Days after the Reserve Bank of India sounded a note of caution on reversion to the Old Pension Scheme as announced by some states, the Punjab Government has constituted a five-member sub-committee for formulating the Standard Operating Procedures (SoPs) for implementing the Old Pension Scheme in the state.

The committee, chaired by the state Chief Secretary Vijay Kumar Janjua, comprises KAP Sinha, Ajoy Kumar Sinha, Abhinav Trikha, and Punjab State Power Corporation Limited’s Director (Finance) as members.

The committee has been asked to present its recommendations — regarding how the old pension can be restored and what benefits the employees will get from the same — to the Cabinet Sub-Committee for consideration.

Notably, the Punjab Government, on November 18 last year, had issued a notification regarding implementation of the OPS for the State Government employees, who are presently being covered under the National Pension System (NPS). Interestingly, Punjab was among the first states in the country to adopt the 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 NPS, who joined service after 2004. Already, 1.26 lakh employees are covered under the old pension scheme.

Other than Punjab, the governments of Rajasthan, Chhattisgarh, and Jharkhand also decided to restart the OPS for their employees, with the Congress-ruled Himachal Pradesh being the latest one.

In 2004, the Union Government came out with the NPS, a defined contribution pension scheme replacing the old pension scheme. Under the old pension scheme, employees get a defined pension. Under this, an employee is entitled for a 50 per cent amount of the last drawn salary as pension. However, the pension amount is contributory under the NPS.

Cautioning the states, the RBI — in its recent report titled ‘State Finances: A Study of Budgets of 2022-23’, had observed that reverting to OPS poses a major risk on the “subnational fiscal horizon” and would result in accumulation of unfunded liabilities in the coming years for them by postponing the current expenses to the future.

Several economists too have expressed their concern over reverting to the OPS saying that it would put stress on states' finances.

The panel has been constituted at a time when a section of employees unions, under the banner of Old Pension Receipt Front, have been staging protests and dharnas against the non-implementation of the government’s decision to bring back the old pension scheme in Punjab.

The employees argued that the Punjab Government’s notification regarding the implementation of the old pension “is proving to be just a political statement”. They also pointed that the Central Government is also continuously campaigning against the restoration of old pension scheme.

The protestors have also planned to hold a state-level protest march to the residence of BJP leader and Union Minister of State Som Prakash in Phagwara on January 29.

Punjab’s 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.

In case of Punjab, the required amount to revert to OPS is nearly Rs 18,000 crore — a major hurdle in smooth implementation of the scheme, especially with the PFRDA having already refused to refund the money to Rajasthan and Chhattisgarh governments.

BOX:  What is Old Pension Scheme

·         Under OPS, entire pension amount to a govt employee is paid by the Govt after retirement

·         Pension amount is not deducted from employees’ salary during the period of employment

·         OPS was discontinued by NDA Govt in 2004, introducing the National Pension System

·         Under OPS, retired govt employee used to get benefit of revision of Dearness Relief (DR), twice a year

·         About 50 per cent of last drawn salary was provided as pension under OPS

·         Only govt employees were eligible for receiving a pension under OPS after retirement

·         There’s a provision of General Provident Fund (GPF), which is available only for all govt employees in India, under which all govt employees can contribute a certain percentage of their salary to the GPF