JOIN USPension politics: Gehlot has lit a fuse under the Modi regime
Rajasthan Chief Minister Ashok Gehlot has set the cat amongst the pigeons by announcing the restoration of the Old Pension Scheme (OPS) for state government employees. The demand for the restoration of the OPS could become a major headache for the Modi government in the run-up to the 2024 general elections. Implementing the OPS in the Congress-ruled states and leading agitations for it in the Bharatiya Janata Party (BJP) ruled states could provide a platform for the party to revive itself.
Gehlot’s announcement on the day of the fourth phase of polling in Uttar Pradesh might even impact the polls in this politically significant state. It was already an issue in Samajwadi Party (SP) chief Akhilesh Yadav’s campaign agenda. Yadav promised to revert to the OPS, claiming that he had already consulted financial experts on creating a corpus fund for implementing it. The Rajasthan announcement underlines that it is a doable measure instead of leaving government pensioners to the vagaries of the stock market.
The issue reverberates in the UP elections because there are 11 to 13 lakh state government employees in the state who will benefit from the OPS. Although it is difficult to predict the impact on polling, apart from state government employees, teachers and unemployed youth eagerly looking forward to government jobs, could veer towards the SP, breaking with religious and caste mobilisation.
Incumbent Chief Minister Yogi Adityanath has not engaged with the state government employees’ and teachers’ unions who have been agitating for reverting to the OPS. Nor has he been able to give a convincing answer to counter the SP’s promise, other than blaming Mulayam Singh Yadav for implementing the New Pension Scheme (NPS) when he was in power.
Most state and central government employees feel that the OPS gave them far better social security than the NPS, which was introduced by the Centre in 2004 and came into effect from April 1, 2005. Under the OPS, an assured pension plus various allowances, buffering them from inflation, is preferred over NPS, which is market dependent and therefore, introduces uncertainties in their post-retirement incomes.
Under the OPS, retired employees receive a defined amount of pension calculated as 50 per cent of their last drawn salary plus frequent hikes and benefits depending on the rate of inflation—in effect, an assured income that is not dependent on their contribution to their pension during their period of service. If there are periodic salary revisions across the board because of the recommendations of a Pay Commission, then the benefits also accrue to government pensioners proportionately.
The Central government gives pension under the OPS to only the army personnel. Every other government employee who joined the service after 2004 has had no option but to opt for the NPS. Under the NPS, one’s pension would depend on the corpus saved by the employee at the time of retirement and will be subject to the volatility of the market, impacting the value of their pension investment. There is no protection against inflation, nor any revisions in the pension rate linked to the Pay Commission’s recommendations.
The Vajpayee government, which introduced the “fixed contribution” NPS, had taken the decision arguing that India’s implicit pension debt because of government employees at the Centre and the states was becoming unmanageable and unsustainable. While the OPS was limited to only the Central and state government employees, the contributory NPS was in principle open to all.
The government will be in a fix if the demand for reverting to the OPS were to catch on. Government expenditure has exploded over time – and this may be one of the reasons why there is no eagerness to fill nearly eight lakh job vacancies in the Central government (as Congress leader P Chidambaram pointed out in Parliament). The debt burden of the state governments had risen from 26.3 per cent of the GDP in 2019-20 to 31.2 per cent in 2021-22 (budget estimate). The GST compensation cess paid to the states by the Centre will also end in its present form this year. States, therefore, may have to find innovative ways to implement the OPS if their pension expenditure, estimated at Rs 3.86 lakh crore in 2020-21, is not to shoot up further.
The Modi government and state governments will be in a tough spot if there is concerted demand by its employees to revert to the OPS. Any agitation on the OPS may never reach the intensity of the farmers’ agitation over the three controversial farm laws but is likely to be more decentralised with small fires being lit across the country. Up to now, the bureaucracy has been extremely favourable to the Modi regime. But the OPS issue has the potential to turn it against the government.
The Congress party has described the OPS issue as a “game-changer” and demanded that the Centre and the states ruled by the BJP bring it back. There are reports that the Congress government in Chhattisgarh may be contemplating the restoration of the OPS. In Punjab, the previous Congress government had promised to revert to the OPS but did not act on it. Should the party be in a position to form a government after March 10, it would come under renewed pressure to implement it. The Bahujan Samaj Party has also backed reverting to the OPS. As the measure is popular and populist, other opposition parties could also take it up.
The political impact of the demand for restoration of the OPS may not be felt acutely in elections as voting is, to a large extent, still socially driven. However, the revival of the OPS as a political issue has the potential of being used by the Congress to revive itself through agitations demanding its implementation in the BJP-ruled states. And should the anti-BJP opposition parties implement it in the states where they are in power, they can make life difficult for the Modi regime in the run-up to the 2024 general election.
(Bharat Bhushan is a journalist based in Delhi.)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.
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