Govt may foot entire minimum pension bill

The outcome would only be known after the budget session, said a source.

With polls coming closer,the UPA government may decide to pick up the entire additional burden of providing a minimum monthly pension of Rs 1,000,in the process of winning over the trade unions which dont want employees to make any sacrifice.

Sources said the Department of Expenditure last month initiated paperwork on raising subsidy to 1.79 per cent of the wage from the current 1.16 per cent to guarantee minimum pension to each of the 50 million employees in the organised sector.

The sources said Labour Minister Mallikarjun Kharge put the proposal to Finance Minister P Chidambaram in mid-March after labour unions demanded that the government fund the entire amount.

The feasibility of the proposal will be evaluated by the Committee of Secretaries,scheduled to meet in the first week of May. If approved,it would be sent to the cabinet for ratification. The outcome would only be known after the budget session, said a source.

The minimum pension scheme has been held up for the past few years because of the unresolved question of who would bear the additional cost. Neither employers,who contribute 8.33 per cent of workers pay to their pension fund,nor employees want to share it. A minimum monthly pension of Rs 1,000 for nearly 13 lakh pensioners would require an additional contribution of 0.63 per cent of basic pay and dearness allowance,coming either from the government or subscribers.

While 12.8 lakh out of 35 lakh pensioners get a monthly pension of less than Rs 500 some receiving as little as Rs 12 about 15 lakh get Rs 500-1,000 and 7.3 lakh get more than Rs 1,000.

The labour ministry had earlier proposed funding the extra outgo by stopping the two years bonus that subscribers get after 20 years,raising the pension eligibility age from 58 to 60 years,or enhancing employees contribution by 0.63 per cent of basic pay.

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But trade unions,which went on a strike in February 2012,say universal pension is the responsibility of the government,and that the worker should not be made to bear the burden. The finance ministry,which is struggling for funds,favours a revenue-neutral scheme. Raising the governments contribution to 1.79 per cent will entail a spend of Rs 539 crore over and above the Rs 1,000 crore it contributes to the Employees Provident Fund Organisation annually.