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Friday, September 4, 2015

OROP: Would implementing the populist scheme eventually turn India into another Greece?

One Rank One Pension (OROP) is a demand raised by retired army personnel, urging the government to grant them a pension which is based upon the system of Defined Benefits (DB). If the call of veterans is adhered to, Centre would have to pay the ex-servicemen based upon the number of years they worked and the last salary they drew.
Under DB scheme, the government would also need to redefine the pension allotted to them in a yearly manner scaling it with all future enhancements in the salary drawn by a personnel in the same rank. The rationale behind the veterans’ demand is justified from an patriotic point of view, where one could argue that the state should bear the brunt for ensuring a comfortable post-retirement life for those who risk their lives for the nation.
However, from a financial standpoint, implementation of the scheme may spell disaster. The government would have to initially spend Rs 18000-20000 crores to roll-out the OROP scheme. Annual allotment of Rs 75,000 crore will be required to upscale the pensions of the retired defense personnel. The amount will escalate year after year. (ALSO READ: OROP: Finance Minister Arun Jaitley rules out annual pension revision)
The defense sector currently pays a massive amount of Rs 93,216 crore as salary to the current serving army. The price to be bared by the government for sustaining OROP would be around Rs 75000 crores. That would be around 80 per cent of what the government currently pays to its serving army staff. The financial burden on the government would be same as maintaining an additional army simultaneously to the existing one.
Another factor which needs to be considered in the OROP debate is the retirement age of servicemen. Private sector employees, bureaucrats and civilian forces who retire at 60 years of age. However, 80 percent of the army personnel retire between the age of 35-37. Thus, the government is forced to allot them their pension for a longer period of time, often exceeding the total duration of their service.
Also to be noted is the fact, that a pension could not replace salary, as the defense personnel have been demanding. The centrifugal point of contention in this entire row has been the assumption that the pension should serve as a salary to spend a relaxed life according to current market inflation. On the contrary, pension should be considered only as a measure of financial assistance. If a jawan retires at 35 of age, the state can’t continue to provide him a sort of salary for the rest of his life.
Once the OROP is rolled out, the concerns faced by the government is bound to multiply,since there is a strong possibility of similar demands be raised by paramilitary forces, Central Reserve Police Force (CRPF) and Indo-Tibetan Border Police, who also serve under life threatening risks dealing with Naxals, several insurgent movements and guarding north-eastern border. In surprising move, demand for OROP is now being made even by Railway union. “The government should also discuss OROP for Railway employees. 7th Pay Commission has failed to consider our demand. We will pitch up our agitation against government along with the defense veterans,” said Shiv Gopal Mishra, General Secretary of All-India Railwaymen’s Fedration.
The immediate step to be taken by the government should be to pacify the aggrieved veterans and find a middle-of-the-road solution to the contentious issue after carefully weighing the economic backlash. Though Prime Minister Narendra Modi did not consider the ambiguity involved while using the emotive issue as a poll plank, he needs to take action in a cautious manner. The OROP as demanded by the veterans would push the nation under severe financial woes which could ultimately turn India into Greece, who repeatedly denied austerity measures by offering its citizens ‘Defined Benefits’.

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