The Department of Military Affairs headed by Chief of Defence Staff Gen. Bipin Rawat is working on a new proposal to increase the retirement age of officers, besides Junior Commissioned Officers and Other Ranks from selected streams. Gen. Rawat is also proposing a new pension policy for those taking Pre-Mature Release (PMR), which seeks to dissuade officers from leaving the force in their prime.
His move has drawn a sharp reaction from serving officers and the veterans.
Majority of those who take PMR are from specialised fields who have been trained on the job. They end up leaving the force and taking up jobs in the private sector, which is actually a loss for the Services — Army, Navy or Air Force — that invest heavily in them.
However this does not mean that one changes the rule of the game suddenly. I don’t see a reason why the Army would want to forcibly keep someone against his/her wish. Most of those who take PMR are those whose career is not progressing in the pyramidal structure of promotion in the armed forces or are disgruntled.
Rather than forcing them to stay back, the Services should work on ensuring that it remains attractive for them to stay on.
The real aim of Gen. Rawat, however, is to ensure that the pension bill of the armed forces is reduced. Whatever one may say about Gen. Rawat’s way of functioning and his proposal, the truth is that the booming defence pension bill harms the military capability and it needs to be tamed.
Steady rise in pension bills
Out of a total outlay of Rs 30.42 lakh crore in Union Budget 2020-21, Rs 4.71 lakh crore has been earmarked for defence, including pensions. This defence budget hence is about 15.5 per cent of the central government’s entire expenditure plan.
The fine print is a shocker. In the ongoing budget, the pensions, one of the biggest expenditure components of the defence ministry, stands at a whopping Rs 1.33 lakh crore — 13.6 per cent more from the revised estimates of Rs 1.17 lakh crore.
What is even more troubling is that the increase is higher than the hike given in revenue (which takes care of daily expenditure and salaries) and capital funds (modernisation and acquisition) for the forces.
And financial crunch is something that affects the capability of the armed forces. The Navy has been forced to scale back its plans of becoming a 200-ship strong force by 2027 because of a monetary crunch. It’s now aiming to be a 175-ship force. This comes at a time when China is investing heavily on its naval arm.
Even the IAF and the Army are feeling the pinch. The IAF needs new fighters to transport planes and mid-air refuellers, but has been forced to go slow due to cash crunch.
Research scholar Gary J. Schmitt, in his book A Hard Look at Hard Power, published by the US Army War College, writes that an “underperforming economy and the budgetary constraints have limited the Indian military’s expansionist capability”.
He also noted that the crisis afflicting Indian defence spending is mainly because the resources available for modernisation are being crowded out almost entirely by the “revenue expenditure” — costs that neither create assets nor reduce the government’s liabilities.
He added that almost 60 per cent of the defence budget is eaten up by pay and pensions, a testament to the steady increase in size of India’s personnel under arms over the last three decades — during which the 10 biggest defence spenders have done exactly the opposite.
Armed forces and the NPS
The New Pension Scheme (NPS) was introduced for all central government employees — from the IAS and the IPS to the lower clerical staff — in 2004. But the armed forces personnel were kept out of the scheme.
This was because the working condition of the armed forces personnel was different from the civilian workforce of the government. And hence they cannot be clubbed together.
However, the central armed police forces’ (CAPFs) personnel were included in the NPS, even when their work is way different from their civilian counterparts and they get postings in extreme terrain and climatic conditions.
The whole idea of the NPS, which is self contributory, was to bring down the pension cost of the government. And this is also the way forward to bring down the defence pension cost.
The Narendra Modi government needs to come out with a new National Pension Scheme for the armed forces, which gives them extra in comparison to the civilian workforce.
Lt Gen Prakash Menon and researcher Pranay Kotasthane have argued that moving incoming defence personnel to the NPS is perhaps a long-term solution to the rising defence pension bill. But they also say it is a myth that this shift is possible under the current political circumstances.
In fact, the political feasibility of such a move is extremely low, they say. However, this is where the government needs to step in and take some hard decisions.
Lateral entry into CAPFs
Another way to cut down pension costs is to ensure that lateral entry of the armed forces personnel needs to be ensured into the CAPFs, but not at the cost of the already slow-moving career of cadre officers.
Also, the government should try and bring in more defence personnel into government jobs. And once they are accommodated into a central government job, the pension should start only when they retire from the new job. Of course, the difference between the last salary drawn and the new one should be given as pension in case it is less.
In cases such as the Defence Security Corps (DSC), the personnel get a pension from even the new organisation after serving a minimum tenure as well as the earlier Service, thus drawing two pensions. This should be streamlined as well.
I am sure there are many ways to cut down pension costs. The Modi government and the armed forces need to come together and take some bitter decisions, which will work in the military’s favour in the longer run.
Views are personal.