Military & Aerospace

Defence Pensions – The Other Side of the Picture
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Issue Net Edition | Date : 13 Nov , 2020

I tread with great trepidation on a subject that has drawn the attention of, and comments from two erudite, intellectual Generals and a civilian editor who writes often on Defence matters on an online publication. The “pandemic” that burgeoning Defence Pension budgets brought on appears to be diagnosed to be due to a home made virus called “OROP” (One Rank One Pension). The proposals range from the extreme (excision of Defence Civilians Pension from the Defence Pension Budget) to the seemingly benign (need to look at the most recent of the esteemed CDS’s brain waves – increase the retirement ages and reducing pensions of those proceeding on pre-mature release (PMR), and the need to change over Defence Pensions to the National Pension Scheme (NPS).

This piece tries to identify the symptoms to remove the fixation that OROP is the equivalent of COVID-19 of the pandemic (to repeat ad nauseam) of “Exponential increase in the Defence Budget.”

One Rank One Pension (OROP) – simplified

While identifying OROP as the virus that is spreading the contagion on the Defence Pension Budget, one tends to ignore the co-morbidities. 

To refresh memories, OROP was sanctioned by a MoD/DESW letter 12(1)/2014/D(Pen/Pol)-Part II dated 07 Nov 2015 and the OROP tables and the arrears were to be paid (vide para 3 (iv) as follows: –

    • Family pensioners and Gallantry award winners: – one lump sum amount
    • All others entitled in four equal half yearly instalments.

The OROP scheme did not increase the pensions of the lakhs of Armed Forces pensioners.  

    • It just increased pensions of only those holding the (i) same rank with the (ii) same (number) of years of service from a lower amount to the average pension.
    • The average pension was arrived at from the minimum and maximum of a group of pensioners across 3 Services comprising (a) (i) and (ii).
    • It left the pension(s) of those earning more than the average amount untouched (recall the lament of a Maj Gen that there are several pensions?) as per Para 3 of the letter dated 7 Nov 2015.

For example: – PCDA (P) provided raw data obtained through RTI that a Lt Col (& equivalent) with 20 years of service:

    • Army – Minimum Rs 30395, Maximum Rs 31630;
    • Navy – Minimum & Maximum Rs 30120;
    • Air Force – Minimum Rs 31630, Maximum 32490;
    • Average across 3 Services Rs 31305.

Therefore, all those earning pensions lower than Rs 31305 (a few Lt Cols in the Army, a few Cdrs in the Navy and none of the Wg Cdrs in the Air Force) were given the higher amount while the pensions of those earning more than Rs 31305 were not changed.

OROP tables released vide 12(1)/2014/D(Pen/Pol)-Part II dated 03 Feb 2016 reflects this average pension.

Beneficiaries of the Defence Pension Budget

Defence Forces retirees fall into two categories for this discussion – those who have superannuated (at younger ages) and those who were granted PMR because they fulfilled the strict scrutiny of the Armed Forces HQ and the MoD.

Also while proposing that Armed Forces personnel may also be pushed into (for want of a better term) the National Pension Scheme (NPS), it would be relevant to examine in some relevant detail why the NPS was not made applicable to the Armed Forces before I wander onto thin ice. But that for a later riposte.

Defence pensions cover a phalanx of pensioners – not just retired uniformed personnel and family pensioners (26, 33, 947 or 81%) but also civilians and their family pensioners (6, 01, 983 or 19%).

The civilians are retirees from Ordnance Factories, DRDO, MES, Army Ordnance Corps, Army Supply Corps, Naval Dockyard, Base Repair Depots, Equipment Depots, and Army Base Workshops.

[Note: On the other hand, 73, 000 MoD pensioners are paid out of the Min of Finance Civil Pension Budget. They are retirees from Defence Accounts Department such as CGDA, MoD (Fin) (don’t swallow your breath), Border Road Organisation, J&K LI and Coast Guard (source: https://idsa.in/issuebrief/estimating-india’s-defence-manpower-04820). 

Budget by Budget Comparison – Tracing the Primary Contacts of OROP Virus

It is on record in Para 12 (b) of the Comprehensive Affidavit dated 25 Sep 2020 submitted by the MoD that a sum of Rs 10795.04 crore was disbursed as the initial payment of OROP and the recurring annual expenditure on OROP is Rs 7123.38 crore (repetition of this fact is intentional) and that from 1.7.2014 onwards a total of Rs 42740.28 crore was expenditure on OROP. 

    • The Defence Pension Budget (DPB) for FY 2015-2016 was Rs 54466 crore and the revised budget was Rs 60197.74 crore. Therefore, the amount expended on OROP being Rs 10795.04 crore was for FY 2014- 15 (OROP w.e.f 1.7.2014) which indicates Rs 5731 crore  was the OROP paid in full to Family pensioners and Gallantry award winners and first instalment of arrears and OROP to others.    
    • The DPB for FY 2016-17 was Rs 82299.45 i.e. an increase of Rs 22, 801.51. As per the affidavit the annual expenditure on OROP is Rs 7123.38 crore, so where did the additional expenditure of Rs 15678.17 crore come in? One needs to recall that arrears of 7th CPC were paid in Oct 2016 to all pensioners by multiplying their existing Basic pension by a factor of 2.57, which is Option A recommended by the 7th CPC.
    • The DPB for FY 2017-18 was Rs 85705 i.e. an increase of Rs 3405.55 crore. Instead of Rs 7213.38 crore on OROP could reason be the Concordance tables (No. 17 (01)/2017/(02)/D(Pension/Policy dated 17.10.2018) for Notional Pay based pensions for Defence retirees were still under preparation the reason that lesser amount was expended on OROP in this FY?
    • The DPB for FY 2018-19 was Rs 101754 i.e. an increase of Rs 16049 crore of which Rs 7123.38 crore was OROP. Could the expenditure of  Rs 8925.62 crore be attributed to the increase in pension for (i) Option B of the 7th CPC recommendations of Notional Pay i.e. Last Pay Drawn on date of retirement/death as well as arrears to Maj Gen & equivalents in the UoI Vs Maj Gen SPS Vains case MoD No. 12(22)/2009/D(Pen/Pol) dated 14 Jul 2016?
    • The DPB for FY 2019-20 was Rs 112059 i.e. an increase of Rs 10305 crore, including Rs 7123.38 crore. Is that the effect of the Dearness Relief on the 7th CPC’s Notional Pay Based pension?  
    • The revised DPB in 2015-16 was Rs 60,197.94 crores i.e. before the 7th CPC regime was implemented but arrears @ 2.57 multiplication factor paid in FY 2016-17 amounts to only Rs 82299.45 crores. No one has explained this anomaly. Have budgetary constraints i.e. fiscal deficit of 3.5 (or whatever) resulted in juggling of figures?

[The Defence Pension budget of the past 5 years obtained from https://openbudgetsindia.org]

Now we tread on the thickening ice to look at certain other anomalies (co-morbidities?) that were resolved at the behest of the much reviled “Armed Forces leadership” with the consequence that pension amounts were increased, and in almost all cases arrears were paid. The following co-morbidities to OROP added to the “exponential increase” in DPB (and not resolving them invited more invectives for the ubiquitous “leadership” (dates omitted to stop spoon feeding but PCDA (P) circular numbers provided to encourage fact checks): –

    • Removing the 33 years requirement for full pension, and consequent arrears and enhancement of pensions including to those who commuted 43% and 45% of pension, restoration of pension of those who had commuted 100% on absorption in PSUs  

(PCDA (P) Circular Nos 532, 568 and 592)

    • Payment of pension based on recommendations of GoM 2008, Cabinet Secretary Committee (CSC) 2009 and CSC 2012 to the “best of each rank and group across the three Services” for PBORs (per month benefit for ‘Y’ Group Sepoy of Rs 500, Naik Rs 550, Havildar Rs 800 leading to an additional expenditure of Rs 1400 crore annually)
    • Enhancement of Family Pension to minimum of fitment table from minimum of Pay Band
    • Extension of Dual family pensions to post 1.1.2006 retirees

PCDA (P) Circular Nos 529, 533, 536, 537, 547 to 554

    • Broad banding of disability

PCDA (P) No. 561)

    • Multiplication factor of 1.84 x 5th CPC Basic Pay + Rank Pay on transition to 6th CPC scales
    • Arrears to all officers of the rank of Maj Gen & equivalent consequent to the Vains case by MoD letter dated 14 Jul 2016
    • Multiplication factor of 2.57 x 6th CPC Basic Pay + Grade Pay on transition to 7th CPC pay matrix. 

Raw data provided by PCDA (P) [available on Aerial View blog (sharad10525.blogspot.com) but here are just two numericals: –

  • Lt Col with 23 years of service.
    • The 6th CPC OROP (from table 1 of Circular No. 555) is Rs 32428.
    • The 7th CPC OROP would be Rs 32428 x 2.57 = Rs 83339.96 or Rs 83340
    • Now let’s move to the Notional Pay based Pension (Circular 608, Page 195)
    • Pay being 50% of last pay drawn, his 6th CPC pay would be Rs 32428 x 2= Rs 64856
    • In the appropriate table of Circular No. 608 (Notional Pay Based pension), Rs 64856 falls in the pay range of Rs 63350 to Rs 65250 and 7th CPC Notional Pay is Rs 167700. 
    • Add MSP of Rs 15500 + Rs 167700 = Rs 183200. Hence Pension works out to Rs 91600.
    • Therefore, from 2018-19 onwards an extra amount (Rs 91600-83340) = Rs 8600 pm would be added in the DPB, not for OROP but for Notional Pay based pension for all Lt Cols & equivalents drawing 6th CPC pay band range of Rs 63350 to Rs 65250, which incidentally applies to OROP pension for 21 to 24 years of QS (as per PCDA (P) Circular No. 555).

Is National Pension Scheme the panacea    

As for NPS being the cure for the “exponential increase” in Defence Pension budget, RTI reply might elicit in more detail the reason(s) for not extending the NPS to Armed Forces. Was it because Armed Forces personnel are exposed to higher risks and hazards compared to civilians? Does the NPS cover low intensity conflict or terrorism related deaths in the line of duty?

Some brief information on the NPS is not repeated here for the sake of brevity (source: https://www.indiatvnews.com/brand-content/understanding-the-national-pension-scheme-a-beginner-guide-599579 It covers Returns and Risks of the NPS, Withdrawals are not allowed until the age of 60, No assurance on returns Withdrawal and Taxation, (d)Tax on returns:

Compensation for the “Exponential” (couldn’t resist using the word) Daily Risk and Hazards

What about the Disability Pension which is tax free by an order of the Govt and the exemption from tax for gallantry award winners & families of award winners under Sec 10 (18) of the Income Tax Act? Would that be factored into a new avatar of the National Pension Scheme for Defence? (source: https://www.taxworry.com/3-types-pension-armed-forces-completely-tax-free/ ]

Or would some brain in DMA decide that this too be given in even more graded fashion than the Broad banding of Disability Benefits upheld by the hon’ble Supreme Court in many cases?

In Conclusion

Perhaps this is too stout a defence of OROP and of status quo i.e. not switching over to NPS because of the so called “OROP” virus spreading the contagion of increasing Defence Pension Budgets. But it is also fact based, enabling readers to verify the validity of the defences and draw an independent conclusion.

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27 thoughts on “Defence Pensions – The Other Side of the Picture

  1. A good defence for OROP, but with many faulty assumptions and incorrect use of data. But arguments apart, all others except def have moved to a more sustainable NPS. Till all employees under non-NPS exit, the civil pension bill will also continue to rise. However, NPS has plugged any further expansion of civil non-NPS pension base. No such measures have been taken for def services. May be a modified NPS, where only Govt contributes and guarantees a min pension of the rank and length of service to def personnel, be the answer. It will not only assure current pension to def pers, but will bring down def pension bill for good.

  2. Actually it would be better for the govt. to simplify the pension procedures. The following method may be considered.
    1. All civilian employees must be put into the NPS.
    2. The govt. should fix a ratio of one time payment to all retiring personnel at the rate something like 1.5 months last drawn salary for every year of completed service and transfer the amount to a fund like the NPS or pay the amount to the person right away depending on his/her choice.
    3, The above method would ensure that the load and complications arising of pension payments over extended time frames will be restricted only to special categories like war wounded, etc. Family pension headaches too would be subsumed in this one time payment and the person can invest the amount received in the best way possible to get maximum returns or leave it in the fund which will invest the amount sensibly and pay the pensioner a monthly amount like a pension.

    This of course is only one possible way of looking for a solution. Sustained long term payments are subject to several variables and will result in more complications arising over time.To avoid all this there is a need to look for simple,easily manageable and lasting solutions to problems.

  3. Dear Airmarshal Sir,

    All this documentations and the Govt’s stand appears tome reversal or diluting/ ignoring the plight of retired officers who completed pensionable service and retired in Feb 1979.

    I am a retiree in GD Branch ( Navigator, who competed ver 25 years of pensionabe service in Feb 79. At the interim relief we were that this pension is based on the pensions before 2006 whose pension will be reviewed every 5 years starting 2014. So I waited to be brought with officers of my rank who retired after 2006,
    Nothing has happened till now and I am forced to accept no parity with those now can retire after 16 years with pension applicable with those retiring after 2006. Was the designation Of OROP Not applicable to us. such undecided or inapplicable review will remain with my death( I am approaching 85 years) and affect even my wife’s family pension same way???

  4. While the author has brought out certain aspects of budget /finances , the article is short of projecting a wholistic picture of the Pension & Salary Burden on the state.
    1. 40 % of those drawing pensions from Defence budget are civilians.
    2. 90% of pension & salary is paid to civilian govt employees.
    3. There has been no talk of reducing the pension burden caused by OROP being drawn by any other organisation, but the Armed Forces have suddenly become a Burden?! Not the CAPFs
    Such articles are seen to be biased and perhaps influenced by the Govt .The ill effects will manifest years from now and damage done will cost the Nation dearly.

  5. PM Modi is delivering sweet lecture to defense folks but cleverly stabing them behind. Cutting down pension and work age. Cutting down the size of military band, officer’s mess and ration etc. In single word all military expsnces will be curtailed to a tiny one.
    PM Modi is a uglyest circus clown and tyrant person. Modi always speak fake propaganda and all his promises are purely publicity stunt. He always speak fake and lies. PM Modi is a great lier and love to speak fake propaganda and false promises.
    BJP Gov and PM Modi are stabing civilization and military too. But BJP ministers leaders and PM Modi are enjoying much on public exchequer.
    When India is in hunger index in 94 and 990 million people of India are in poverty, unemployed, homeless and living in slum, Modi was ordered two super class aircraft Boeing 777 for retrofit in Boeing company in Dallas by spending 90 thousand crores of rupees.
    How clever Modi Gov and his Gov and PM Modi himself transforming India into a bagger country.
    Very sad indeed. We believe, people of India must and positively kick out BJP in next general election in 2024.

  6. I wish, Air Marshal Savur had used much larger range of
    pension data, then his deductions would have been different.
    His data is limited to just 5 years. He has omitted 2020-21 figures also.
    I have excel sheet covering Pension Budget from 2003-04 to 2020-21 (18 years).
    Unfortunately, I can not upload for everyone to peruse. Not only that
    he has used Budget estimates except for 2015-16. The
    Deductions would be different in case Actuals were used,
    available on Union Budget website, not on openbudgetindia.org.
    I can share my data with him, and request him to comment on the
    growth of pension / OROP effect.

  7. Read in news papers, supreme court’s judges & top IAS officials are tried to get the equalant benefits but it failed, so they wanted to destroy the total scheme which is so benefits the ordinary soldiers likee. Astonishing thing is, The CDS is the great, become a main gun to fire against OROP.
    Hope that the CDS is going to parliament as MP like sc judges.
    Our Air Marshal has very good direction to lead and win.
    Thanking you.
    Ex. Cpl. Rajasekar

  8. Sir,
    You are the only services senior officer to use brainand takes pains to understand the subject before hitting the keyboard. There are scores of self styled experts who don’t understand head and tail of the matter. Unfortunately most of them excel in abusing Generals, Politicians and Babus and get cheap thrills when equally ignorant followers clap for them. JM is a circus refusing to die. Truely a sad state of affairs.

  9. Armd forces is the first and foremost. Budget pension facility Csd all must b stay including orop. This is armd Right. Fighting from enemy and save from country in ground armd. If cut pension the cut MLA facility political leader banking airlines. But must not b cut pension of armd and not increase service age PMR.

  10. This nation was made a shelter home and welfare state for all chamche and foj of all impotent people by the then Govt of Congress. What ever he (Modi Govt) is doing was essentially required for the nation to remain with its existence of its rich cultural heritage, if it was not done, we would have certainly lost our identity . Congress has dented the culture of this great nation more than what Muslims and Christians (British) couldn’t do.

    Long live Modi Govt.

  11. This is quite a complex reasoning you have worked out will every individual be able to understand it I doubt. Had this been a bit simple and more easy to grasp it would have been better anyways this brings out a more information and makes all of us to a more understanding why this delay in its disbusment I think the delay is dissapointing and making more frustrating mentally. Thanks for the whole workout .

  12. THE GOVT IS NOT INCREASING PENSION OF COAL INDIA EMPLOYEES WHO ARE GETTING LOWEST FIXED PENSION WITHOUT ANY DA FOR WHOLE LIFE. THIS SPEAKS ABOUT JUNGLE RAJ OF MODI GOVT WHICH IS NOT GIVING ATTENTION TO CIL EMPLOYEES. A CMD RANK OF OFFICIAL IS GETTING PENSION OF RS2000/- TO RS 3000/- PER MONTH. BUT NO ACTION IS TAKEN SINCE LAST TWO DECADES. THE GOVT SHOULD FREEZE ALL WAGES & FRINGE BENEFITS OF ALL GOVT EMPLOYEES & LEGISLATURES AT PAR WITH CIL EMPLOYEES.

  13. in 1986 pension was fixed as half of the maximum pay for those having completed 28 years of service since there was weightage of 5 years.It means those served 28 years and more were entitled same pension. It is not inderstood whose mind created pension different pension rTe for different years of servvice beyond 28 years

  14. A complex subject, wonderfully researched and attempted to be explained as simplistically as possible. Kudos to you, Sir! I hope guys at DMA grab this lifeline explanation and rid themselves of the OROP phobia.

  15. PM Modi has promised OROP. He should uphold on to his promise. If not he should discus with the stake holders and arrive at a solution acceptable by the Armed forces. A PM should not go back on his promise but stand firmly to deliver on his promise otherwise he would loose his credibility.
    Otherwise let him come out openly and state that OROP is not possible and publically offer an apology to the Armed Forces.

  16. In a poor country like India huge salary and huge pension as cited above will make the country even more poor. All pay commission should first factor per capita income as bench mark and then only decide the pay otherwise Government servants will be like in category of British Babu and common poor public would be like Indians of colonial era.

  17. Also isn’t the DPB directly proportional to the Current salaries of govt employees. If the govt is unable to afford the pensions then why are they affording the salaries. Aren’t both inter related? Why only focus on Pensions. The pay commission should have forseen this right in 2006 when they took the quantum leap. Targeting only the pensioners for the current woes is unjust, unfair and vindictive.

  18. This covers most of the queries /doubts. I am positive all officers & ranks gets satisfied with these clarifications & do not follow few who are bent upon spoiling the happiness without understanding the concept. Also there is no need to go to the courts if you have understood this .
    Thanks Air Marshal S Y Savur.

  19. Dear Sharad,
    This article by you,explains in simple language how complex the whole pension scheme of our defence services is.I thank you for taking the trouble .Remarkable job done by you.Even shri Harish Salve would find it a breeze to push our case through( I know that we can’t afford him!!).
    Thanks
    Raghu Rajan

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