For the last few years, India’s defence budget has been hovering at around two per cent as a percentage of the GDP. Given the state of the economy and the conflicting requirements of development, this is unlikely to change soon. Keeping in view the urgent need to modernise the armed forces, military planners have been seized with the requirement of better management of the budget to find more money for capital expenditure. Hence, measures to reduce pension and salary bills, which account for nearly 50 per cent of the defence budget, have been an essential feature of defence reforms.
An obvious solution is to reduce/optimise the size of the armed forces, which is related to the perceived threats and the National Security Strategy. In absence of a comprehensive strategic review driven National Security Strategy, there has been a slew of proposals since 2018 for incremental reforms to reduce the pension and salary bill including reduction/optimisation of manpower, ‘three-year tour of duty’/short service engagement for soldiers, increase in percentage of short service commission officers, increase in retirement age and reduction in pension for premature retirees. These proposals have been analysed by the three Services and are being refined by the Department of Military Affairs for final decision by the new Chief of Defence Staff.
None of these proposals has been formally put in the public domain. The media latches on to ‘off-the-cuff’ remarks of the Chief of Defence Staff, Service Chiefs and other senior officers at seminars or during interactions. At times, the Department of Military Affairs (DMA) and service headquarters resort to inspired leaks using the media as a sounding board. This leads to a lot of speculation and controversy over contentious proposals.
One such controversial proposal is to increase the retirement age and reduce the pension entitlement for officers seeking premature retirement.
What the proposal was
The proposal first became public through media reports based on sources and an alleged internal noting of the Department of Military Affairs in November 2020. It sought to increase the age of Colonels, Brigadiers, Major Generals and equivalent from 54 (56 for the Navy), 56 and 58 years to 57, 58 and 59 years respectively. No change was proposed in the retirement age of Lieutenant Generals, which is 60 years. Retirement age of all Junior Commissioned Officers and other ranks and equivalent of technical, logistics and medical branches would be increased to 57. Currently, it varies from 42 years to 57 years.
To discourage officers from seeking premature retirement after 20 years of service, particularly with respect to technically qualified officers, it was proposed to reduce the pension as follows:
• 20-25 years of service – 50 per cent of entitled pension.
• 26-30 years of service- 60 per cent of entitled pension.
• 31-35 years of service – 75 per cent of entitled pension
• After 35 years of service – Full pension.
A non-starter proposal
The proposal to increase the retirement age is not new. It has been done twice since independence. On both these occasions, the retirement age was increased across the board for all ranks. The primary motivation was an increase in the life span, optimum utilisation of personnel and increased job/financial security. By default, this also reduced the gap between the retirement age of defence personnel and civilian employees of the government. An increase in age must be balanced with the need to “keep the armed forces young” to withstand the rigours of battle/terrain. Qualities of boldness and audacity associated with the young, also whither with age.
The current proposal will redress the anomaly of differences in the retirement age of Colonels, Brigadiers and equivalent in the three Services as directed by the Armed Forces Tribunal and the Supreme Court. Currently, in the Army and the Indian Air Force, a Colonel and Group Captain of flying branch retire at 54. A Captain in the Navy retires at 56, and a ground duties’ Group Captain of the IAF retires at 57. In the case of Brigadiers and equivalent who retire at 56 years, a ground duties’ Air Commodore in the IAF retires at 57.
The proposal became popular with serving officers because it enhances financial security and does away with the rather demeaning re-employment scheme wherein Colonels and Brigadiers could seek re-employment for four and two years respectively in two ranks lower positions. It also reduces the shortage of officers to some extent because retirements will be delayed by one to three years. However, the proposal will only postpone the payment of pensions and retirement benefits and not reduce the financial burden in any manner. In fact, the financial burden is likely to increase due to increments that will accrue in the extended tenures. In turn, this will eventually increase the pension, which is 50 per cent of the last pay drawn.
Since the promotions are vacancy based, the increase in age will lead to stagnation and increase in the age of Commanding Officers who have to physically lead in battle. Ironically, the armed forces fought a prolonged battle to obtain a younger profile at the battalion level through the Ajai Vikram Singh Committee Recommendations in 2005. All this effort will be negated by the new proposal.
Pay, pensions and allowances are complex matters. The anomalies of the 6th and 7th Pay Commissions are still to be resolved. One of these is related to Military Service Pay granted up to the rank of Brigadier without relative compensation to higher ranks. This has resulted in Colonels and Brigadiers getting higher pay than Major Generals and Lieutenant Generals. With increase in retirement age and more increments, this problem will be aggravated leading to higher ranks moving courts for a pay increase. The pay of ranks is also linked to equivalent ranks in the civil service.
In a nutshell, the selective increase in age will open Pandora’s Box when it comes to pay and pensions without any saving to the State. In its current form, the proposal is a non-starter.
The second part of the proposal to reduce the pension of those seeking premature retirement is nothing more than speculation. The Department of Pensions and Pensioner’s Welfare, Ministry of Personnel, Public Grievances and Pensions, lays down the broad pension policy of civil, defence and railways personnel. Department of Ex-servicemen’s Welfare in the Ministry of Defence deals specifically with defence pensioners. It is beyond the purview of the Department of Military Affairs to modify the terms of engagement of service and the scale of pension. The Supreme Court/High Courts have repeatedly ruled that pension is a right to property under Article 300A of the Constitution – “Pension and gratuity are not mere bounties, or given out of generosity. It’s a benefit by virtue of long, continuous, faithful and un-blemished service.”
In any case, discouraging premature retirement after 20 years of service is a retrograde step that promotes stagnation, increases the age profile and saddles the organisation with disgruntled officers. With rapidly changing trends in military technology, it is better to induct fresh talent.
The way forward
It would be prudent for the new Chief of Defence Staff to adopt a holistic approach to reduce the salaries and the pensions expenditure. He must prevail upon the government to carry out a strategic review to formulate a National Security Strategy to fight the short, intense and high technology driven wars of the 21st century. This will dictate the quality and size of the armed forces.
The size of India’s armed forces, particularly the Army, is elephantine, focusing on quantity over quality or mass over class. Our organisations are 25-30 per cent larger than corresponding organisations in advanced militaries. Overall, there is scope to reduce the size of the armed forces by 30-40 per cent.
Short Service Commission for officers and Short Service Engagement for soldiers of 5-10 years duly covered by a contributory pension scheme, gratuity and an ex-serviceman status with all benefits is the best method to reduce the pension bill. This approach is time-tested and followed by all advanced armies. We must not reinvent the wheel.
Lt Gen H S Panag PVSM, AVSM (R) served in the Indian Army for 40 years. He was GOC in C Northern Command and Central Command. Post-retirement, he was Member of Armed Forces Tribunal. Views are personal.