Centre's stand on NPS funds makes it tough for govt

KS TOMAR

Notwithstanding the union government’s clear stand not to refund the contribution of Rs 8,000 crore made by employees of Himachal  under New Pension Scheme (NPS) from the date of abolition of Old Pension scheme (OPS) by the NDA government on April 1, 2004, the Congress government in Himachal was determined to fulfil its main election promise to restore the OPS. The state Cabinet approved the implementation of the OPS w.e.f April 1, 2023 in its Friday meeting which will pave the way for allocation of Rs 1000 crore or more in the budgetary proposals for 2023-24.

No provision to return contribution

• Union minister of state for finance had recently clarified in Parliament that there is no provision to return the employees’ contributions along with accruals made under the NPS which has been conveyed by Centre/Pension Fund Regulatory and Development Authority (PFRDA) to the respective state governments and it will be applicable to Himachal also.
• Due to Centre’s refusal to accept the OPS, the Himachal government will have to struggle to get back Rs 8,000 crore contributed by state employees in the NPS.

New Sukhu government had earlier approved the OPS in its first Cabinet meeting held on January 13 after storming to power in November elections.  As per rules, employees will not be required to contribute to the lifelong OPS where 10 per cent is being deducted from their salaries under the NPS of the Centre and 14 per cent share comes from the state government. Due to the advantages of the OPS, employees had gone on the warpath against the previous government and contributed to the defeat of the BJP in the recent Assembly polls.

The previous Jai Ram government had rejected employees’ OPS demand outright and hence the BJP paid heavily in the elections which was the repeat of 1993 when Shanta Kumar government was ousted owing to the anger of employees. The former Chief Minister had crushed the 41-day agitation of the employees who had revolted against his government on the principle of ‘No work no pay’.

In view of the negative implications of the OPS on the fiscal health of states, the union government has refused to permit BJP-ruled states to replace the NPS by the OPS.  Union minister of state for finance Bhagwat Kisanrao Karad recently clarified in Parliament that there is no provision to return the employees’ contributions along with accruals made under the NPS which has been conveyed by Centre/Pension Fund Regulatory and Development Authority (PFRDA) to the respective state governments and it will be applicable to Himachal also.

Due to Centre’s refusal to accept the OPS, the Himachal government will have to struggle to get back Rs 8,000 crore contributed by state employees in the NPS during the past 19 years. Legal experts say that employees and the state government will be within their constitutional right to approach the Supreme Court to get back their contribution from the Centre.

The BJP in Himachal was in a belligerent mood hence its leaders were busy in making hue and cry over the capability and efficiency of Chief Minister Sukhvinder Singh Sukhu to fulfil Congress party’s number one guarantee to employees to restore OPS as the state is reeling under the debt liabilities of over Rs 74,000 crores. But the CM has silenced them as the OPS has been taken to its logical end which resulted in a huge celebrations amongst the 1.36 lakh employees in the state.

Experts say that the state government is within its constitutional right to restore OPS but it will have to bear the burden as the Centre will not give any financial assistance to the debt-ridden state. Experts say that the OPS is a pension-oriented scheme which offers a regular lifelong pension amount to employees after retirement and a 100 per cent contribution is made by the government. The pension amount is 50 per cent of the last drawn salary drawn by the employee which ensures permanent financial safety to the families even after demise of the beneficiaries.

Economists are opposed to the OPS as it adds to liabilities of the states and it is fiscally unsustainable owing to its demographic transition which can always lead to fiscal disaster in future.

(Writer is senior scribe based in Shimla)