Anomalies ail defence pension system

Amit Cowshish & Rahul Bedi

Amit Cowshish, Ex-Financial Adviser, acquisition, MoD & Rahul Bedi Senior Journalist

THE harsh reality of the military pension structure is that few among the retirees and in the government really understand its complexity in totality. Recurring changes in pension configuration have resulted in such complex anomalies that implementing every new decision poses fresh, and at times, insurmountable challenges.

Consequently, the three pension sanctioning offices of the Defence Accounts Department (DAD) in Prayagraj, Mumbai and New Delhi have been braving the ire of thousands of military pensioners nationwide. And even though the DAD is neither responsible for policy decisions nor for the disbursement of monthly pensions to about 85% of the pensioners, it remains the retirees’ whipping boy.

One of the foremost incongruities regarding military pensions concerns civilian employees retiring from varied defence departments. For years, military pensioners have been railing against their civilian colleagues for cornering a substantial part of — and needlessly inflating — the fast-burgeoning defence pension budget that has escalated 585 times from Rs 228.52 crore in 1980-81 to Rs 1,33,825 crore in 2020-21.

While some of these ‘defence civilian pensioners’ have retired from establishments like workshops, depots and dockyards headed by military personnel, others have superannuated from ordnance factories and the Defence Research and Development Organisation. They have been clubbed with military pensioners because their salaries emanated from the services’ revenue budget whilst in service.

Other civilians, like those retiring from Ministry of Defence (MoD)-administered organisations like the Indian Coast Guard and the Defence Accounts Department, receive their pensions from a separate budget managed by the Ministry of Finance (MoF).

Successive governments’ inexplicable failure to maintain separate accounts of expenditure on military and defence civilian pensioners, however, has given rise to self-serving distortion of data on the latter. This, in turn, has buttressed outrageous arguments, frequently voiced on social media, that the latter are an ‘extortionate’ drain on overall defence pensions.

Many service personnel argue that this perceived anomaly can be resolved by simply shifting the civilian pension liability to the MoF-managed pension budget. But in reality, it makes little or no difference which budget these pensioners get paid from, as the money emanates from a common source: the Consolidated Fund of India. Therefore, shifting the liability from the MoD’s pension budget to that of the MoF’s will simply lead to the annual allocations being similarly adjusted in merely a deft accounting manoeuvre.

Several defence analysts and service personnel also speciously maintain that there is little need to employ so many civilians in military establishments, and that many of the jobs they presently perform can either be dispensed with, or better performed by uniformed personnel. If so, this culling should have been executed long ago, even though all three services had previously demanded an increase in their respective civilian and military manpower, paradoxically at odds with their enduring objections regarding pension payments.

In December 2016, the MoD-appointed Committee of Experts headed by Lt Gen DB Shekatkar (retd) for enhancing combat capability and rebalancing the armed forces’ expenditure had recommended the restructuring of the civilian workforce of the Military Engineer Services (MES) by managing their tasks via departmentally employed staff and by outsourcing.

This resulted in a cosmetic abolition of 9,304 MES civilian posts out of a total of 13,157 positions that were lying vacant, indicating that the entire work could be managed by the remaining 3,853 personnel. That is, indeed commendable, but nothing has been heard of since about abolishing posts in other defence departments, outsourcing work, or adoption of a government-owned-contractor-operated (GOCO) model for managing military workshops, depots and dockyards. Hence, in an ironic move reminiscent of ‘ghost’ jobs in numerous civilian sectors, all that the MoDs fiscal measures achieved was the termination of some 9,000 jobs that simply did not exist.

Such superficial steps focused on defence civilians can in no way resolve the problem of rising defence pension budgets. In any case, in time, retired civilian pensioners will cease to be a burden on the state exchequer, following the discontinuance of assured pensions for all civilian employees, including those in defence, paramilitary and police departments recruited on or after January 1, 2004, and they all mandatorily migrate to a market-driven New Pension Scheme (NPS).

Pensions for the uniformed personnel will, however, continue as before.

Therefore, the problem of a rising defence pension budget can only be resolved by focusing directly on military pensions and striking a balance between the government’s financial constraints, service personnel’s interests and overall financial practicality.

Sporadic military pension reforms that do not satisfy the pensioners and ill-conceived ideas of limiting the entitlement of one or the other of their categories that are routinely struck down by the courts are also of no help. The recent concept mooted by the Department of Military Affairs (DMA) to introduce a system of graded pensions, with only those retiring with at least 35 years of service being entitled to full pension, is a prime example of such an approach. This idea is inherently impractical, not only because of its impact on military morale, but also its legality.

Successive court judgments have held pension to be a legal right which a pensioner cannot be deprived of, even in part, except in accordance with the authority of law. It may not be easy to give a legal veneer to the CDS-proposed graded pension scheme and to successfully defend it in court, a challenge it is almost definite to face, even if sanctified through executive fiat. Besides, pursuing such a strategy, too, is unlikely to resolve any outstanding problem.

Pension is a basic right for services rendered. The amount payable or the quantum of periodic increase can neither be determined by the beneficiaries nor claimed self-righteously as a matter of right with disregard for overall financial implications.

More importantly, it is beyond the vast capability of information technology professionals to develop software programmes to capture, coordinate and administer all pension-related data, some of which may not even be available in existing records. The inbuilt anomalies in the complex system, too, are self-defeating for any credible software to competently manage pension payments that remain a riddle within an enigma.

Accordingly, a dispassionate approach is necessary to oversee the burgeoning pension confusion. It could possibly include adopting a scheme along NPS lines, customised for retiring defence personnel in keeping with systems prevalent in militaries abroad.

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