India’s Veterans Deserve More Than OROP (Why an overhaul of recruitment, resettlement and retirement polices for the armed forces is necessary)

How does pension work for central government retirees?

Currently, all civilian retirees (recruited before 2004) and all military retirees earn a monthly pension for life that is based on their pay at the end of their service and years of service. This monthly amount has a fixed component called basic pension (typically 50% of last drawn basic pay) and an inflation-indexed component called Dearness Allowance (DA). Also, every 10 years, there is a government-wide pay increase (called the pay commission), during which salaries of all government servants are increased substantially. Retirees’ basic pension is also increased during pay commission reviews, though not by the same percentage as salaries.

E.g. Consider a Deputy Commissioner of Income Tax who retired in 2008 after 35 years of service with a basic pay of 35,000. Let’s call him Ram. Ram’s basic pension would be 17,500. In 2008, the central government’s dearness allowance was 16% of basic pay, and so he would have earned a total pension of 1.16 x 17,500 = ~20,000 per month in 2008. By 2015, the Dearness Allowance (roughly an inflation index) has been gradually raised to 110%, and so he will now receive 2.1 x 17,500 = ~37,000. In addition, in 2018, if there is another pay commission, his basic pension will also be adjusted up significantly! In other words, he will on average, have at least ~5-7% year-on-year increase through DA plus a major increment every 10 years in his retired life.

What is OROP?

One-rank-one-pension is a concept in which 2 people retiring with the same length of service at the same rank will earn the same pension, even if they retired years apart. Currently, since basic pension isn’t increased by the same percentage as salaries in a pay commission, past retirees do not earn the same as new retirees of the same rank and length of service.

E.g. Consider a DCIT who retired in 1998 with 35 years of service. Let’s call him Shyam. Shyam would have last earned a monthly salary of ~ Rs. 14,000 in 1998. His basic pension would have been ~7,000 in 1998. By 2008, the pay commission would have increased his basic pension to ~15,500. In 2015, he would receive around ~32,500, as opposed to ~37,000 that is received by Ram. With OROP, both would receive around ~37,000.

Why don’t we have OROP?

Pension is extremely expensive. In fact, the Central government’s pension budget (~2% of GDP) is about the same as the central government’s defence budget! In other words, it already costs the government just as much to pay its pensioners as it does to pay all currently serving soldiers and maintain all the weapons and bases that guard our borders!

The reason for this is simple – the pension bill keeps ballooning each year for various reasons:

1) Every year, the total number of pensioners increases as new people retire

2) Every year, all pensioners get a DA adjustment, and once in 10 years, they get a huge raise!

3) Widow(er)s of pensioners also get a partial pension post the death of the pensioner

The Indian pension plan is already exceptionally generous because of point #2. In comparison, most countries use a pension scheme that’s based on a simple annuity (i.e. fixed amount), which would be terrible in a high-inflation economy like India. This article explains how there is a ~100% incremental cost between a simple annuity and an inflation-linked annuity!

E.g. In our example, with OROP, Shyam (1998 retiree) alone will cost the government an additional 50,000 per year or approximately ~15% more than he does now! Imagine this delta of ~15% across all retirees from before 2008 and it will be an additional cost in 10,000s of crores per year. The government simply cannot afford OROP for all employees, especially its civilians, who comprise of 75+% of pensioners.

Why is there merit in armed forces personnel wanting OROP?

Armed forces personnel want OROP for 2 interlinked reasons:

1) Forced early retirement for armed forces personnel leading to lower years of service

2) Lower pay at retirement than civilian counterparts, who are assured promotions

So, OROP seems like the least we can do for armed forces retirees. Why not do it?

Short answer – OROP is not enough. It is unforgivable that people who have spent their youth defending this country will have to embrace the austere life of a retiree so early in life. It is unconscionable that the Government of India feels no sense of duty to ensure that they have a career post their military service. OROP is a band-aid on a broken arm. It may drive a placebo effect or at best provide extremely expensive temporary relief, but it does nothing to help the fundamental flaws in the system.

What should be done instead?

There needs to be an overhaul of recruitment, resettlement and retirement polices for the armed forces to ensure that every single soldier and officer has the ability to serve the government till he is 60, if he so wishes.

Recruitment:

The current policy of recruiting career officers is not in sync with the fact that a majority of officer roles are at the company level, which an average officer will outgrow in (at max) 12 years. The default recruitment policy should be a Short-Service Commission with a commitment of 8 years of service. This would allow 3 years of training and 5 years of service at company leadership levels. Junior Commissioned Officers such as Subedars can fill any gaps at the platoon leadership level, as they do in the Central Armed Police Forces. Post these initial 8 years, the government should confirm employment till 60 years of age (not exactly in the military) for all officers whom it chooses to keep.

A 8 year Short Service Commission has several benefits – 1) it enables those who want a career in the Army to do so without (a) worrying about being stuck in it for life if they don’t like it, and (b) being asked to leave 15 years down the line, when they have fewer options in life, and 2) it ensures that those with the potential to be battalion commanders are picked up and are given the right opportunities to move up.

Resettlement:

Enlisted ranks should be given two options upon completing their 10 years – either a career (till 58/60) in the armed police (either Central Armed Police Forces or state Provincial Armed Constabulary) or an opportunity to attend a college of their choice (provided they can get in), fully funded by the Defence Ministry. (The US GI bill does exactly the latter.) While many may choose to go to college, the former will also have more than enough takers from those who wish to serve the country. With hundreds of battalions, CISF, BSF and CRPF alone can absorb almost all enlisted discharged. In fact, these can be veteran-only forces, with Sr. NCOs/ JCOs also entering laterally from the armed forces into Inspector/ AC roles.

Officers who do not pass the 8 year filter should be given an option to pursue a 2 year advanced degree/ MBA/ secondment in a PSU/willing corporates (with full pay) to learn and to develop lateral skills to set them up for life.

In addition, since there is a natural filter between battalion commander and general officer roles, Lt. Col.’s should be cross-trained and cross-posted with CAPF personnel so that they can be permanently absorbed into the senior leadership cadres of CAPFs. Similarly, they can be absorbed into civilian roles in the Defense ministry and in allied departments at the Director-level. This will ensure that those Cols who do not make Brigadier or more can have a fulfilling career on par with their civilian (gazetted) peers. This way, every officer who crosses the 8 year threshold should be able to get to a Director level position, and every soldier who crosses the 10 year threshold should be able to get to a Group B position by the time they end their careers.

Retirement:

Retirement benefits should kick in at the age of 60 for all veterans who passed the 8/10 year filter. Those who choose to stay in government service post their discharge should be able to earn a pension based on their last government salary, even if it were a civilian salary. This will ensure that all forces personnel get their well-deserved pension (on par with/ better than their civilian counterparts.)

How much will it cost?

I have not done the math, but this should lead to a cost reduction from the status quo for the central government! This is because every single Central Armed Police Force is spending money in recruiting, training and employing fresh civilians, while people who have those exact same skills are being paid to be retirees! The government can eliminate this waste with next to no effort. In addition, the government will also save by deferring gratuity and other lumpsum payments by 15-20 years for those who choose to remain in civilian service. A hidden benefit is that an actually short SSC will attract enough qualified young men to plug the officer shortage in the Indian military.

In summary, OROP is a burden on the exchequer and does nothing to address the fundamental issues with the HR policies of the Indian armed forces. India’s veterans deserve more.

This is an edited version of a post first published at subfusced.blogsopt.in on August 16, 2015.

======================================================Sir,

A well written article and can lead to corrective action in times to come. 

The VI CPC had already recommended LATERAL ABSORPTION of AF Pers with pros and cons and a detailed justification, and the Govt approved this recommended but kept pending for implementation. And it is pending since the HM had reservations/objections.

But our own MOD/DESW does not act on its own but look for other Depts to take lead.  Why cant they absorb the retiring men in their civil orgs. They have 42 PSUs employing lakhs of civilians like Ordnance Factories and other Def Production units. They do not do.

The DGR is mandated to train these people to re-settle in civil life. Pre-release courses in ITIs and all other worthless organisations. Many ESM are joining on their own struggle in Railways and Nationalised Banks due to their grit and capability and without support of DGR. 

Why cant the CSD employ ESM in the URC instead of deploying regulars and some other civilians.? 

The State Govt can also directly absorb them at appropriate levels in Dept like Police, Transport, RTC, Revenue, Survey, Forest, Fire, Jails, Education, agriculture, horticulture etc and a host of other Depts. But there is CG policy but leaves it open to State Govt to decide.

THIS ALL FINE AND GOOD WORDS FOR FUTURE BUT WHAT THEN WHEN THE SAME CENTRAL GOVT DENIED ITS BENEFITS, AND THEREFORE THE AGITATION NOW BY THE VETERANS NOW.

1. REDUCTION OF SOLDIERS PAY BY 40% (Pre-1947 scales) and giving edge to Civilians  

2. Systematic Degradation of pay/pension/status (degree of precedence) of AF Personnel vis-a-vis Civil counterparts.

3. Reduction of 70% pension  to 50% (on par with Civilians) and also adding the element of 33 years for full pension, which is not applicable to AF Pers w.e.f.1.1.1973.

4. Reduced the pay of sepoy to that of a constable grade (III CPC), thereby further reducing the benefit.

5. Non-representation of AFs in matters of national security or the matters pertaining to their affairs, the Govt playing a big brother role - just-take-what-is-given, or else, you-wont-get-this-also, style.

6. RANK PAY GAMBLE/ATROCITY (V CPC)/Lesser fixation of pay for all across the spectrum 

7. Restructured trade/groups of airmen from 5 to 3 but the accompanying benefits given prospectively, from10.10.97 and thereby creating a divide, pre-10.10.97 and post-10.10.97 financial benefits.

8. skewed merger of 50% DA with basic pay w.e.f. 1.4.2004.

9. Revision of pay w.e.f.1.1.2006, denying the minimum prescribed pension of Rs.1913/- which was also reduced pro-rata for 33 yrs.

10. Revised pension from 1.7.08 and again improved wef 24.9.12/17.1.13 as per recommendations various committees.

11. Not paying the arrears from 1.1.06.

12. All above grievances resulted in OROP agitation.

DON'T YOU FEEL, SIR, THE ABOVE NEEDS RECTIFIED/RESTORED? 

And lastly Sir, OROP is but one of the issues. Much more, apart from above listed grievances are required to be addressed by the Govt. And the ESM community, shall strive to achieve them.

G VENKATANARAYANA

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(sOURCE- swarajya)