Journalism of Courage
With elections for the 182-member Gujarat Assembly to be held in two phases on December 1 and 5, the Aam Aadmi Party (AAP) and Congress are attempting to halt the BJP’s 27-year rule in the state with a range of poll promises. One such promise has been frequently invoked in the run-up to other state elections this year as well.
The demand for restoration of the Old Pension Scheme (OPS) has emerged as a major poll plank, with the two parties promising to implement it if voted to power, in an attempt to bring to their side lakhs of government employees, many of whom are dissatisfied with the new scheme. AAP national convener and Delhi Chief Minister Arvind Kejriwal in a statement recently said the new pension scheme was “unfair” and the OPS should be restored and implemented all over the country.
As per the OPS, pension was fixed as 50% of the last basic salary drawn, along with other benefits. Whereas, the New Pension Scheme (NPS) is a contribution-based pension system. The pension benefit is also determined by factors such as the amount of contribution made, the age of joining, the type of investment, etc.
The scheme was introduced by the Centre for all government appointments after January 1, 2004. The NPS is regulated under the PFRDA (The Pension Fund Regulatory & Development Authority) Act, 2013. Under the Centre’s scheme, every government employee is allotted a Permanent Retirement Account Number, and has to mandatorily contribute 10% of pay, which the government matched, and dearness allowance to the new pension fund. This money can then be invested by fund managers. After the latest amendment, in 2019, the government’s contribution was raised from 10% to 14%.
At superannuation, the employee can withdraw 60% of the corpus but is required to invest at least 40% to purchase an annuity or annual payment from an insurance firm regulated and registered by government authorities. The interest on the annuity is to be provided as a monthly pension to the employee. The Centre left it to states to adopt the new system.
The Gujarat government introduced the new scheme for employees joining the service on or after April 1, 2005. As per its notification, it was to make a matching contribution of 10 per cent of the basic pay plus DA contributed by the employees in the NPS fund. After protests by employees in Gujarat in September this year, the state government said the new pension will not be applicable to those employees who had joined duty before April 2005, and increased its contribution to the fund to 14 per cent.
The employees have staged massive agitations against the government in Gujarat while demanding restoration of the OPS because they believe the New Pension Scheme is not in the interest of the retiring employees, according to a PTI report.
Already, opposition-ruled governments in Rajasthan, Chhattisgarh and Punjab have announced similar returns to OPS. In Punjab, where AAP emerged victorious in the state elections of March 2022, there is some discontent over the delay in implementing this promise. The Contributory Pension Fund Employees’ Union (CPFEU) of Punjab, for one, plans to bring it to the notice of people in Gujarat ahead of elections there.
Digvijaysinh Jadeja, working president of the Akhil Bharatiya Prathmik Shikshak Sangh, a body of government primary school teachers, told PTI, “We launched an agitation with 15 demands, of which those related to restoration of the OPS and fixed salary issue were not accepted. The government formed a committee. It said it will increase its contribution to the NPS fund but no notification was issued…The OPS is better because the retiree gets 50 per cent as a pension. The NPS is based on the share market and the amount of pension reduces,” he claimed.
A big reason why the new scheme was introduced was to reduce the burden of pension payments on the state. For instance, Punjab has a significant pension bill of Rs 11,000 crore annually. The bill would go up after the old pension scheme is brought back.
Rajasthan Chief Minister Ashok Gehlot had said those claiming that the OPS would put a burden on the exchequer were not correct as it was all about “financial management”. However, as written by ex-civil servant Rajiv Mehrishi and academic Renuka Sane in The Indian Express, currently, the costs would have to eventually be passed down to future generations with the lack of taxing resources at the hands of states at the moment. Rajasthan spends Rs 23,000 crore on pensions and Rs 60,293 crore on salaries and wages. “This is 56 per cent of its own tax and non-tax revenues. Thus 10 lakh families — about 6 per cent of the 1.6 crore families in Rajasthan — pre-empt 56 per cent of the state’s revenues,” they wrote.
