There needs to be a compelling case for any law-making body to bring back a two-decade old welfare scheme. The Old Pension Scheme (OPS) was discontinued by the NDA government back in 2003 with effect from April 1, 2004.
Last week, the central government, asked a group of select government employees to opt for the old pension scheme. State governments of Rajasthan, Jharkhand, Chhattisgarh have also informed the centre and Pension Fund Regulatory and Development Authority of their decision to restart OPS for their employees. Meanwhile, Punjab government has already issued a notification in this regard, on November 18, 2022. The notification announced the implementation of OPS for the state government employees being covered under NPS.
Following suit, last week, Himachal Pradesh government also finalised OPS and announced that it will benefit roughly 1.36 lakh employees of the state.
It's one-time option
As per the notification issued by Ministry of Personnel, old pension scheme is an option for the employees which they can choose before it expires. The notification said that government employees who are eligible to choose OPS, "but do not do so by the stipulated date" of August 31, 2023 will continue to be covered under the existing NPS National Pension System.
Who all are eligible for OPS?
The employees who joined the central government services against posts notified/advertised before December 22, 2003 are eligible to join the old pension scheme under the Central Civil Services (Pension) Rules, 1972 now 2021. December 22, 2003 is the day the NPS was notified.
New pension scheme vs old pension scheme
Under the Old Pension Scheme, employees get a defined amount as pension. Under OPS, an employee is entitled to 50% amount of the last drawn salary as pension. Whereas under the New Pension Scheme, an employee contributes 10% of their basic salary towards pension while the government contributes 14%.
What the experts say?
Of the many who voiced their opinions on the GoI's move is former RBI Governor Raghuram Rajan who expressed his concern at the Old Pension Scheme. Calling it, "an enormous obligation," he said that OPS involved massive future outlays because of the indexation of pensions to current salaries.
He also stressed that some less expensive ways should be worked out to address the demands of government pensioners. "It's an enormous obligation, not necessarily in the short run but in the long run," he said in an interview to PTI.
What the statistics say?
Often, most schemes by the government, try to meet the impossible benchmarks of politics, popularity and economy. Where does the OPS stand? Does it consider economy or it is a populist measure at the hands of the centre and state government?
India's elderly population has been increasing not just in terms of absolute numbers but also in terms of ratio. Between 2001 and 2011, more than 27 million people were above the age of 60. In 1961, the age bracket of 60 plus represented at least 5.6% of the population. This proportion increased to 10.1% in 2021 and is projected to further increase to 13.1% in 2031.
The 2020 National Commission on Population report estimates that there are nearly 138 million elderly persons in India in 2021. According to WHO, the geriatric population in India will be 315 million by the year 2050. Population Census of 2021, represented a roughly 34 million elderly persons increase over 2011. By 2031 an additional 56 million elderly people are expected to added further.
Long term implications
With the ever growing fiscal deficits, it's the recurring expenses that governments need to address. The long term implications of the move on government finances is what concerns most against the OPS. The Hindu quoted Jitendra Singh, Union Minister of State, as saying that the number of people receiving central government pensions exceed the number of active employees. "There are more pensioners, about 77 lakhs, than active-duty personnel, which is about 50-60 lakh."
Which is what makes the OPS unaffordable and unsustainable on the state exchequer. Increasing longevity further inflates the pension liabilities and makes the question difficult to answer; how will the working population sustainably support at least, ever growing and more than one tenth of the population?
