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Growing defence pensions a problem. But CDS Rawat’s retirement age proposal not the solution

There are no short-term solutions for increasing defence pensions. It is a political challenge that the National Security Council must holistically examine.

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India’s Chief of Defence Staff General Bipin Rawat made a startling suggestion on 4 February when he said that the retirement age of defence services personnel, predominantly for those who are below the rank of officers, should be increased to 58 , from the current 37-38, in order to reduce the increasing defence pension bill and optimise services.

Gen Rawat’s recommendation, if implemented, could debilitate the effectiveness of India’s military instrument, for a nation’s military is fundamentally shaped for combat, where age plays a significant role in conditions that are characterised by danger to life and limb, fear, uncertainty and unimaginable physical and mental stress.

Also read: CDS Bipin Rawat on military retirement age at 58: Is greying army a good or dangerous idea?

Youthful force necessary for operational requirements

The character of combat conditions is, no doubt, constantly changing due to technological advancement. So, one could argue that close combat and bayonet charges are things of the past and one could inflict greater destruction from the safety of a well-protected underground facility by simply watching a computer screen and pressing a button. This is a dangerously misplaced notion that ignores the nature of war, which essentially remains a form of  violence for serving political purposes. As long as there is an adversary who can reciprocate in kind, one cannot wish away the natural ambience of the battlefield that imposes itself on combatants.

It is true, however, that not all military persons are on the battlefield, so those who have logistic and administrative functions need not be young and can, therefore, serve till 58 years of age as suggested by the CDS. This possibility must be explored as long as the identified slots leave enough scope for rotation of personnel from the difficult conditions of field to peace. While there is definitely some room for exploration here, by itself, the overall impact on reduction in pension would be marginal.

The fact that  28.4  per cent of the defence budget goes to pensions and there is revenue-capital ratio of 75:25  is alarming because it has deleterious impact on modernisation. In an increasingly challenging geopolitical environment, this is a grave security concern and one that has been known to India’s security establishment for decades. The issue of burgeoning defence pensions has been exacerbated by the ‘One Rank One Pension’ scheme . In 2015-16, before the OROP was introduced, defence pension expenditure was at Rs 54,000 crore . By 2020-21, the pension expenditure has more than doubled and is now pegged at Rs 1.33 lakh crore.

With the issue of 60,000 defence retirees every year, coupled with increasing life expectancy, the problems associated with reconsidering the military retirement age are manifold, and call for political intervention at the highest level. These issues pose serious threats towards maintaining military effectiveness. CDS Rawat’s suggestion may not be feasible, but he has certainly highlighted a critical issue that has grave implications.

Also read: India’s defence forces can’t wait for Modi’s $5-trillion economy dream. Slowdown is hurting

The five pathways

Since it is clear that complex problems such as growing defence pensions can’t be solved with a single proposal of extending the retirement age of soldiers, here are five pathways that are examined:

First, bring India’s armed forces personnel under a variant of the National Pension System (NPS). The NPS is a “defined contribution” scheme where the pension is paid out of a corpus the employee creates using their own savings. Such a mechanism will help reduce the government’s own expenditure on employee pensions, but its political feasibility is quite low; the 2019 Lok Sabha election manifestos of both the Bharatiya Janata Party and Congress claimed credit for the implementation of OROP, which is diametrically opposite to the NPS because it is a defined benefit scheme that resets periodically based on current employee compensation leading to a perpetually growing liability for the government.

Second, retain retired armed forces personnel in the other segments of the national security system like intelligence, the Defence Research and Development Organisation (DRDO), Ordnance Factory et al to reduce expenditure on pensions for the additional number of years served. However, this solution is not viewed in favourable terms by the retiring armed forces personnel currently due to concerns of loss of rank, seniority and pay protection.

A third solution is the reduction in the intake of defence personnel in the armed forces over time. However, any such reduction is heavily dependent on operational requirements and threat perceptions. Given India’s national security challenges and the continuing continental strategic challenges posed by China and Pakistan, a major reduction in intake is unlikely.

Fourth, reduce the number of defence civilians in India’s armed forces. The Indian military’s ‘tooth-to-tail’ ratio of about one soldier to 1.15 civilians is considered quite high. However, unlike the OROP for defence personnel, incoming defence civilians have been made a part of the NPS, which means that the pension expenditures incurred per civilian by the central government will decline over time. Moreover, our calculations show that the total defence pension outgo planned for all defence civilians is 25 per cent of the total defence pension expenditure in FY 2019-20.

Also read: Stop celebrating CDS. Gen Rawat will barely be able to command forces thanks to bureaucracy

A long-term solution

A long-term solution was suggested in August 2017 when the issue came up for consideration of the Standing Committee on Defence as part of its 33rd report to the Lok Sabha titled “Resettlement of Ex-Servicemen“.

The National Security Council Secretariat originated a proposal that mentioned reducing the quantum of pensioners by creating a system wherein there would be a flow between the armed forces and the police forces. It was unique one in suggesting that initially the parent police organisation could recruit personnel and after which the personnel would serve in the armed forces for seven years and return to the original organisation. This would decrease the pension outflow as the OROP of a soldier will be replaced by a much smaller National Pension System (NPS) bill of a Central Armed Police Forces/State Armed Police Forces recruit. The Ministry of Defence will then not have to bear the pension burden because CAPF/SAPF fall outside their funding mandate.

Moreover, there are likely to be positive spillover effects because the fighting capabilities of these forces will improve as a result of inverse induction. The proposal found acceptance by the defence ministry but not the home ministry. Political intervention is required for the MHA to change its stance, because in the view of the author, it is primarily based on turf protection.

In September 2019, we proposed a Human Capital Investment Model to operationalise this solution, which is illustrated below.

The Human Capital Investment Model
The Human Capital Investment Model | Source credit: Takshashila Institution

The scope of this model can be scaled up with other government agencies by matching common skill sets. We conservatively estimate that by recruiting only 10 per cent of its soldiers through this track, the government can achieve pension savings worth a net present value of Rs 1.2 lakh crore.

Also read: New Army chief Naravane must mend ties with veterans & stop politicisation of forces

Certainly, there are no short-term solutions other than an increase in the defence budget. In the present economic situation, this is a political challenge that must be examined holistically by the National Security Council to weigh in with the priorities imposed by security imperatives and the demands of development. In any case, escalating defence pensions should not be treated as an issue that can be decided by financial mandarins but be based on a politico-strategic outlook.

Lt Gen (Dr) Prakash Menon is Director, Strategic Studies Programme, Takshashila Institution, Bengaluru. Pranay Kotasthane is Research Fellow at the Takshashila Institution. Views are personal.

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  1. Defence civilian chowkidar to naval police, gate duty chowkidar is local area suty most important security parpos defence civilian chowkidar is NPS formula and retired age for 60 combined defence chowkidar for naval police

  2. Defence civilian chowkidar to Defence Police defence civilian chowkidar is local area is study same for state police defence chowkidar is nps formula under and is retired age for 60 is security and responsibili person and defence civilian chowkidar and defence police is combined work most for security

  3. No body is talking about the improvement of the condition of the forces specially PBOR. Today’s scenario is like that nobody wants to continue to serve beyond the initial regular engagement (RE). WHY??? nobody asked? Bipin Rawat saheb never asked that?
    When any body will forsee some carrier aspect and other prospect and better working condition , then definitely he will opt to continue to serve.
    In Indian Air force , a PBOR can serve up to 57 years of age. But now days , every body mostly retires at age 38 years after completion of RE. Whatever facilities defence services provides is limited to OFFICERS only. If they continue to serve up to 57 years Then the burden of pension theoretically became half than the present.
    Jai hind..

  4. By increasing intake of SSC officers and decreasing P C officers in defence forces pension budget can be reduced as explained below.The central government should make defence service of atleast 10 years essential condition for selection in civil services of center and states at all levels. Another option can be to make provision for 50 % reservation for SSC officers in all category if first option is not admissible in our constitutional set up.This will not only reduce pension budget of defence forces but also ensure disciplined officers for civil services of country.Besides this it will encourage youth to join Short service commission as youths are now disinclined to join SSC as the are retired in age of 35 years when their family responsibility is at peak.By increasing intake of SSC officers and decreasingly P C officers and adopting reservation policy for SSC officers pension budget of defence can be curtailed.

  5. Lateral Entry in to govt jobs is best solution because we will get hardworking , Discipline & loyal employee in govt sector.

  6. Yes, increasing Def Pers pension is a National calamity whereas pension of other Govt emp, railways, police, bureaucrats, politicians r constantly decreasing, isn’t it ? MERA BHARAT MAHAN.

  7. I think you need to address both Officer and PBOR. For Officers, a solution could well be to reduce the number of Permanent Commissioned (PC) Officers and increase Short Service intake. Some of the SS intake will get selected for PC, others get absorbed in the Private Sector, or preferably allowed to take UPSC exams for the so-called Group A services, some credit can be given for Services rendered. It probably is too much to make Service mandatory for UPSC exams, but that would be ideal.
    For PBOR, usually highly trained and disciplined, their induction into Para-Military forces and other central and state police forces would give you a very strong, disciplined pool to choose from.
    The advantage of both suggestions is to reduce the number of pensionable staff, reducing financial outlays.

    Reduction in absolute size of the Army, as suggested by Mr Barsode is also essential. Unfortunately leaving a vacuum in the defensive posture is not an option – one needs to accelerate the creation of Integrated Battle Groups – these need to be highly mobile and pack a punch enough to deter likely adversaries.

  8. The basic issue is that the size of the Indian Army is quite large by itself and it is not clear if we need such a large army. We need to dispassionately consider the required size of the army assuming worst case scenario of two front war and given that we are now in an era of modern warfare with highly sophisticated equipment. If China could reduce its army considerably and USA manages with a small army as well, we ought to make a fresh assessment. Pending that, options suggested by the author are worth examining. However, given our approach to such complicated issues, it is most likely that suggestion by CDS will be accepted, as it is the most non controversial! But that would be a wrong foot forward and just an interim measure.

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