Mann Govt Plays Ducks And Drakes With Punjab Finances To Influence Voters In HP, Gujarat

The Rising Panjab Bureau

By restoring the old pension scheme (OPS) for government employees, the AAP government in Punjab led by Bhagwant Mann has taken a costly gamble to influence voters in Himachal Pradesh and Gujarat where the Aam Aadmi Party is making a serious bid to make a splash. In the process, it is playing ducks and drakes with the state’s finances.

Already reeling under the impact of an ever-increasing fiscal deficit, the decision to restore the old pension scheme for the employees recruited after 2004 will further burden the state exchequer. Nearly 1.75 lakh employees stand to benefit from this decision.

The old pension scheme was discontinued 19 years ago on April 1, 2004, and replaced with the National Pension Scheme. Political observers have not failed to notice that the announcement on the OPS has been made with an eye on the election-bound states of Himachal Pradesh and Gujarat.

The burden of the pension scheme will not have to be borne by the present government. Since it is for the employees recruited after 2004, the impact on the state exchequer will be visible only around 2030.

Officials say that before the implementation of the old pension scheme, the issue of funds (employees contributing 10 percent of their salary towards the pension with the state government contributing 14 per cent) under the new pension scheme deposited with the PFRDA has to be sorted out by the state government with the Centre. Already, the state’s expenses on pensions have hit the Rs 11,000 crore-mark.

Although the exact calculations are yet to be made, the restoration of the scheme will further burden the state. The state’s debt stands at Rs 2.63 lakh crore during the current financial year and is growing. The power subsidy bill of the state is likely to cross Rs 20,000 crore.

At present, 1,700 pensioners draw pensions under the old scheme. Since the NPS is a defined contribution plan, there is no doubt that the guaranteed pay-out feature in the old scheme is appealing to the employees. Under the old pension regime, pension was 50 per cent of the last drawn salary of the employee and the entire amount was paid by the government.

Governments come and come but compromising with the financial prudence having potential to throw the economy under the bus is simply not done and all political parties are better advised to not resort to such tactics.  Overall development of any state or country for that matter if financial discipline is not maintained.