The Centre’s rules on the Old Pension Scheme (OPS) have put Telangana in a fix, despite increasing pressure from employees to restore it.
The Centre said that States which are changing over to the Old Pension Scheme will see a change in their Net Borrowing Limit. By not implementing power sector reforms, Telangana is now losing 0.5% of additional borrowing capacity. Now, if OPS is restored due to pressure from employees, the state will lose out on borrowings.
In December 2022, Chief Minister K. Chandrasekhar Rao gave an assurance that his government is considering the restoration of the Old Pension Scheme (OPS) which will replace the Existing Contributory Pension Scheme (CPS) after he met the leaders of employees’ unions in New Delhi.
The Central Government has changed the above rules and are now dis-incentivising States which are switching over to the Old Pension Scheme (OPS).
BRS MPs Kavitha Malothu and Venkatesh Netha Borlakunta questioned the Centre and asked whether this is not discrimination by the Centre against States which are thinking of social security for their employees.
The Centre said that provisions for additional borrowing has been introduced to facilitate a proper, common yardstick for all States in the method of handling pension obligations by providing incentives to the States who are making due contribution under the National Pension System (NPS) and to incentivise the States to implement specified reforms in the power sector.The extra borrowing ceiling has been allowed to State Governments and it is roughly equivalent to the estimated combined share of the State and its employees’ contribution pertaining to the financial year 2023-24 which would be actually deposited with the designated authority as per the guidelines of National Pension System (NPS).
The Centre said that it had come to its notice that there is increasing divergence of practices between different State Governments regarding the method of handling pension obligations for Government staff recruited after 2004.
Some of the States either decided or indicated a decision to follow a system of pay-as-you-go with defined benefits, others have issued orders adopting the National Pension System (NPS) but have not made due contributions, while the majority of States have adopted NPS and are making due contributions under NPS.
The States, who are on pay-as-you-go system or have now indicated a shift to such system and those who have not made the NPS contributions may give the notion of a lower fiscal deficit but the fiscal deficit of such States does not reflect the contributions towards future liabilities for the payment of pension.
Nirmala Sitaraman responded to BRS MPs and said, “To facilitate a former proper and common yardstick for all the States, the net borrowing ceiling of each State has been augmented by the amount of pension contributions actually paid to the NPS by the State Government and its employees. This amount represents an approximate proxy for the unfunded liabilities being carried by other States without reflection in the fiscal deficit, although the true unfunded liabilities of those States are likely to be higher in view of the residual liability of the State for payment of pension under the old system.”
It may be mentioned here that demanding implementation of the old pension scheme instead of the contributory pension scheme (CPS) the State Contributory Pension Scheme Employees Association (TSCPSEA) has decided to undertake a ‘rath yatra’ from Alampur in Jogulamba-Gadwal district from July 16. They also gave a call for Chalo Hyderabad on August 12.