Jagan’s middle path on pension scheme
After protracted negotiations with government employees, Andhra Pradesh has come up with the Guaranteed Pension Scheme (GPS) to replace the existing Contributory Pension Scheme (CPS) or NPS, which was formulated by the NDA government in 2004. The State government argues that it is the best that can be done, keeping in mind the present and likely future financial position of the State and the interests of the employees as well as coming generations.
At first glance, it is better than CPS in the sense that the employees will get an assured pension of 50 per cent of their last drawn basic salary besides dearness relief twice a year. The pensions are unlikely to be revised with every Pay Revision Commission (PRC) recommendation. Similarly, it is unclear if reimbursement of medical expenditure will be given as was done under the Old Pension Scheme (OPS), which the NPS replaced. Compared to the CPS, the GPS offers a better deal without burdening future generations. Because, just as in the CPS, 10 per cent of the basic pay is contributed by the employee and the State government, but unlike the former, under the latter, the employees stand to receive a fixed amount, and it is not linked to markets or interest rates.
Looking at this way, it is a compromise between the OPS and CPS. There is merit in the government’s point that reverting to OPS is untenable. According to its estimates, if OPS were to be implemented, pensions alone would account for Rs 65,234 crore of the State Budget by 2041 and by 2070, it may shoot up to over Rs 3.5 lakh crore — without any contribution from the employees during their service. In other words, taxpayers will have to pay for the retired employees in perpetuity. Besides, if pensions and other linked benefits are implemented as per the Old Pension Scheme, the government’s financial freedom will be crippled, forcing it to spend less and less on essential services and development works.
As per back-of-the-envelope calculations, the State must cough up around Rs 1.3 lakh crore for pensions under the GPS by 2070. Prima facie, it is obvious that GPS is better than OPS and CPS. The employees ought to be understanding and not hold the State hostage with threats. After all, they have the best job security on the planet.