All eyes are on GST as Centre plans higher social pension

HIGHLIGHTS

• A draft proposal is readied by the government to proliferate the quantum of the three key “social pensions”.
• It will however, depend largely on whether there are resources with the Centre to fund the revision.
• In the first quarter after GST, revenue collections far exceeded the Centre’s expectations.

NEW DELHI: A draft proposal is readied by the government so as to increase the three key social pensions’ quantum but everything relies on the revenues of the Centre post-GST, with the reconstruction being dependent on whether there are resources with the Centre to fund the revision.

The estimates say that restructuring of NSAP (National Social Assistance Programme) — disability pension, widow pension and old-age pension— will invite an extra expenditure of approx. Rs 10,000 crore over and above the present annual budget of Rs 9,500 crore.

While the proposal has been worked out by the rural development ministry, but it will be put forward to the Expenditure Finance Committee when there is a clearer picture on the availability of funds.

As per a source, “The fate of the proposal will be decided majorly by GST. We are ready, if there is availability of funds”.

Observers mentioned that in the first quarter, revenue collections were above the Centre’s expectations, which raises hope that in such revisions, funds will not be a hurdle. Recommendations of the Sumit Bose committee mentions that the government should link the pensions given to BPL households, under NSAP, to the CPI (consumer price index) and should reduce the age eligibility from 40 years to 18 years for widow pension.

At the time of accepting the recommendations, the ministry should also try to absorb the rising outgo on pensions, which can be done by restructuring the pattern of funding.

The Centre may ask states to share 40 % of the bill in contrast to the existing arrangement of total cost being borne by the Centre alone. The extent of coverage needs to be finalized crucially, probably viewing the uncertainty over resources.

As per the expert panel, pensions should be extended to all households except for those “automatically excluded” under the ‘socio-economic caste census’ — the measure of deprivation levels — the rural development ministry has kept it open whether to limit its schemes to families with “one deprivation” or “two deprivations”.

As a pilot proposal, the ministry may increase the old-age pension to Rs 500 from Rs 200, of which the states will pay Rs 300 and Centre Rs 200.

Currently 3.5 crore households are included by the pension. Extending it to people with “one deprivation” will increase the net to 8.72 crore households and extending it to those with “two deprivations” will spread it to 5.5 crore households. The ministry favors instituting widow pension for those aged 18-39 years while agreeing to pay a one-time grant in case of remarriage. On disability, the ministry has agreed to change the eligibility criteria from 18 years to the person’s date of birth, and from 80% disability to 40% disability. The pension too is to be raised from Rs.300 to Rs.500. There are estimations, that the Centre will need around Rs.22,000 crore to fund the revamped pensions. Introduction of state’s share of 40% will bring in Rs.10,000 crore and considerably ease the Centre’s burden.