Alarmed after the Punjab Government employees announced to hold “pol-khol rally” in the poll-bound Gujarat where the Aam Aadmi Party (AAP) is working overtime to make inroads, the Punjab Cabinet on Friday approved the restoration of the Old Pension Scheme (OPS) in the state. Reverting to the old pension scheme is the government employees’ long pending demand, and AAP’s major pre-poll promise in Gujarat and also in Himachal Pradesh where the election was held on November 12.
“OPS has been approved by the Cabinet today. Its implementation will bring huge benefits to the employees. Notification of OPS has been done,” said Chief Minister Bhagwant Mann, while addressing the media at the Punjab Civil Secretariat after the meeting.
Notably, Bhagwant Mann, ahead of Diwali, had announced reverting to Old Pension Scheme (OPS). The announcement was made ahead of the assembly polls in the neighboring hill state — Himachal Pradesh — after the state’s agitating employees threatened to hold a series of poll-khol rallies across the State against the AAP which was promising OPS as its poll guarantee. However, AAP Government failed to implement the same during this period.
Peeved over the AAP Government’s lackadaisical attitude in fulfilling its commitment even after a month of the announcement, the state’s employees had once again announced to hold a similar “poll-khol” rally in the poll-bound Gujarat, where stakes are high for AAP.
Running the campaign against the AAP-led Punjab Government, the members of Punjab’s Contributory Pension Fund Employees’ Union (CPFEU), days ago, announced to visit Ahmedabad to expose AAP to the people of Gujarat.
With the implementation of the OPS in the state, Punjab will be the fourth state after Rajasthan and Chhattisgarh — both Congress-ruled states, and Jharkhand — a non-BJP-ruled state. Interestingly, Punjab was among the first states in the country to adopt the New Pension Scheme (NPS), which got implemented on April 1, 2004.
An in-principle approval to implement OPS in Punjab had already been given by the State Cabinet on October 21.
Once implemented, the scheme will directly benefit more than 1.75 lakh government employees, currently covered under the National Pension Scheme (NPS), who joined the service after 2004. Already, 1.26 lakh employees are covered under the old pension scheme.
Announcing the decision, Chief Minister Bhagwant Mann said that the objective of this scheme is to secure the future of government employees and to recognize their immense contribution towards the State.
“To ensure that the scheme, being introduced, is financially sustainable for the exchequer in future also, the State Government will be contributing proactively towards the creation of a pension corpus which will service the pension in future to the beneficiaries of the scheme,” he said, adding that the scheme is expected to benefit more than 4,100 employees in the next five years alone.
Mann informed that initially, the contribution towards the pension corpus will be Rs 1,000 crore per annum and will gradually increase in the future.
In addition to this, the current accumulated corpus with NPS is Rs 16,746 crore for which the State Government will request the Central Government’s Pension Fund Regulatory and Development Authority (PFRDA) to refund this amount for effective utilization at its end.
“The Cabinet reiterated its firm commitment that the scheme will be made self-sustainable from the resources available with the exchequer,” said the government spokesperson, adding that under no circumstance, the future of employees will be jeopardized.
The major challenge ahead of the cash-starved state is a deposit of nearly Rs 18,000 crore to the pension fund authorities. It has been learnt that the state Finance Department has been working overtime to claim the same, besides taking a legal view in the matter.
Under the OPS, the employees pay 10 percent of their salary to the contributory pension fund, and the Government pays 14 percent. The collected amount is then deposited with the Pension Fund Regulatory and Development Authority (PFRDA).
In the case of Punjab, the required amount to revert to OPS is nearly Rs 18,000 crore — a major hurdle in the smooth implementation of the scheme, especially with the PFRDA having already refused to refund the money to Rajasthan and Chhattisgarh governments.
Union Finance Minister Nirmala Sitharaman had, while recently campaigning in Himachal, had stated that the money in the National Pension System (NPS) belonged to individual contributors as per law and that the State Governments could not avail it.
BOX: What is the Old Pension Scheme?
The Old Pension Scheme or OPS is a post-retirement benefit for government sector employees that assured a definite amount to be paid to the employee after his superannuation. It is also known as the ‘Defined Benefit Scheme’. Under the OPS, government employees are guaranteed an amount that is 50 percent of their basic salary. The entire amount under OPS was paid by the Government. The scheme was discontinued as it was considered a financial liability for the government without any source to derive income from the corpus collected as savings of the government employee.
What is New Pension Scheme (NPS)
NPS is common for all salaried and non-salaried persons across the country. Anyone can subscribe to this scheme. The difference is that in OPS, the government used to provide a fixed amount; while in NPS, the market has a role to play as the amounts are invested. The amount investors get as the annuity is less than what is given in OPS. In this scheme, the employee has to contribute 10 percent of his salary and the employer makes an equal contribution.
