State panel moots six pension plan options

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State panel moots six pension plan options

Renni Abraham, The Business Standard
September 29, 2003

A high-powered committee of state secretaries, in consultation with the Reserve Bank of India (RBI), has suggested six alternatives to replace the existing pension schemes of the Central and state governments.

The proposal seeks to reduce the financial load on the Union and state governments in the face of pension-related expenditure mounting to as much as 20 per cent of some state Budgets.

A senior official, who attended this meet, said: “The current scheme, if allowed to continue in its present form, would witness the annual pension expenditure of states reaching the same levels as the annual salary expenditure. States such as Kerala (Rs 600 crore pension expenditure per annum) are suffering the most because their current pension expenditure is as high as 20 per cent of the state’s annual Budget.”

The new proposals seek to delink the dearness allowance paid to a pensioner or at least maintain it at a controlled level in order to reduce the pension liability of the Union government and state governments.

These proposals also seek to put in place a contributory pension scheme to replace the existing pension scheme in force all over the country.

Close behind Kerela in high pension expenditure is Rajasthan and Tamil Nadu whose annual pension outgo is in the range of 15-20 per cent of their respective state Budgets.

Maharashtra , which has a large pension outgo of Rs 2,500 crore annually, finds this amount constituting 8.6 per cent of its annual Budget.

“However, even in Maharashtra if the current pension scheme continues in its present form, the pension expenditure curve and the salary expenditure curve’s will reach a matching point around 2010.

“However, steps taken by the state government such as imposing a ban on fresh recruitments have helped to keep the pension liability of the state staying within manageable levels,” the official said.