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?
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.