New Delhi: The February 1 interim budget is likely to present a status report on the National Pension System (NPS), said people aware of the matter. The group headed by finance secretary TV Somanathan that’s reviewing the scheme is likely to submit its report by the end of this month, they said.
The panel has considered some tweaks and guarantees in the discussions that have been held, but it’s not in favour of adding to the fiscal burden or going back to the old pension scheme, said the people cited above. The Centre may seek public consultations before taking any action.
“The fine print is being worked out,” one of the officials told ET. The report will focus on how to improve the NPS, taking into consideration the worries of a section of pensioners in comparison with the old pension scheme (OPS).
“The report will not be prescriptive and any changes, if at all required, will be weighed against the fiscal impact and it will be then put for the public consultation,” the official added.
The Centre had set up the panel in April last year to look into the issue of pensions under the NPS for government employees. The committee was asked to suggest measures to improve NPS pension benefits while keeping in mind fiscal considerations.
The NPS has been implemented for all employees joining the central government on or after January 1, 2004, except those in the armed forces. According to the Pension Fund Regulatory and Development Authority (PFRDA), all state governments, except Tamil Nadu and West Bengal, have notified and implemented the NPS for employees.
Debate over the NPS sharpened last year after Congress-ruled states such as Rajasthan, Chhattisgarh and Himachal Pradesh decided to go back to the old defined benefit system, which offered government employees 50% of their last-drawn salary as monthly pension. In contrast, the NPS is a defined contribution scheme through which an employee accumulates a corpus for retirement. Rajasthan and Chhattisgarh have since got BJP governments.
The opposition has said that state government employees cannot be left at the mercy of the equity market in which NPS funds are invested. The states that brought back the OPS had also asked for a refund of the corpus accumulated under the NPS. The Centre rejected this, saying it’s not possible under the existing law.
The Centre has argued that the old pension scheme is not fiscally sustainable as the burden on the exchequer keeps mounting, the reason it was discontinued.
The Reserve Bank of India (RBI) and several economists have opposed restoration of the OPS. They argue that such a move will upset the fiscal balance of the states.
The government told the Rajya Sabha last month that there was no proposal under consideration for the restoration of the OPS in respect of central government employees.
