Monday, September 7, 2015

MISSION PENSION - Will `pure VRS' cases be excluded from OROP?

The government is expected to closely consider whether the “clarification“ the defence ministry will issue on OROP benefits should exclude personnel taking premature retirement on a purely voluntary basis while including those who left service due to injury or for being declared otherwise unfit to continue in the armed forces.As the government gets down to resolving the complex nitty-gritty of OROP, the argument under the scanner is whether personnel who opt for premature retirement on their own can claim that the principle of same pension for same rank applies to them as compared to those who either completed their entire tenure or left involuntarily .
The argument advanced by a section of ex-servicemen that many opt for early retirement as they do not see much scope for promotion in the armed forces is not seen to be convincing as the terms of employment are well set and understood at the time of enrolment. Also, many such retirees usually leave the forces to seek re-employment elsewhere.
While officers may choose to opt out, the government does incur considerable expense on their training while in service, and these sums are not trivial. In fact, the skills so gained are an important factor in making retired defence personnel eligible for employment outside the forces. To a varying degree, personnel from all services are employable outside.
The underlying principle of OROP, that armed forces personnel retire early and get smaller pensions in comparison to other government employees who work for longer years, falls flat in the case of those who choose to opt out and also find choose to opt out and also find re-employment.
It is not the case that such personnel do not draw benefits as they will continue to receive existing pensions. But what is seen to require much closer examination is whether they are eligible for enhanced benefits under OROP.
The government seems quite clear that “equalization“ of pension will take place only once in five years as attempting to do so annually, or even bi-annually, as demanded by ex-servicemen, is seen to be an administrative nightmare. The sheer `administrative costs' will undercut the feasibility of the OROP policy . The annual fiscal burden may be around Rs 500-700 crore, but the computational logistics sharply reduce its benefits.
Retired personnel number around 17 lakh, with government figures differing with the 24 lakh claimed by ex-servicemen. The number increases by around 60,000 a year and those in the know say that the real computation cannot be predicted by any model, including the ones put forward by the agitators. On the basis of the public policy principles of balancing benefits and economic costs -a policy that is unimplementable will not help the intended beneficiaries -annual revision is ruled out. On this count, OROP fails on the efficacy, efficiency and equity test.
The calculations on whether the increases will be in the range of 2% over the annual outgo is being examined. Even so, over the Rs 48,000 crore burden, the addition can be Rs 500-800 crore. The veterans have argued that the increase may be just Rs 40 per person per month in which case a five-year equalization is not much of a problem.
As things stand, the officer ranks at senior levels can see sizable jumps from Rs 65,000 to Rs 80,000 plus and these quantums and percentages are more than what “other ranks“ will get.So, while officers account for about 2.5% of retired personnel, they will get around 10% of the OROP fiscal outgo.
An examination of the historical situation also shows that before 1973, when pensions were reduced to “civilian“ levels, there was no equality with standard tables distinguishing the amounts given to personnel depending on when they retired, the periods being bunch as 1953-61, 1961-68 and 1969-72.
The pensions changed with the 6th pay commission. Now, the formula worked out by the government sees retirees who might have held the last rank -lets say havildar -for different periods of time getting an average pension. This will be done even while protecting those who did well and spent more time at a higher rank. The estimated outgo on arrears is Rs 10,000-12,000 crore.

1 comment:

  1. With the help of Spread sheets and computers it would not be difficult to draw up tables on yearly basis once initial tables for 2014 are drawn up. It is not a question of no of veterans. All we have roses is the pension payable to each rank and then revise it rank wise. I am sure our pay cells or accounts offices can work out such pension tables.