1. OROP move to cost Rs 16,000 crore; to impact fiscal math: HSBC

OROP move to cost Rs 16,000 crore; to impact fiscal math: HSBC

One Rank One Pension (OROP) will have a significant impact on the country's fiscal bill and the overall cost will be around Rs 16,000 crore in the current financial year, says an HSBC report.

By: | Updated: September 7, 2015 5:12 PM
ONE RANK ONE PENSION

HSBC said OROP decision would ‘mean higher current pension payments as well as paying off arrears (retrospectively from July 2014), and it will have a significant impact on the fiscal bill’. (PTI)

One Rank One Pension (OROP) will have a significant impact on the country’s fiscal bill and the overall cost will be around Rs 16,000 crore in the current financial year, says an HSBC report.

The government has “in principle” accepted OROP – a demand by India’s defence personnel that uniform pension should be paid to armed force retirees with the same rank and same length of service.

“This would mean higher current pension payments as well as paying off arrears (retrospectively from July 2014), it will have a significant impact on the fiscal bill. We estimate the overall cost to be Rs 16,000 crore (USD 2.5 billion or 0.1 per cent of GDP) in FY16,” HSBC said in a research note.

As per the global brokerage firm, the existing defence pension bill is likely to go up by Rs 10,000 crore, while arrears totalling Rs 12,000 crore will be paid over two years.

“In sum, we estimate the fiscal implication to be Rs 16,000 crore in Fiscal year 2015-16,” HSBC Chief India Economist Pranjul Bhandari said.

Meanwhile, other pressures on the fiscal front are also mounting. The government recently announced capital infusion of Rs 70,000 crore over the next four years including Rs 25,000 crore in the current fiscal. The disinvestment department’s mammoth target of Rs 69,500 crore, on the other hand, is unlikely to be met.

“The disinvestment receipts target of Rs 69,500 crore looked rather rich. Even in the previous year, FY15, the government budgeted for Rs 63,400 crore but ended the year with about half of that,” Bhandari added.

However, factors like lower than expected subsidy bill, additional non-tax revenues like RBI and PSU dividends are likely to offset some pressures on the fiscal front.

The deciding factor on whether the fiscal deficit target of 3.9 per cent of GDP is easily met is likely to rest on tax revenue growth.

“All said, while it’s too soon to declare that the fiscal target will be missed, pressures are mounting and it is time to monitor closely,” HSBC said.

OROP no threat to fiscal arithmetic: Govt

The government today ruled out the additional financial burden of Rs 8,000-10,000 crore on account of OROP scheme hurting the fiscal consolidation programme, saying there was “space” to absorb it.

“We have the fiscal space to be able to absorb this without having any impact of the fiscal deficit target, which is 3.9 per cent. So, we have taken that into account as we have prepared the One Rank One Pension (OROP) scheme,” Minister of State for Finance Jayant Sinha said.

The government had last week announced that it will implement OROP under which a uniform pension would be given to armed forces personnel retiring at the same rank with the same length of service. The scheme would be implemented from July 1, 2014.

Funding the OROP, the Minister said, was never a consideration, but the government took time in finalising the scheme as it wanted it to be “equitable and not half-baked”.

Sinha said the actual payout in arrears for implementation of the scheme from July 1, 2014, as well as the recurring burden are being worked out. For the current year, the outgo is estimated at Rs 8,000-10,000 crore, he said.

“We are estimating that cost would be between Rs 8,000-10,000 crore at present and it would increase further in future… It is a recurring number. The Rs 8,000-10,000 crore is in this fiscal and there are of course arrears which have to be paid,” he said.

As per the OROP scheme announced by the government, the pension for defence personnel would be revised every five years.

The arrears would be paid in four half-yearly instalments. However, all widows, including war widows, will be paid in one instalment.

“We have taken into account what adjustment will be necessary in the Budget to be able to both apply one rank one pension which we have promised to our brave servicemen while at the same time maintaining our fiscal discipline and fiscal target that we have already outlined,” he said.

Sinha said there are estimated 6.5 lakh war widows and over 27 lakh ex-defence personnel who will benefit from the OROP scheme.

“We have sufficient ability to be able to find fiscal space for that… As of now, we are quite confident we will be able to find that fiscal space,” Sinha said.

In the current fiscal, the government aims to restrict fiscal deficit at 3.9 per cent of GDP. As per the fiscal consolidation road map, the fiscal deficit is to be brought down to 3 per cent of GDP by 2017-18.

  1. Virendra Sason
    Sep 7, 2015 at 10:21 pm
    क्या रिटायर्ड फौजी भाई Rs 1,65,000 crore का हक़ छोड़ चुके है? क्या अब भी OROP in true sprit में नहीं दिया जा रहा है? 1..1973,1986,1996 व 2006 पूर्व का जवान Approx Rs 6000-9000/ (including DA) तथा आज का जवान Approx Rs16000-20000/(including DA) पेंशन ले रहा है अंतर 8 to 12 हजार प्रति माह है। २..एक साल का फ़र्क़ एक लाख प्रति वर्ष का है। यदि सभी 25 लाख को जवान ही मान ले तो 25 लाख * 1 लाख = 25000 करोड़ प्रति वर्ष। 3..2006 to 2015 का arear 25000*10/2 = Rs 125000 Crore 4..1996 to 2005 का arear approximately = Rs 30000 Crore 5.. 1986 to 1995 का arear approximately = Rs 7000 Crore 6.. 1973 to 1985 का arear approximately = Rs 3000 Crore In all Expenditure approximately =Rs 165,000 Crore डॉ मनमोहन सिंह ने 6th commision पर कहा था की ऐसे पैसा देंगे तो अगली सरकार रोयेगी अब 7th pay commision की रिपोर्ट 1st January 2016 से लागु होगी जिस पर लगभग Rs 50000-60000 crore खर्च होगा। क्या बीजेपी सरकार 2,25,000 crore का बोझ सकती है जबकि Central का Plan Exp Rs 4,60,000 Crore है
    Reply
    1. D
      Detlev Jonas
      Sep 8, 2015 at 4:49 am
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        CBSH
        Sep 7, 2015 at 10:29 pm
        its a bank, they only can think of interest, loss, gains, profit etc. One cant expect them to think about looking after the soldiers, Baniyagiri hi in bankski aukat hai & they think like that only.........
        Reply
        1. P
          pkpk
          Sep 7, 2015 at 9:08 pm
          RE-ORGANIZATION OF MILITARY/CIVILIAN COMMAND STRUCTURE. VRS inclusion in OROP draft indicates how ignorant are ministers about military? But the problem is the real govt (babus, who are ignorant about matters military as well as spiteful towards military?) This is dangerous situation for national security. Since there is so much communication gap between the PMO and the service chiefs, babus being the bridge. Babus will filter the information reaching the PM as per their understanding (perception or interests whatever you call it?). Past PM and the current PM consider service chiefs as something untouchable - Manmohan Singh reportedly never met service chiefs despite repeated requests and current PM's record may be same. Why? If he can meet secretaries on daily basis, why not service chiefs, who have a rank higher than secretaries? Is the matters military or national security that unimportant? Here is the suggested solution: RE-ORGANIZATION OF MILITARY/CIVILIAN COMMAND STRUCTURE - There should be only 5 commands (NOT as Army, Navy or Air force but all three combined) - Northern Command, Western Command, Eastern Command, Central Command and Maritime Command (including Strategic Command). Eastern Command will include areas right up to South East Asia. Western Command will include areas up to Russia. Maritime Command will include areas up to West Asia including Arabian Sea, India Ocean, right up to Australia. Northern Command’s area will be limited but Kashmir itself is very important and areas in Tibet and Mona can be included. All 5 commands should be commanded by a 4 star general from army, air force or navy, who will report to Joint Chiefs of Staff (4 star general but a higher appointment) in PMO deputed by another 4 star general. Both Joint Chiefs of Staff and his deputy will report to the defense minister but their offices will be in PMO. Prime Minister will be connected to all 4 star commanders in field by a hotline. There should be a situation room in PMO where regular meeting of top br of security apparatus can take place. Current service chiefs of army, air force and navy will remain in service headquarters to maintain and inter command transfers of the forces, however the military commanders in field will exercise the command and control over the forces under their command. Instead of one defense secretary, there will be secretaries each for army, air force and navy to exercise civilian control on specifies areas. The above model will ensure complete civilian control over military, yet the highest level defense decision maker (PM) in touch with matters military and national defense (You know current DM’s frank admission about matters military). Imagine our PM calling the field military commander directly on hotline, eliminating all red tape. There will be no more inter service acrimony and all forces will jointly responsible for national security! If you ask for the opinion of service headquarters, that may be influenced by their self-interest.
          Reply
          1. P
            pkpk
            Sep 7, 2015 at 9:08 pm
            RE-ORGANIZATION OF MILITARY/CIVILIAN COMMAND STRUCTURE. VRS inclusion in OROP draft indicates how ignorant are ministers about military? But the problem is the real govt (babus, who are ignorant about matters military as well as spiteful towards military?) This is dangerous situation for national security. Since there is so much communication gap between the PMO and the service chiefs, babus being the bridge. Babus will filter the information reaching the PM as per their understanding (perception or interests whatever you call it?). Past PM and the current PM consider service chiefs as something untouchable - Manmohan Singh reportedly never met service chiefs despite repeated requests and current PM's record may be same. Why? If he can meet secretaries on daily basis, why not service chiefs, who have a rank higher than secretaries? Is the matters military or national security that unimportant? Here is the suggested solution: RE-ORGANIZATION OF MILITARY/CIVILIAN COMMAND STRUCTURE - There should be only 5 commands (NOT as Army, Navy or Air force but all three combined) - Northern Command, Western Command, Eastern Command, Central Command and Maritime Command (including Strategic Command). Eastern Command will include areas right up to South East Asia. Western Command will include areas up to Russia. Maritime Command will include areas up to West Asia including Arabian Sea, India Ocean, right up to Australia. Northern Command’s area will be limited but Kashmir itself is very important and areas in Tibet and Mona can be included. All 5 commands should be commanded by a 4 star general from army, air force or navy, who will report to Joint Chiefs of Staff (4 star general but a higher appointment) in PMO deputed by another 4 star general. Both Joint Chiefs of Staff and his deputy will report to the defense minister but their offices will be in PMO. Prime Minister will be connected to all 4 star commanders in field by a hotline. There should be a situation room in PMO where regular meeting of top br of security apparatus can take place. Current service chiefs of army, air force and navy will remain in service headquarters to maintain and inter command transfers of the forces, however the military commanders in field will exercise the command and control over the forces under their command. Instead of one defense secretary, there will be secretaries each for army, air force and navy to exercise civilian control on specifies areas. The above model will ensure complete civilian control over military, yet the highest level defense decision maker (PM) in touch with matters military and national defense (You know current DM’s frank admission about matters military). Imagine our PM calling the field military commander directly on hotline, eliminating all red tape. There will be no more inter service acrimony and all forces will jointly responsible for national security! If you ask for the opinion of service headquarters, that may be influenced by their self-interest.
            Reply
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