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Gujarat Model of VRS: Ex-gratia plus pension payout to be capped for BSNL, MTNL staff

The model, first conceptualised to offer VRS to state-owned sick or incipient sick public sector undertakings (PSUs) of Gujarat, limits the immediate dues payable by companies.

Written by Aashish Aryan | New Delhi | Published: March 18, 2020 3:23:51 am
BSNL voluntary retirement scheme, MTNL voluntary retirement scheme, bsnl, mtnl, bsnl and mtnl retirement, voluntary retirement scheme Under the VRS model offered to BSNL and MTNL employees, the ex-gratia payout for retiring employees was limited to 35 days for every completed year of service and 25 days for each year of balance service left until actual date of retirement. (Express Archive)

The central government used what it calls a ‘Gujarat Model’ of voluntary retirement scheme (VRS) for the payout of the nearly 93,000 Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) employees, who retired on January 31, 2020, according to papers accessed by The Indian Express.

The model, first conceptualised to offer VRS to state-owned sick or incipient sick public sector undertakings (PSUs) of Gujarat, limits the immediate dues payable by companies. It was first used to offer VRS to some employees of now Reliance Industries Ltd (RIL)-owned Indian Petrochemicals Corporation Ltd (IPCL) and later to employees of Gujarat State Petroleum Corporation Ltd (GSPC).

Under the VRS model offered to BSNL and MTNL employees, the ex-gratia payout for retiring employees was limited to 35 days for every completed year of service and 25 days for each year of balance service left until actual date of retirement.

Since the VRS offer was only for employees in the 50-60 age group, the staffers were divided into two groups. Employees above the age of 55 who opted for VRS, the lump sum pension would be offered only when the attain the age of 60, while for employees below the age of 55, the pension would be commuted only in 2024-25. The payment of gratuity, too, will be postponed in a similar manner, according to the documents accessed by The Indian Express.

Apart from this, the ex-gratia-plus-pension payout will also be capped at 125 per cent of the current basic and dearness allowance. To further check its payment outgo, the government has also decided that, as of now, it would give the ex-gratia payment only for 40 months, even if a staffer’s period of service left was more than that as of January 31, 2020. In cases of voluntary retirement from PSUs where the Gujarat Model is not applied, the retiring staffer’s ex-gratia is lump sum of his dues accredited over the years, which is then added to the remaining service period’s salary and paid out in one go.

The government also plans to use the Gujarat Model to offer VRS scheme to eligible BSNL and MTNL employees for the next 10 financial years. It aims to finally trim and keep the staff-strength at BSNL at 50,000 in 2027-28, and at nearly 2,600 at MTNL in the same financial year. This staff-strength has been calculated by including both hiring and retirements as well as VRS, the documents showed.

At IPCL, originally a state-owned enterprise, the first VRS under the Gujarat Model was offered to the employees in 2003, when the government had divested its 26 per cent stake to Reliance Petroinvestments Ltd, the then Reliance Group company. About 1,800 employees had opted for the VRS then. The scheme was again repeated in 2005, when about 600 staffers opted for it.

In the BSNL-MTNL case, apart from limiting its ex-gratia and pension payout, the government has tweaked the model suitably to pay as less as possible for the time being. For example, for a retiring employee with salary of Rs 10,000 and 40 months of service, though the ex-gratia and pension benefit payment for the remainder of service would come to around Rs 6 lakh, the actual payout done will be 125 per cent of their respective current salary or Rs 5 lakh.

However, for employees with 79 or more months of service left, lump sum ex-gratia plus pension will be paid as it is less than 125 per cent of their salary, the documents showed.

“This saves the PSU the trouble of immediate huge payout bill. While the ex-gratia payment has been divided for payment between this and next financial year equally, the pension payout will be over the next ten years,” a senior DoT official explained, adding the immediate estimated savings would be around Rs 2,000-2,500 crore.

The VRS option for BSNL and MTNL employees was floated by the central government between November 4, 2019 and December 3, 2019. Of the 1,53,000 employees working for BSNL when the VRS scheme was approved in October 2019, over half — 78,569 employees in all — opted to retire, while at the smaller MTNL, which had an employee strength of over 18,000, nearly 80 per cent — 14,400 employees — opted for VRS.

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