Across the aisle: The OROP whodunit By P Chidambaram (13 Sep 15)

The other mystery story running on our screens is One Rank One Pension (OROP). Actually, there is no mystery. All the facts are recorded and documented. However, in the race to claim credit (and disown criticism), the OROP issue is being presented as a big controversy shrouded in mystery.

Get facts right

Let’s get the facts right. The Indian Armed Forces are voluntary forces. There is no conscription. Men and women join the forces as jawans or officers for a variety of reasons and, among them, is the security of a job. While the job is reasonably secure, it is not a job for the entire working life. According to the report of the Koshiyari Committee, 85 per cent of the Armed Forces personnel retire by the age of 38 years and another 10 per cent retire by the age of 46 years. They have to work for a living for many more years, but there is no guarantee of a post-retirement job.

Retirement at an early age is good and necessary to keep the forces young and fighting fit. Hence the case for an honourable pension.

There is another reason to make pension an attractive term of service that has not been noticed adequately: it is to attract new volunteers. The attrition rates, and the vacancy levels, are alarmingly high and, if the Armed Forces have to remain voluntary forces, recruitment must remain robust. The promise of an honourable pension is an important factor in recruitment.

OROP is an honourable pension. The time to debate the merits and demerits of OROP is over. It was a decision taken by the UPA government and reiterated by the NDA government. Both may share credit.

Some more undisputed facts: While presenting the interim budget for 2014-15 on 17 February 2014, I had said: “During the tenure of the UPA Governments, changes in the pension rules applicable to the defence services were notified on three occasions in 2006, 2010 and 2013. As a result, the gap between pre-2006 retirees and post-2006 retirees has been closed in four ranks (subject to some anomalies that are being addressed): Havildar, Naib Subedar, Subedar and Subedar Major….. Government has therefore decided to walk the last mile and close the gap for all retirees in all ranks. I am happy to announce that Government has accepted the principle of One Rank One Pension for the defence forces.”

What is orop?

On 26 February 2014, the Ministry of Defence defined OROP and the following definition was communicated to the Chiefs of the three Services: “OROP implies that uniform pension be paid to the Armed Forces personnel retiring in the same  rank with the same length of service irrespective of their date of retirement and any future enhancement in the rates of pension to be automatically passed on to the past pensioners. This implies bridging the gap between the rate of pension of the current pensioners and the past pensioners, and also future enhancements in the rate of pension to be automatically passed on to the past pensioners.”

The letter was a 4-page, 12-paragraph letter that left no doubt on what was intended to be done. The conditions, modalities and the manner of implementation were spelt out in detail. On 22 April 2014 a Working Group was constituted with the Controller General of Defence Accounts as the chairperson with Terms of Reference that included “to work out the detailed financial implications.” It was specifically stated that “since substantial increase is anticipated in expenditure on OROP, FA (DS) would thereafter seek additional funds as per requirement.”

Much is made of the fact that the interim budget provided only Rs 500 crore. It was, as I had said, an estimate and the money was provided as “an earnest of the UPA Government’s commitment.”  Mr Arun Jaitley reaffirmed the commitment in his Budget Speech on 10 July 2014. And, pray, how much did he provide? He said, “we propose to set aside a further sum of Rs 1,000 crore to meet this year’s requirement”!

So, why is the Government adding ifs and buts? Why is the Government adding unacceptable riders or conditions that will dilute the “commitment” of two successive Governments?

Reject the objections

The sticking points are entirely due to bureaucratic back-pedalling and the inability of the Government to overrule the objections. The promise must prevail over the objections, even if some of them appear valid. The promise was to implement OROP from 1 April 2014, and not 1 July 2014.

The promise was same pension to personnel retiring in the same rank with the same length of service, and not grant of same pension by looking into the cause of retirement. The promise was that future enhancements in the rate of pension will be automatically passed on to the past pensioners, and not that the adjustment will be made every five years.

OROP is indeed a defined benefit pension and different from the National Pension System (NPS) which is a contributory pension scheme. A person who has a short working life in the Armed Services cannot contribute enough during that period to earn an honourable pension. Hence OROP.

Whatever it takes to implement OROP, the resources must be found. In 2010-11, the RBI transferred to Government a surplus of Rs 15,009 crore. Who thought RBI would transfer Rs 65,896 crore in 2015-16? If there is will, a way can be found.

(Source- Via e-mail from Cdr Chandra Shekhar)

==============================================
Reaction from a Veteran : 

Dear Mr Chidambaram Sir,

 

I find that your blog of the 13^th September, 2015 has resurfaced and gone viral again. It’s a pointer to ex-servicemen community’s desire to further/renewed action by you and the Congress Party to take up the matter of OROP very strongly during the current Winter Session of the Parliament, whose four working days are still left.

 

The Government of India (GOI) has issued Notification on the 7^th November, 2016 to roll out the OROP Scheme. This Notification has been rejected by the Federation of Ex- Servicemen (FESM) on the following anomalies, which completely changes the soul and spirit of APPROVED Definition of OROP.

 

You in your said blog have criticised the tempering of the Definition of OROP, which had been approved / passed by the 15^th Lok Sabha and the 16^th Lok Sabha.The President of India, the Supreme Commander of the Indian Armed Forces in his address to the joint session of Parliament (16^th Lok Sabha) mentioned that OROP scheme shall be implemented. He did not change the Definition either, leaving no doubts in anybody’s mind that GOI has accepted that Definition.

 

You have rightly disagreed with the Government’s decision to review military pensions after EVERY FIVE years. GOI has been citing financial non-affordability as the reason. The cost for implementing OROP Scheme has been worked out by the Controller General of Defence Accounts (CGDA) and his Pay Cells as Rs. 8,293.48 Cr for all Military Pensioners including those who took premature retirement. The Government Notification of 7^th November, 2015 specifies review of pensions every five years shall create five different pensions because the pay scale of central government’s employees generally increase by 3% annually.

 

The current pension budget for the Defence Pensioners is Rs. 54,000 Cr. This budget includes payments to 400,000 Civilian Pensioners who had worked under the Ministry of Defence and served upto the age of 60 years. These Civilian Pensioners are not part of the OROP Scheme. Post c2004 they are covered under NPS. Civilian pensioners are 23% of all Defence Pensioners and receive 45% of the Defence Pensions’ budget, that is, Rs. 24,300 Cr. The balance 55% amount of Rs. 30,000 Cr is disbursed among 77% Military Pensioners.

 

According to IMF’s latest world economic outlook, India’s GDP is poised to RISE by 7.5% annually for next 5 years. It shall get into higher gear thereafter. To study the affordability aspect, we shall presume the GDP Rise @7% per annum.

 

The perceived rise in pension bill needs to be put in the correct perspective. The figures in the Table below include the existing Military Pensions, the OROP cost, annual increase @3% and the impact of implementing the recommendations of 7^th & 8^th CPCs. The Military Pension would rise in absolute numbers but when viewed as a percentage of the nation’s GDP, the expenditure on Military Pension shows an overall declining trend, meaning thereby - higher affordability by the country’s economy Year-on-Year.

 

Financial Year	Defence Military Pensions Budget - (Rs. in Cr)	Indian GDP at Market Price with Annual Increase @7% - (Rs. in Cr)	Percentage of Defence Military Pensions Budget wrt GDP - (in %)	Remarks
(a)	(b)	(c)	(d)	(e)
2014 - 2015	30,000	13000000	0.0023#	Pre OROP
2015 - 2016	40000	13910000	0,0029*	Rs. 10,000 Cr added towards OROP*
2016 – 2017	48000	14883700	0.0032	20% added as presumed raise by 7th CPC
2017 – 2018	49440	15925559	0.0031	Annual increment @3% added.
2018 – 2019	50923	17040348	0.0030	- do -
2019 – 2020	52451	18233172	0.0029*	- do -
2020 – 2021	54024	19509494	0.0028	- do -
2021 – 2022	55645	20875159	0.0027	- do -
2022 – 2023	57314	22336420	0.0026	- do -
2023 - 2024	59033	23899969	0.0025	- do -
2024 - 2025	60804	25572966	0.0024	- do -
2025 – 2026	62628	27363075	0.0023#	- do -
2026 - 2027	75154	29278490	0.0026	20% added as presumed raise by 8th CPC
2027 - 2028	77408	31327984	0.0025	Annual increment @3%  added.
2028 - 2029	79731	33520943	0.0024	- do -
2029 - 2030	82123	35867409	0.0023#	- do -
2030 - 2031	84586	38378128	0.0022	- do -

 

It will be evident that in 14 years (2015 – 16 to 2029 - 30) the national economy has absorbed the impact of Cost of OROP (Rs. 10,000 Cr), the cost of implementing two CPCs (7^th and 8^th) and cost of 3% annual increment.

 

Please note that after FY2029 - 30 the economy shall take the cost of future CPCs and annual increments in its stride and the ratio, between Military Pension and the GDP, shall always remain below the Pre-OROP level - of 0.0023%.

 

Where is the monstrous rise in Military Pensions that the nation’s economy cannot afford?

 

The Dearness Allowance for the Central Government employees is changed every six months, ie, January and July. If that is being paid regularly, the Military Pensions can also be increased by 3% annually automatically WITHOUT any administrative problem.

 

Paragraph 4 of the Governments’s Notification excludes the legally premature military retirees, in future, from the OROP Scheme. The military personnel primarily opt for legal premature retirement on compassionate grounds - that force them to quit the military job under duress. Keeping these retirees out of the OROP Scheme shall be like ‘adding oil to the fire’ since the circumstances beyond their control compel them to quit service midway and face the grind of taking care of the family without any assured alternative job. I am not sure how many Netas and Babus have lived through such penury to even visualise its impact? It should be remembered that the ‘Life Expectancy’ of 85% military retirees is in any case between 59 and 64 years. Under such circumstances who would like to die even earlier than that?

 

Other category of legally premature retirees comprises those who get passed over for promotions or have no chances of further advancement in their military career, affecting them socially and psychologically. Would it be beneficial for the armed forces to force retention, by withholding legal premature releases, of such inefficient, disinterested or frustrated superceded personnel or would it be better to let such personnel proceed on legal premature retirement and allow the competent, motivated and dedicated personnel remain in service? Exclusion of legally premature retirees from OROP Scheme shall adversely impact the quality of the armed forces.

 

‘Lucrative Commercial Re-employment’ has been stated as the reason for their exclusion. Majority of military retirees are from fighting arms – experts in use of rifles, guns, tanks, aircrafts, submarines, frigates etc and after retirement they are considered suitable for watchmen / sentry duties by the civilian population!! How many Colonel Wahee(s) former Chairman, Oil and Natural Gas Corporation (ONGC) has the military produced for lucrative employments? If there are few – far and between - probably fraction of a percent! Is the punishment to large numbers justified by exclusion?

 

The soldiers ALWAYS followed their “Sainik Dharm - The Safety, Honour And Welfare Of India Comes First, Always And Everytime; and, in words of Lord Tennyson -

“Theirs not to make reply,

Theirs not to reason why,

Theirs but to do and die…”

 

The Soldiers never ever negotiate in performance of their duties in peace or war!!!

 

We have 25 Lakh retired servicemen; you have aptly pointed out that they are without any legally assured re-employment opportunities. And there are 6,45,000 widows. The personnel who retired in c.1973 onwards suffered the most and are now in their mid seventies and eighties. They are the ones who fought 1962, 1965 and 1971 wars gallantly for the country. About 200 ex-servicemen die every day. Can we create an occasion for them to rejoice and smile awhile before they pass away awaiting the fruition of OROP!!

 

The ex-servicemen are pursuing their Satyagrah, at Janter Manter and scores of other towns in all the states since 15^th June 2015, that is, 189 days requesting the GOI to ACCEPT & IMPLEMENT the OROP Scheme as per the APPROVED DEFINITION.

 

As explained through the table above that the country, with RISING GDP and INCOME, can comfortably BEAR the cost of OROP Scheme - please coax the GOI to SANCTION OROP with GRACE as per the Approved Definition and without HAGGLING lest the serving soldiers pick a cue.

 

I understand that Privilege Motion/Adjournment Motion/Call Attention Motion etc are effective in forcing the Treasury Benches to perform.

 

The emails sometimes get corrupted in transit; hence, a copy of this mail is attached please.

 

With kind regards,

 

Colonel Ramesh Khatri (Retd)

(Source- Via e-mail)