Restoration of old pension scheme to further burden Punjab

Chandigarh, October 21

The decision of the cash-starved Bhagwant Mann-led AAP government to restore the old pension scheme for the employees recruited after 2004 is set to further financially burden the state exchequer. Nearly 1.75 lakh employees stand to benefit from this decision.

Annual pension bill touches Rs 11K cr

• The state’s annual expenses on pension is touching Rs 11K cr
• The debt stands at Rs 2.63L cr during the current FY
• The power subsidy bill of the state is likely to cross Rs 20K cr

Funding issue to be resolved with centre

Before the implementation of the old pension scheme, the issue of funds under the new pension scheme has to be sorted out by the state govt with the Centre. Sources

The old pension scheme was discontinued 19 years ago on April 1, 2004, and replaced with the National Pension Scheme.

Political analysts point out that the old pension scheme had been announced keeping in mind the election-bound states of Himachal Pradesh and then Gujarat.

The burden of the pension scheme will not have to be borne by the present government. Since it is for the employees recruited after 2004, the impact on the state exchequer will be visible only around 2030.

“Before the implementation of the old pension scheme, the issue of funds (employees contributing 10 per cent of their salary towards the pension with the state government contributing 14 per cent) under the new pension scheme deposited with the PFRDA has to be sorted out by the state government with the Centre,” sources in the government said.

The annual state’s expenses on pension is touching Rs 11,000 crore.

“Though the exact calculations have not been made, the restoration of the scheme will further burden the state. The state’s debt stands at Rs 2.63 lakh crore during the current financial year and is growing. The power subsidy bill of the state is likely to cross Rs 20,000 crore,” the sources said.

On being asked about the financial implications, Principal Secretary (Finance), AK Sinha said: “Around 1.75 lakh state government employees will benefit from the decision. As far as burden is concerned, the individual departments have worked on it, but the exact data is not with me at the moment.”

At present, 1,700 pensioners draw pensions under the old scheme. Since the NPS is a defined contribution plan, there is no doubt that the guaranteed payout feature in the old scheme is appealing to the employees.

Officials in the Finance Department said under the old pension regime, pension was 50 per cent of the last drawn salary of the employee and the entire amount was paid by the government.