Saturday, June 10, 2023
Support Our Journalism
HomePolitics'Results in front of us' — Sushil Modi says not promising Old...

‘Results in front of us’ — Sushil Modi says not promising Old Pension Scheme cost BJP Himachal

Speaking at PRS Legislative’s annual conference in Delhi, BJP Rajya Sabha MP & Bihar’s ex-deputy CM said it is the public that ultimately bears the cost of such doles.

Text Size:

New Delhi: The Bharatiya Janata Party’s decision to not go back to the Old Pension Scheme (OPS) cost them the assembly elections in Himachal Pradesh, Bihar’s former deputy chief minister and party leader Sushil Kumar Modi said Wednesday.  

Speaking at the annual conference of PRS Legislative, an independent legislative research institute in Delhi, Modi, however, qualified his remarks by saying that it was the public that ultimately bears the cost of such doles. 

“(Because) we didn’t revert to the Old Pension Scheme, didn’t announce anything, the results are in front of us. The BJP had to pay a price in Himachal Pradesh. There might be other reasons also but the main reason for this (election) debacle was not reverting to the Old Pension Scheme,” Modi, a BJP Member of Parliament in Rajya Sabha, said while speaking at the conference ‘State of State Finances’.

He further added that in competitive politics, “parties try to give as many doles as possible”. 

“One promises 300 units (of electricity), the other will promise 500. The public thinks it benefits them more, but the loss is also borne by them,” he said. 

The remarks come at a time when the debate on the “revadi” (freebies) culture has been gathering steam, with even the Supreme Court taking up the subject for hearing earlier this year.  

As one of its key promises made during the assembly elections in Himachal Pradesh, the Congress had promised to revert to the OPS. 

Under the scheme, employees, upon retirement, receive 50 per cent of their last drawn salary as their monthly pension, in addition to a dearness allowance or their average earnings in the last 10 months of service, whichever is higher. The pension contribution is made by the government as an incentive for taking on government jobs.

The scheme was done away with by the Vajpayee government in December 2003 and the new National Pension System (NPS) came into effect in April 2004.  

By comparison, the NPS is a voluntary contribution pension scheme under which individual deposits are pooled into a pension fund and invested by fund managers in a variety of portfolios, corporate bills, and other securities.

The NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

Also Read: ‘Nadda’s interventions, misplaced focus on PoK over OPS’ — many reasons for BJP’s Himachal loss.

‘Generational cost’

Wednesday’s conference was moderated by Modi and N.K. Singh, chairman of the 15th Finance Commission.

Tamil Nadu finance minister P. Thiaga Rajan was also scheduled to speak at the conference, but couldn’t make it because of other official responsibilities. 

The PRS Legislative also published a document that explained how switching to the OPS would also add to intergenerational costs.

“There may not be any significant impact of this change on pension expenditure in the short term. Pension expenses may even be lower, as the government contribution for current employees need not be paid anymore,” the document said. “However, when the employees, who joined after the implementation of NPS begin to retire from 2034 onwards, the costs of reverting to the Old Pension Scheme will become more visible. Adoption of the old pension scheme is expected to benefit the current generation at the cost of future generations.”

The document shared by PRS Legislative also showed how spending on pension and retirement benefits took a major chunk of the state government’s earnings.

For instance, in 2022-23, Himachal Pradesh spent close to 21 per cent of its revenues on pensions and retirement benefits — the highest across all the states — followed by Kerala (20 per cent) and Tamil Nadu (17  per cent). 

N.K. Singh said that reverting to the Old Pension Scheme meant “impoverishing the future at the expense of giving greater benefits to the present”.

“In my view, it’s an intergenerational choice,” he said. “I really think it’s also a breach of trust. The New Pension Scheme was launched after a lot of deliberations, adopted consciously by states as a measure of important economic change and reforms.”

He added that there was a “moral consideration” as well.

“2034 looks far, but look at you young people,” he said. “Should you really burden the future at the expense of the flexibility you have at present?”

Modi suggested a “sinking fund” — a separate fund for the OPS that can be used to service debts in the future — which Singh agreed could be a useful mechanism for states opting for the Old Pension Scheme.

“You require a sinking fund for the general government (Union and states) to retire debts in an orderly way,” Singh said. “In that sense, the suggestion made by Sushil Modi is worthwhile to examine.”

(Edited by Uttara Ramaswamy)

Also Read: ‘No resentment’ or outburst against BJP govt? How Agnipath impacted poll outcome in Himachal


Subscribe to our channels on YouTube & Telegram

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism

Most Popular