Old Pension Scheme, Purani Pension Yojana: As many non-BJP ruled states like Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab and Jharkhand have started implementing the old pension scheme, the Reserve Bank of India (RBI) cautioned that it will increase the financial burden of In its report titled ‘State Finances: A Study of Budget 2022-23’, the central bank said the move poses a major risk to the ‘subnational fiscal horizon’ and could lead to accumulation of unfunded liabilities in the coming years Is.
New Delhi: Old Pension Scheme, Purani Pension Yojana, RBI: Many non-BJP ruled states like Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab and Jharkhand have started implementing old pension scheme, Reserve Bank of India (RBI) cautioned. It is that it will increase the financial burden of the states. In its report titled ‘State Finances: A Study of Budget 2022-23’, the central bank said the move poses a major risk to the ‘subnational fiscal horizon’ and could lead to accumulation of unfunded liabilities in the coming years Is.
RBI mentioned the risk in the report
The RBI report said, ‘A major risk on the sub-national fiscal horizon is the possibility of changes in the old pension scheme by some states. The annual saving in fiscal resources from this step is short term. By postponing current spending to the future, states run the risk of accumulating unfunded pension liabilities in the coming years, the report said.
These states have restored the old pension scheme
The governments of Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab and Jharkhand have informed the Center about their decision to implement the old pension scheme, which they had promised to do in their election manifestos. The decision of these states has triggered a political tussle between non-BJP and BJP ruled states.
Old pension scheme was abolished in 2004
Incidentally it was the BJP-led NDA government, which abolished the old pension scheme in 2004 with effect from April 1, 2004. Instead, the government introduced the National Pension Scheme (NPS), under which government employees contribute 10 percent of their basic pay to their pension, while the government contributes 14 percent. The private sector was also included under the NPS system.
Under the old pension scheme, retired government employees used to get 50 per cent of their last drawn pay as monthly pension and this amount kept increasing with the increase in DA rates.
Former RBI governor had also counted the flaws
Experts have said that the old pension system is not fiscally sustainable as it is non-contributory in nature and the burden on the exchequer keeps on increasing.
Former RBI governor D Subbarao recently talked about the negative effects of the old pension scheme.
‘The burden of pension will fall on the existing revenue’
He had said, ‘In a country where most people have no social security net, government employees with assured pension are privileged. Giving them even more privileges at the cost of the larger public would be morally wrong and financially harmful. Subbarao cautioned that if state governments reverted to the ‘pay as you go’ pension scheme, the pension burden would fall on existing revenues.
