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Friday, August 28, 2015
Demand for rolling pension change plan holds up OROP
Ex-servicemen protest against the non-implementation of one-rank, one-pension scheme in New Delhi.
NEW DELHI: What exactly is holding back the implementation of one-rank, one-pension (OROP) scheme for ex-servicemen? Well, it's not a difference over the date for the scheme to kick in; it's a startling demand for a "rolling" pension adjustment plan - one that would be adjusted every year (the demand was earlier for even more frequent adjustments) as against the norm of a 10-year adjustment for all other government pensioners.
The veterans' demand was like this - say, one colonel retired in 2005 and another on August 27, 2015. The moment the latter received his pension - which would naturally be higher than the colonel who had retired 10 years back - the older colonel and all other retired colonels should get the pension received by the last-retired colonel. And if another colonel retired a few months later, pensions of all colonels would have to be readjusted yet again.
The government viewed this demand as impractical and an administrative nightmare. Still, in the wake of the high-voltage emotive agitation, it is now prepared to adjust the pension of all retired services personnel once every five years (as against the norm of 10 years), but the veterans want a revision at least every year. The inability of the two sides to come on a meeting point on this is why OROP is stuck.
They are, however, on the verge of reaching common ground with regard to the date of rolling out new pension parity formula and 2011 is the likely base year, sources said. The government has offered to roll out the proposed OROP from April 2014, while defence pensioners want it to be implemented from January 2014. This could cost the government an additional couple of thousands of crores, and may not come in the way of a deal.
But the demand for annual adjustment has created a stalemate. Sources said the revision will be made from 2011, with government proposing the next one in 2016. However, the Centre is finding it tough to concede the demand for annual revision due to possible implications on government spending.
"An annual revision is very difficult as it will have major financial implications on a rolling basis. You can't keep adding surprises to the budget every year," said official sources.
However, the veterans are unwilling to budge and have also turned down a proposal to refer the issue to the pay panel or have a pension table (something that was the norm until 1973) to deal with the issue. At best, negotiators are willing to refer the issue to a panel where they have majority representation — a position which is potentially fraught with the possibility of another set of complications being introduced.
The veterans have also argued that the yearly increments of a person in service need to be factored into the pension calculations. However, official sources point out that this will turn out to be an endless spiral. For instance, those who retire today will be earning less than those who retire in the same rank a year later after factoring in the increment that the latter would have earned. Going by the veterans' prescription, the pensions of all those of the same rank should automatically be revised every July.
"You can very well imagine what will it mean." a source said."If a government servant is on leave, he does not get an increment which is due till he resumes work since the principle is that you have to work for your increment. Under the scheme that's being demanded, this principle will be overlooked. And yet we have offered to take a fresh look every five years," he added.
Sources also said the pension schemes of the UK, which the ex-servicemen had cited as reference point, provide for an annual adjustment for changes in cost of living index, while in India this is done twice a year through payment of dearness pension.
Implementing the decision from April 2014 would result in the Centre having to pay Rs 12,000 crore as arrears up to August 2015, with the annual estimated addition to the pension bill expected to be around Rs 10,000 crore or over 18% of the budgeted for pension of Rs 54,500 crore for 18 lakh ex-defence personnel.
The original suggestion from a section within the government was to implement a Supreme Court order in the SPS Vains case — which would have meant compliance with the court order and would have caused an annual addition of Rs 500-600 crore to the pension bill. But the PMO, it is learnt, sought a more comprehensive review to bridge the gap between current and past pensioners.
Sources said the formula suggested by ex-servicemen is expected to benefit officers more as the government has implemented OROP for personnel below officer ranks (PBOR), who retired before 2006 as they are deemed to have served for 33 years. Based on the formula, a sepoy who earned a pension of around Rs 2,500 a month at the end of 1997, now earns over Rs 12,500 in addition to canteen benefits, estimated at Rs 4,000 a month for PBOR and around Rs 7,000 for officers.
"The rationale is to ensure that a jawan who retires at 35 years does not lose out. The case of officers is different. Even if someone retires as a colonel after 25-30 years of service, he is around 50 years old," said an official.
For officers of the Army, Navy and Air Force, the norms are the same as those for civilian officers and provide for indexation to inflation which is done through dearness allowance. There is also an indexation for wage, which is done once in 10 years through the pay commission award, along with a floor for modified parity.
The defence personnel have contended that IAS officers, most of whom retire in the apex scale, along with the three defence chiefs get a better deal as their pension is upgraded to 50% of the pay when the new pay panel award kicks in. Government sources, however, said that an officer retiring as a joint secretary gets a pension of Rs 27,500 a month while a major general (who is of comparable rank) earns Rs 30,500 a month.