial bankruptcy.
Government statistics say that the number of people who are employees of the central government who get pension is more than the number of existing employees. There are about 77 lakh pensioners, while only about 50-60 lakh are workers.
Of these, 6,000-7,000 pensioners are above 100 years of age. They get the same amount in the form of pension as they used to get in the form of salary. About one lakh pensioners are in the age group of 90 to 100 years.
According to a report by State Bank of India, the pension liability of three states Chhattisgarh, Jharkhand and Rajasthan has been pegged at Rs 3 lakh crore. If we look at the tax revenue of these states, the pension liabilities are around 200%.
what is the way
India can take a lesson from the violent protests taking place in France these days on the issue of pension. There also the increasing number of pensioners was becoming a burden on the exchequer. The time has come to increase the retirement age. There was so much opposition to this that a riot-like situation came. In view of this, the same form of pension can be adopted in our country, which is liked by the employees, but does not become a burden on the exchequer. The opposition to NPS is among government employees, but its customers are increasing in the private sector.
NPS has been in existence for two decades. The responsibility of managing Rs 9 lakh crore has been given on this. Young workers are showing less interest in fixed income investments, they are more inclined towards market linked products. This is the reason that the interest rates of fixed deposits have increased rapidly in the recent past, yet there has been a record increase in the number of subscribers of NPS. In the last financial year, about 10 lakh customers were added, who were not government employees. For the first time such a large number of people joined in a financial year. Overall, NPS has gained the trust of more than 6 crore people. Then why consider it bad?
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