With elections in states coming up and the country’s finances not in the pink of health, Finance Minister Jaswant Singh has sought Deputy Prime Minister L K Advani’s help in tackling Budget pressures, especially on matters concerning the growing pension bill. The duo’s likely to meet later this week for a road map on these issues and to discuss options for a social security net for senior citizens in the run-up to the elections. This Budget, pensions alone are set to touch a record level of Rs 22,000 crore, a severe pressure on the country’s finances. With subsidies accounting over Rs 40,000 crore and bailout for financial institutions, courtesy non-performing assets (NPAs), needing another Rs 15,000 crore, Jaswant Singh has very few choices. With Advani heading the Ministry of Personnel, Public Grievances and Pensions, politically agreeable solutions are likely to be drawn out. There have already been some rounds of meetings between Finance Secretary Dr S Narayan and Personnel Secretary S S Dawra on the issue but the final proposals require Advani’s approval. Among the options that are being considered are a ceiling on age till which pensions can be drawn, minimising dearness relief revisions in pensions, reducing the level of commutation of pension whereby retiring government officials get around 40 per cent of their pension amount calculated over 10 years as a lumpsum at the time of retirement. Other options include making pensioners place their retirement benefits with private pension funds which would then pay them monthly income schemes. Another option includes a transition to a funded system of pension payments for new employees and a system of incentives to encourage migration of existing employees also to this funded system. This option could put a steep burden on the government initially in investing in the fund but it could help resolve future crisis. The pension bill according to estimates by the Working Group on Pension Liabilities had shot up six times in just ten years between 1990-91 and 1999-2000 from Rs 3,277 crores to Rs 19,446 crores. It has gone up by another Rs 2000 crores over the last two years. Retirement age is now fixed for government officials at 60 years, the suggestion is that the pension should be paid for 10 or 15 years until the person reaches the age of 75. However, this being a ticklish political issue, it could be put off for a while with the government going in for a softer option of setting up a committee or task force to recommend a new pension dispensation. According to an official estimate of the workforce in March 1998, there were 3.4 million pensioners as against 5.2 million employees on the Central Government rolls, a whopping 65 per cent. Military personnel topped the list of pensioners. The Expenditure Reforms Commission as well as the Working Group on Pension Liabilities that was set up by the Finance Ministry in 1999 have earlier strongly favoured a 15-year ceiling on pension. The Defence personnel, however, may have to be kept out of this 15-year ceiling as otherwise there will be serious implications in case of those who retire from the military in their forties. The Expenditure Reforms Commission had also questioned the justification of discounting the value of pension to the full period of life expectancy, pointing out that ‘‘logically discounting pension should be done over a period of only 15 years after retirement and not stretched to the full term of life expectancy.’’ Its argument was based on the restoration of full pension done 15 years after commutation as per a court decision.
