SUMAN K SHRIVASTAVA
Ranchi, June 29: Jharkhand, which is among the 10 states with the highest debt burden in the country, should be ready for a long legal battle with the Centre and professional pension fund managers if it goes ahead with implementing the old pension scheme (OPS) on August 15.
The reason being that there is no exit clause in the agreement the Jharkhand Government voluntarily signed with the Pension Fund Regulatory and Development Authority (PFRDA), to implement the New Pension Scheme (NPS) in 2004.
It simply implied that Jharkhand will not be able to get back Rs 17,000 crore, deposited in the PFRDA, by the State Government as well as the employees under the NPS soon.
The PFRDA has already rejected such requests from the two Congress ruled states-Chhattisgarh and Rajasthan-which have restored the OPS, promised during elections. The Rajasthan government had said it would withdraw funds accrued since 2004 and shift them under the general provident fund.
According to official sources, all the states, except West Bengal had voluntarily implemented the NPS in 2004. “Now, we cannot leave it halfway. The professional fund manager must have invested the funds contributed by the employees as well as the state government under a long-term plan. There is no clarity whether the state can get back the funds before they mature.”
“Also, there is no clarity on how the State will give benefit to the employees recruited between 2004 and 2022 if the PFRDA refuses to release the deposited fund. Will they be covered with both the schemes or will the OPS schemes be executed for only new recruits?” sources said.
The issue had been discussed during the last cabinet meeting and then the concerned file was referred to the Law department for its opinion.
Earlier also, the State government had sought the opinion of the law department which pointed out that there is no exit clause in the agreement signed by the Jharkhand Government with the PFRDA.
“However, there is a provision to go for arbitration in case there is any dispute. So, the State government may invoke this provision in case the PFRDA and other professional fund managers refuse to release the fund,” sources said.
Ironically, the Jharkhand Government has not served a notice so far to the PFRDA to get its response.
But then, according to experts, if Chief Minister Hemant Soren still goes ahead with implementing the OPS in order to fulfill its election promises, it is sure to prove a financial disaster.
The OPS – primarily a pay-as-you-go system and hence, unfunded – had numerous drawbacks, particularly in terms of medium-term fiscal sustainability and the tax burden on future generations. Many states had switched to NPS after realising that the old system was unsustainable in the long run.
According to a RBI report, Jharkhand’s pension expenditure alone accounts for 12.4 per cent (average of 2017-18 to 2021-22) of the total revenue expenditure. It is estimated that the pension outgo will continue to be in the range of 0.7-3.0 per cent of GSDP in Jharkhand until 2030-31.
“As the current state government retirees are primarily the beneficiaries of the old pension scheme, the immediate financial strain will not be felt if the states choose to revert to the old pension scheme.’
Pension outgo of Jharkhand, Kerala, Punjab, Uttar Pradesh and West Bengal (from 2024-25 to 2029-30) are estimated from 2021-22 to 2029-30 using an exponential smoothing algorithm on the historical data from 1990-91.”
“However, when the state government employees who joined after 2004-05 under the NPS begin to retire from 2034 onwards, the cost of such a move will become apparent. In other words, the adoption of the old pension scheme is likely to benefit the current generation at the expense of future generations,” said the RBI report.
Ironically, Jharkhand, besides Kerala, Odisha, Telangana and Uttar Pradesh are the top five states with the largest rise in subsidies over the last three years.
Notably, the JMM-led Government is providing free electricity up to 100 units to farmers and poor. It has allocated Rs 4.855 crore in the current budget which is 1.2 percent of GSDP. It has also implemented the Guruji Credit Card Scheme under which soft loans up to 10 lakhs will be given at a low interest rate without mortgage to students for pursuing higher education. The government has allocated Rs 1800 crore for it in the 2022-23 budget.
