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Saturday, September 5, 2015
Why the One Rank One Pension is not a good idea - By SC Mitra
It was not the Third Pay Commission, but the Services' inherently contradictory desire to ‘have their cake and eat that too’ which led to the present situation.
For the past year or so, the country has been witness to much breast beating on an issue which seems to have enough material to enflame passions among members of the Armed Forces as also create a schism between an otherwise enviable civil-military relationship. Much of the arguments on One Rank One Pension (OROP) are loaded with high emotions and somehow assume the colour of patriotism or the lack of it. Given the sterling performance of our Armed Forces, people are wary of criticising any stand, lest it be mistaken as being hostile to our soldiers. No wonder, the government seems to be in a bind on how to tackle the issue.
When looked at just as a slogan, One Rank One Pension sounds as an appeal at ‘equal pay for equal work’. But mixed with the flavour of patriotism against inflamed passions and high decibel opinion peddlers on various media, it induces willing suspension of reason. Everybody thinks it was the Third Central Pay Commission (CPC) which did away with OROP and accepts it without question, which proves that mass confusion creates widespread acceptability. With the surprising fact that the Third CPC Recommendation is not available online, save for one website which doesn’t even load, it is more likely than not that people holding forth on various fora on the desirability of OROP, may not even have seen it, let alone read it.
'One Rank One Pension' is the demand of retired defence personnel for the same amount of pension for similarly ranked defence personnel, irrespective of the date of retirement, provided the person concerned had retired from the same rank and they had served for an equal number of years. Roughly translated, a sepoy who retired in 1995 with 20 years of service should get the same pension as a sepoy who retired in 2010 after 20 years of service. Or a Major who retired in 1995 should get the same amount as a Major who retired in 2010, provided both had put in equal number of years in service.
Seems alright, one would think. On the face of it, the argument can be very persuasive, but very deceptive at the depth of it. Another force multiplier to the argument in favour of OROP is that it was already in vogue till the Third Pay Commission, after which it was discontinued. But nobody seems to be wanting to dig into why it was done away with! As a matter of fact, the principle of OROP was not scrutinised by even a single Pay Commission before the Third Pay Commission (which was the first commission to be entrusted with the task of recommending pay, allowances and benefits of civilians as well as Armed Forces). This principle has now subsequently been scrutinised by four Pay Commissions (the Seventh CPC is the fifth Pay Commission seized of the matter) when it is not in force and none of them have recommended a reversion to status quo ante. The fact that successive governments of all shades and on all sides of the political divide have found it difficult to deal with, points to something which is not what meets the eye.
Given the amount of heat that this issue has generated, a bit of background information is warranted to understand the context and evolution, which has been covered in Volume III, Chapter 48 and Chapter 53 of the Third Pay Commission Recommendations.
The Third Pay Commission was the first time that a Pay Commission was asked to look into the emoluments of civilians as well as personnel of the Armed Forces. Before this, emoluments of the Armed Forces were always considered by departmental committees, including the representatives of services, in light of the recommendations made by Pay Commissions for civilian employees. The events which have shaped and led to the present situation are the Post War Pay Committee for Armed Forces. Set up soon after the First Pay Commission, it lead to the promulgation of the New Pay Code from July 1, 1947; the Second Pay Commission Report 1959; the Raghuramaiah Committee 1960 (to suggest consequential changes to the Armed Forces side, in view of the Second Pay Commission recommendations for civilians) and finally the Kamath Committee in 1967. As regards pensioner benefits, the matter was looked into by the Armed Forces Pension Revision Committee (1949-50) headed by Shri IM Lall.
While the Third Pay Commission was keen that Service personnel should have the opportunity to represent their case to the Commission, the Ministry of Defence specifically forbade it, citing military discipline and tradition. Thus, special cells were created in each Service Head Quarter, who would consult the servicemen and formulate the proposal. The Ministry of Defence also set up an Expert Committee in August 1970 with three senior Service officers of Major General rank and two civilian officers from the Ministry of Defence and Finance to “scrutinise, coordinate and integrate proposals received from Service Head Quarters into a common and inter-service pattern before their submission to the Commission.” Subsequently, representatives of the Ministry of Finance and Defence were withdrawn and the report submitted was from the three Service members only.
The Third Pay Commission went into the historical perspectives as also the report of the National Board for Prices and Incomes (NBPI), UK which placed the servicemen at a relative disadvantage vis-à-vis civilians, as also attractions of Service life and defined the balance of advantages and disadvantages as a factor. The principles governing emoluments of Service officers have undergone many changes since Indian nationals were first commissioned into the Armed Forces of British India. The King’s Commissioned Indian Officers (KCIOs) were given pay and allowances, including expatriate Indian Army Allowance, as admissible to British Officers. After 1931, Indianisation of Officers’ cadre in the Army started, along with stoppage of recruitment to KCIOs and reduction in civil salary. Pay and allowances of Indian Commissioned Officers (ICOs) were fixed lower than KCIOs. However, during WW-II, salaries of ICOs were revised upwards to keep their morale while working side by side with the KCIOs. For Personnel Below Officers Rank (PBORs), the rate was never determined in comparison to the rates prevailing in the British Armed Forces.
With the cessation of war, the government appointed the Post War Pay Committee to recommend pay scales for Servicemen and relating these exclusively to Indian conditions. In relation to the ICOs, the government took a policy decision that “future pays of ICOs should be linked with civil pays as determined following the report of the Central Pay Commission.” The basic principle followed by the Post War pay Committee was one of “comparability” with civilian rates of pay. For the pay of Service Officers, a broad relativity was established with officers of Class I Central Services and the Indian Police Service. At that time, an aspirant to IAS and Central Civil Services Gp A had to take an extra paper than aspirants to the Indian Police Service. Hence clubbing with Central Services and Indian Police Service is not understood. It seems like an attempt to humour the Services' demand for pay parity with IAS by conceding Central Services Gp A Pay and linking with uniformed IPS. Be that as it may, the Services were agreed to the basic approach of comparability, although they were not satisfied with the specific civil-military relativities established. With the reduction of civil pay after 1931, stoppage of recruitment to KCIOs and Indianisation of Services with ICOs and establishment of a broad civil-military relativities, the pay and allowances of Armed Forces came down (as did of the civil side). Differences, minor at the beginning, got accentuated with various Pay Commissions peaking at the Sixth Pay Commissions with change of years of service for full pension from the earlier 33 years to 20 years. This gave a major fillip to the OROP demand, which was being raised for many years, but became strident in light of the accentuated disparity after the Sixth CPC.
While examining the demands of the Armed Forces, the Third Pay Commission had noted that almost the entire Class I officers of the Armed Forces are directly recruited as there is no corresponding regular Class II service in the Armed Forces as it exists in the Civil Services. The avenue for promotion to PBOR was much lesser in the Armed Forces and wastage of officers and PBORs much more. The demand of the Armed Forces to the Third Pay Commission for parity with the IAS on the basis of historical parity was disputed by the Commission which noted that the pattern of remuneration adopted for the KCIOs differed from that applicable to officers of the Indian Civil Service and in fact, there was a nexus between the pay and allowances of British Officers serving in the Indian Army and those of KCIOs. The Raghuramiah Committee appointed after the Second Pay Commission suggested for the continuance of parallel between Defence Service officers and Class I service of Central Government and Indian Police Service. This ‘relativism’ continues with slight modifications and is applicable mutatis mutandis to PBOR.
The Pension Codeof the Armed Forces viewed pension and other terminal benefits as a reward for good service, which should vary with the length and quality of service. It was an inducement to the right type of men to undertake continuous service, as compensation for early termination of career, liability for recall and disabilities, if any, attributable to military service and as an element towards the maintenance of those discharged and as support for the members of the family of deceased personnel.
The Third Pay Commission in para 4 of Chapter 53, inter alia, noted that:
Third Pay Commission
We think that the grant of pension should be so regulated as to enable servicemen to earn full pension at a relatively younger age compared to the civilians. Further, the length of service beyond a point should not be allowed to influence pension rates as that would induce these personnel to stay on in service in order to earn higher pension even after they have ceased to be useful.”
In their representation to the Third CPC, the Services favoured continuance of the existing standard rate system. However, they pointed out that the pension earned by a Service officer is related to the minimum service prescribed for the rank and is not increased if the actual period of qualifying service rendered by him is more.(Para 7, Pg 47, Ch 53, Vol-III, Third CPC) Thus by corollary, the demand for more pension if the qualifying service was more than the minimum prescribed for the rank itself, was the negation of OROP and responsible for its discontinuance. It may appear that the Services, proverbially speaking, wanted to ‘have their cake and eat it too'. While they favoured continuance of the existing standard rate system, they decried the same pension if the qualifying service was more. Thus, these two positions were irreconcilable and mutually exclusive. So, saying that OROP was done away with after the Third Pay Commission recommendation would be stating a fact without the context. The context was to accommodate the Services’ demand to give weightage to higher qualifying service, which was a self contradicting demand.
The Third CPC noted that under the present system, service pensions are related to rank and prescribed length of qualifying service, but neither to emoluments nor to the service beyond the prescribed period. Advantages were simplicity, ready comprehensibility, easy administration, inter services uniformity and enabling service officers to earn full pension for the rank without necessarily having to continue in service for that purpose till the age of compulsory retirement. The system thus deliberately does not provide an incentive to officers to stay on in service merely for the sake of earning a higher pension once they realise that their prospects of further promotion are dim and to this extent, facilitates replacement of older men by younger men. In view of these advantages as well as keenness of the Services to retain the existing system, the Third CPC formulated their recommendation within the framework of standard rates of pension relating to rank and the prescribed length of qualifying service. Thus, it was not the Third Pay Commission, but the Services' inherently contradictory desire to ‘have their cake and eat that too’ which led to the present situation.
Commission via para 10, Ch 53, Pg 48 acknowledged the need to compensate service officers for their early retirement and liability to recall by giving an additional benefit in explicit terms in their pensionary benefits, which did not seem to have been provided on any rational basis in existing standard rates of pension. It seems that the Armed Forces Pension Revision Committee (AFPRC) had already considered this aspect of providing a compensatory element for early retirement and liability to recall, but perhaps there was no unanimity among the members and as many as three different schedules of standard rates of pensions were suggested by the AFPRC Chairman, Services members and the Finance member. However, the rates finally fixed were none of these, but in a way, a compromise rate. It is very important to note that at that time, it was not stated explicitly as to what quantum out of the approved (compromised) standards rates of pension could be taken to be the compensatory element. The precise amount of the compensatory element included in the standards of rates were worked out only in 1961, when it became necessary to revise pensions consequent upon revision of pay scales. This was done by deducting from the standard rate, the amount of pension (including the pension equivalent of DCRG) that would have been admissible to a civilian officer for the same pay and length of service. Thus, all other things remaining the same, over and above the amount than a similarly placed civilian officer in standard rate was deemed to be the compensatory element. By this logic, the compensatory element for a Lieutenant worked out to be Rs 125 pm, for a Captain Rs 120, for a Major Rs 122, for a Lt. Colonel Rs 120, for a Colonel Rs 46 and for a Brigadier Rs 13! Evidently, it was not a rational method to judge the compensatory element.
The Services had argued to being given the benefit of a full 30 years of service as civilians and a higher rate of 1/71 for every year served. The Pay Commission opined that ordinarily, a civilian employee retiring at 55 or more has no realistic chances of re-employment, whereas a Service officer retiring in the 48-50 year range has more employability. Also, pension paid to them over a longer period was more valuable in actuarial terms. After much deliberation, the committee reached a conclusion that the most appropriate method of providing a compensatory element in pension rates would be to add a certain number of years of service to the period of qualifying service prescribed, for earning full pension for the rank and applying for each year of service the rate of 1/80 of the maximum pay fixed for the rank. Thus taking maximum of the pay of the rank and adding five years subject to total not exceeding 33 years, would be an adequate compensation element.
The demand for OROP has been considered by the government on a number of occasions in the past. The Estimates Committee in 1980-81 commented on pension inequities and the issue was red flagged again by a high level committee headed by KP Singh Deo, the then Minister of State for Defence, in 1984 which recommended that it be looked into by the Fouth CPC. The Fourth CPC opined that pension changes as and when pay scales are revised and any attempt to equalise pension with respect to new scales of pay would amount to retrospective application of pay scales. Subsequently, another High Level Committee headed by the then Defence Minister Sharad Pawar was formed in 1991. This Committee also did not recommend OROP but granted a One Time Increase (OTI) on the following lines which almost fulfilled the heart and soul of OROP:
- Grant of 18 years benefit to all retiring on/after 01.01.86
- Pre and post 01.01.1973 retirees brought at par and stepped up by neutralising 95% differential between post 01.01.86 and post 01.01.73 pensions.
NCOs/JCOs/Honorary Commissioned Officers:
- Pension of post 01.01.86 retirees reduced in a graded manner by Rs 10 pm for 15 years of service and by additional Rs 2 pm for each additional year of service upto 24 years. The difference between existing pension and revised pension was rounded off to lower Rs 5 and granted as OTI.
- Pre 01.01.73 pension was stepped up to post 01.01.73 level.
Officers Below Colonel:
- Pension further raised by giving the benefit of 33 years of service as the system of weightage was started only on 01.01.73. Revised consolidated pension (RCP) was thereafter determined with reference to improved original pension and difference between RCP and existing pension granted as OTI.
This took care of most simmering demands and was by far the most equalising factor between different sets of pensioners in so far as OROP was concerned. The Fifth Pay Commission (1998) while talking on the pension of Defence personnel commented that while the gap between past and present pensioners needed to be brought down, as every Pay Commission gives a raise in pay contingent upon some new skills, recruitment qualifications, change in job content etc. these cannot be automatically passed onto past pensioners. However the Fifth CPC brought a total parity between pre 01.01.86 and post 01.01.86 Defence Personnel.
An Inter-Ministerial Committee set up in 2003 to consider the demand of OROP again did not favour OROP and recommended modified parity based on maximum of scale with effect from 01.01.96 for PBOR. The Ministry of Finance did not agree with this proposal and the matter was brought to the notice of the Prime Minister who directed that a GoM be constituted to consider OROP. The same was done in January 2005 and the GoM again did not find merit in OROP but found justification for improving the pensionary benefits of the Personnel Below Officer Rank (PBOR), particularly the three lowest ranks and revised pension of pre 1.1.96 PBOR with reference to maximum of post 1.1.96 payscales and enhanced weightage for Sepoys, Naik and Havaldar for past and future retirees.
This was the Seventh Committee from the Third CPC onwards to negate the demand of OROP.
The Sixth Pay Commission, on the issue of 'One Rank One Pension' for Defence personnel, stated as under:-
Sixth Pay Commission
One Rank One Pension has been demanded for all ex-servicemen. The Fifth CPC had already granted full parity between pre and post 1/1/1986 pensioners and a modified parity between pre and post 1/1/1996 pensioners. Identical dispensation was given to the civilian employees as well as Defence Forces personnel. No change is proposed in the existing dispensation either in case of civilians or Defence Forces. Hence, extant provisions may continue."
A petition filed by the Ex-Services League (1991 1 SCR 158) as a sequel to the decision of the Supreme Court in the DS Nakara & Ors. Vs Union of India case claiming relief to the effect that the result of the decision in Nakata is that all the retirees who held the same rank, irrespective of their date of retirement, must get the same amount of pension, was also turned down by the Supreme Court. In its judgement dated 29.1.1991, the SC took the view that the petitioners' claim that all pre-1.4.1979 retirees of the Armed Forces are entitled to the same amount of pension as available to post 1.4.79 retirees was clearly untenable and did not flow from the Nakara decision.
The issue of One Rank One Pension was also referred to the Ministry of Law and Justice by Ministry of Defence to advise the Group of Ministers in 2005. The Ministry of Law, inter alia, opined that:
"the issue has come up for consideration before the Supreme Court in a number of cases wherein the ex-servicemen have not been found to be entitled to One Rank One Pension under the existing legal regime. This is equally true to pensions for the civil side as well. The cases of KL Rathee Vs. U01 1907(3) SLR 207 and Indian Ex-Services League and others Vs. UOI and others 1991 1 SCR 158 may be referred to. The pensioners constitute a class and the Supreme Court has said that there cannot be mini-classification in the category. Nonetheless, it must be noted that the group is not a homogenous one. Pensioners as a group consist of persons with different number of years of service and different average pay during the relevant period. If all of them have to be treated alike by providing same pension while ignoring their respective variations in length of service and average pay, that may amount to treating unequal as equals. This may entail discrimination and offending the principles of equality before law as enshrined in our Constitution. Thus, even in case of One Rank One Pension, there would be large number of persons likely to be affected adversely. The present system has stood the test of judicial scrutiny. The same cannot be said for OROP and the legal feasibility of the same stands open to be adjudicated."
On a subsequent reference made in 2008, Ministry of Law advised again that the same pension for same rank was not an acceptable proposition. It is also pertinent to mention that in a DO reference from the Raksha Mantri to the Finance Minister dated 13 March, 2009, the proposal made in relation to One Rank One Pension was as under:-
"While acceptance of the demand for grant of One Rank One Pension is not feasible administratively, a strong case definitely
exists for bringing the quantum of pension of pre 1.1.1996/10.10.1997 pensioners at par with post 1.1.1996/10.10.1997 pensioners as the gap between the pension of the past and the present retirees has widened after implementation of the recommendations of the Sixth CPC. Financially, this would be feasible as it is broadly estimated to entail additional financial burden only to the extent of around Rs 500 crore per annum and would be much less than the estimated financial liability for grant of One Rank One Pension".
Apart from the above factors, grant of OROP cannot be implemented for ex-servicemen alone and a demand for similar dispensation for civilian pensioners in Centre and State, in autonomous bodies, Central and State Universities and Colleges and in all other institutions where the pension scheme is applicable. The financial implications for such a dispensation would then be substantial.
The most recent Committee headed by the Cabinet Secretary also turned down the demand of OROP in 2009 and was thus the ninth such committee (including Pay Commissions), atleast two SC judgements and two Ministry of Law clarifications to do so. However further improvements and correction of anomalies as detailed below were done, enhancing pension of POBRs, which sought to serve the maximum purposes of OROP.
Personnel Below Officer Ranks (PBOR)
- Pre 10.10.1997 PBOR pensioners were brought on par with post 10.10.1997 PBOR pensioners. Being a new concession, the benefit was prospective.
- Enhanced rate of classification allowance was made applicable w.e.f. 1.1.2006 on notional basis for the purpose of calculation of pension (as in the case of reckoning MSP for determination of pension) benefiting around 88,000 PBORs who retired between 1.1.2006 and 31.8.2008. Arrears were payable.
- In order to reduce the gap between the pensions of pre and post 1.1.2006 PBOR pensioners, the award of GOM of 2006 was further made applicable to reckon the pension of all pre 1.1.2006 PBOR pensioners with reference to a notional maximum in the post 1.1.2006 revised pay structure corresponding to the maximum of pre-Sixth Pay Commission pay scales as per fitment table of each rank along with continuance of enhanced weightages to three mentioned categories.
This dispensation was to result in average monthly increase in the pension of pre-1.1.2006 PBORs in the range of around Rs 800 to Rs 1400 for Group Y depending on the rank and years of service and benefit approximately 12 lakh pre 1.1.2006 PBOR pensioners. Being a new concession, the benefit were also prospective.
The proposal to remove the linkage of full pension with 33 years of qualifying service w.e.f. 1.1.2006 instead of 1.9.2008 in the case of Commissioned Officers was agreed to, along with payment of arrears.
- In order to address the issue of disparity in the pension of pre and post-1.1.2006 pensioners at the level of Lt. General/equivalent/Additional Secretary and equivalent civilian categories, a separate pay scale starting at Rs 67000 and going up to Rs 79000 was created and all officers of the level of Lt. General/Additional Secretaries/equivalent fixed in this scale. As a result of this, the pension of pre-1.1.2006 Lt. Generals got fixed at Rs 36,500 and those of Additional Secretaries at Rs 33,500 benefiting roughly 4000 officers.
All Defence Pensioners
- Percentage of disability/war/injury pension for pre-1.1.1996 disability/war/ injury pensioners was broadened.
- (vii} Cap on war injury element of pension in the case of disabled pensioners belonging to Category E was removed.
The financial implications of the above mentioned benefits worked out to roughly Rs 2145 crores.
To sum up, since the time of the Third Pay Commission till the committee headed by the Cabinet Secretary, as many as nine Committees have turned down the demand of OROP and atleast 2 Supreme Court judgements have held it to be treating unequal classes as equals. To reiterate, it was the Services’ representation to the Third Pay Commission lamenting ‘no compensation for longer qualifying service’ which was against the principal of OROP, because higher pension for higher qualifying service in the same rank went against OROP. However, all the committees have tried to bridge the difference to the extent possible without breaching some other sacred principal of equality and parity with other arms of government.
The differences in pension which were not substantial became pronounced after the Sixth CPC. Hence most demands are a ‘pre and post 2006’ comparison. As most Armed Forces personnel retire before 55 as against very few civilians, the problem is felt more acutely in case of the Armed Forces and hence the demands are more vociferous and strident from them. Whatever the issues, the principles governing are the same for civilians as well as the Armed Forces. Hence, if the principal is to be extended, it will have to be extended to all, as has been stressed by the committee headed by he Cabinet Secretary. Also, Armed Forces personnel are not covered under the New Pension Scheme (NPS) which covered all civilians joining the government from 1.1.2004 onwards. Hence whereas the additional burden for any pensionary recommendation pertaining to civilians would taper off from, say, 2040 onwards (in addition to being miniscule), pensionary liability for the Armed Forces would keep on increasing.
Pension is a deferred liability of the employer towards the employee for the services rendered in the past. That has correlation only to the pay received by them, not to future pay of future staff. Also, any policy would have a cut off date for implementation and there would always be a class of people who would be on the beneficial side of the policy. Same would be the case with any law coming into force from a date. People and their conduct have to be governed as per the policy and law in place at that point of time and one can't try to take beneficial protection of law of a subsequent date. For example, even ‘One Crime One Punishment’ sounds very logical. But if one is guilty of committing an act which was a crime at that point of time, one cannot seek protection of subsequently modified law of the said act ceased to be a crime subsequently. The point sought to be made is that there would always be a cut off date for any kind of policy which would create two sets of people falling on either side of the date of enforceability. Same has been the case with Sixth Pay Commission recommendations. If there are no severe anomalies in pre 06 as a class, there ought not to be any issue.
However much water has flown in the Ganges since the issue saw the light of the day with renewed vigor. One way out for the government may be to recommend a Special Pay to Armed Forces which may be roughly equivalent to their monetized demands in absolute terms instead of accepting the principle of OROP which has been studied and turned down by nine committees and disfavored by two Supreme Court judgements. This principle of perceived parity in isolation itself would not stand judicial scrutiny unless extended to the entire arm of government. But a Special Pay for Armed Forces would finely navigate the civilian demand which as per back-of-envelope calculation for approximately 10% of affected Railwaymen would come to about Rs 520 Cr PA and Rs 360 Cr other civilian employees. Additionally, the government may also like to consider giving war widows a higher status by ensuring and codifying their Right to Personal Hearing by any Head of Department which she may have to visit for any issue. These may be more valuable to our soldiers which would be a step in restoring their pride of place in our society.
The author is an IRAS officer and has over 17 years of experience in dealing with Finance, Pay and Pension related issues in the Indian Railways. Views expressed are personal.