Modi govt succumbs to pension politics with nod to UPS

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Unified Pension Scheme may stress state finances

By Manish Anand

New Delhi, August 24: Prime Minister Narendra Modi-led National Democratic Alliance (NDA) government on Saturday approved a Unified Pension Scheme (UPS). The Cabinet nod marks Modi government’s halfway march towards the Old Pension Scheme (OPS).

The government said that its contribution will increase from the current 14.5 per cent to 18 per cent in the Unified Pension Scheme (UPS). The employees’ unions feted Modi after the Cabinet nod to the UPS.

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The approval to an assured pension scheme marks a major departure from the market-linked pension scheme. The New Pension Scheme was unveiled in 2004 as a major policy reform of the government.

The government said that there will be no additional burden on the employees. The full burden of the additional cost will be borne by the government.

The unveiling of the Unified Pension Scheme, to be effective from April 1, 2025, has come ahead of the key Assembly elections. Also, the Bharatiya Janata Party (BJP) failed to bag own majority in the Lok Sabha after the 2024 general elections.

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The climbdown of the Modi government against sharp response to the Opposition support for the restoration of the Old Pension Scheme is clearly visible. The government had been saying that reverting to the OPS will be a financial disaster for the country.

But the government has almost revised its stand and found a half way mark between the NPS and the OPS. With a new thrust on the government employments at the Centre and the states, the pension burdens will only go further up.

The experts believe that the climbdown of the government to accept a guaranteed pension scheme will cut down the public expenditure. The finances of the states are already stressed. The states will also gradually adopt the Unified Pension Scheme.

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Take for instance the Ministry of Railways, which has close to 13 lakh employees, besides 15 lakh pensioners. The pension bill of the Railways in 2022-23 was ₹60,000 crore. This was about 25 per cent of the estimated internal revenue of ₹2.40 lakh crore in the revised Budget Estimate.

For 2023-24, the pension obligation of the Railways was estimated at ₹70,516 crore. The estimated internal revenue was ₹2.65 lakh crore. This was almost 26 per cent of the total revenue going to meet the pension liabilities.

The other wings of the government will also face similar pension stress. The states like Bihar, Himachal Pradesh, Rajasthan, West Bengal, Kerala, and others are already battling financial woes on account of inelasticity of own revenue.

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About The Author

Manish Anand

Manish Anand is a senior journalist with more than two decades of hardcore reporting on beats such as Prime Minister’s Office, Parliament, BJP, Congress, Planning Commission, NITI Aayog, and scores of Union Ministries.

His past has been with The New Indian Express, The Asian Age/Deccan Chronicle, and The Statesman.

For about 15 years, Manish was also a regular commentator and host for talks on AIR on foreign affairs.

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