Recipe for bankruptcy

With the newly elected Congress government restoring the old pension scheme (OPS), Himachal Pradesh has become the fourth state — after Rajasthan, Chhattisgarh and Punjab — to go down this not only financially imprudent path but also one that is likely to hit insurmountable hurdles. Like in other cash-strapped states, the ruling party in HP has failed to spell out how it will foot the additional bill of

Rs 800 crore per year for pensioners despite running a Rs 70,000-crore debt.

The Congress’s experience of May 2022, when it tried to get the OPS restored in Rajasthan by dipping into the funds contributed for the National Pension System (NPS), should have made it circumspect about the matter. The Pension Fund Regulatory and Development Authority had rejected the state’s request to withdraw Rs 39,000 crore accrued under the new pension scheme since 2004. Similarly, the AAP government in Punjab is nowhere near making the promised shift happen. Notably, citing the ‘rising and unsustainable pension bill’, the Union Government, in reply to a query in the Lok Sabha in July 2019, had ruled out the reintroduction of the OPS. It had claimed that the firm stand also helped the Centre free up more funds for development works.

Rather than making a hollow populist promise to garner votes, political leaders should pay heed to experts, including former Planning Commission Deputy Chairman Montek Singh Ahluwalia, who has warned that moving to the OPS is ‘a recipe for financial bankruptcy.’ Driven by contributions from employees, the NPS aims to rid the government of its ballooning pension liabilities. Plus, being open to the private sector, too, it provides for a more equitable and fair distribution of funds among all retired employees, and, thereby, corrects the balance that is heavily tilted towards the minuscule proportion of staffers in the government sector. Social and old age security, as seen worldwide, has arisen largely from similar schemes funded by the working class. It’s time for private sector workers to collectively oppose efforts by one section to gobble up disproportionately huge chunks of government money.