One Rank, One Pesnsion: It has large cost implications, and is unconscionable
The government is learning the hard way that election promises are one thing, keeping them quite another. Why else would, a year after he won a thumping majority, prime minister Narendra Modi use his radio talk, Mann ki Baat, to tell ex-servicemen he needed time to deal with the BJP’s election promise of one-rank-one-pension (OROP) as the issue was a complex one? The government is in a mess over the UPA’s land acquisition Act that, in the run up to the elections, it supported since it didn’t want to be labelled anti-farmer, and it is running a battle with Delhi chief minister Arvind Kejriwal on more powers to the chief minister though, in the run-up to the parliamentary elections last year, its then-candidate for Delhi’s chief ministership—Harsh Vardhan—had promised full statehood for Delhi.
The major reason for the delay is not as much due to the issue being complex as it is the huge cost implications.
Defence pensions already add up to a whopping Rs 54,500 crore—they have doubled in just the last 5 years—and OROP will add Rs 8,400 crore in a year. While that may look like a small amount to make for those who sacrifice their lives to defend the nation, it will rise dramatically when the next Pay Commission—its report has to be implemented from January 2016 —puts out its award. The 6th Pay Commission’s report was implemented in FY09, but was done retrospectively from FY06, and the money was given over a couple of years. As a result, from Rs 20,232 crore in FY06, India’s total pension bill (excluding railways and the postal department) rose to Rs 42,232 crore in FY10 and R53,262 crore in FY11—the arrears, undoubtedly, added to the bill. In the case of defence, pensions were R12,452 in FY06 and this rose to Rs 25,000 crore in FY11. Unlike the normal civilian population, the defence forces retire the bulk of their population early, so the pensioner-to-active-service ratio is a lot more adverse in terms of the impact on the pension bill. And once the OROP principle is accepted for the armed forces, it is just a matter of time before there will be demands, even court cases, on the need to implement this for bureaucrats in the state and the Centre, teachers, and paramilitary forces.
While India has—there is no justification for this—OROP even today for the Cabinet Secretary and for secretary-ranked officers, it is not as if others, including in the armed forces, are getting a raw deal, since pensions are adjusted every year to take into account inflation, and by the Pay Commission every decade. As a result, India’s pension system is possibly the most generous in the world and pensioners today get several times their pre-retirement salaries. Indeed, the 7th Pay Commission would do well to take into account the trajectory of pensions while calculating the cost-to-company of government employees. That’s something the prime minister should devote a Mann ki Baat to, and keep in mind when the next BJP manifesto is drawn up.