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By Manjeet Sehgal: The reintroduction of the Old Pension Scheme (OPS) by five states, including Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh, has kicked off a controversy after the Union government, citing the provisions of the PFRDA Act, has declined their contribution withdrawal requests.
It is worth mentioning here that 5.01 million subscribers from 32 states and Union Territories have made contributions worth Rs 2.66 trillion besides AUM worth Rs 3.65 under National Pension System (NPS) which was introduced in 2004.
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The five states which reintroduced OPS are now seeking a withdrawal of contributions worth over Rs 79,684 crore. While Chhattisgarh has made a contribution of Rs 17,240 crore, Jharkhand Rs 8,107 crore, Punjab Rs 18,000 crore, Rajasthan Rs 28,337 crore and Himachal Pradesh has contributions worth over Rs 8,000 crore.
These states had made individual requests to PFRDA to let them withdraw the accumulated corpus which was declined as the PFRDA has no such provisions. Union Minister of State for Finance Bhagwat Karad had also told Rajya Sabha that the PFRDA Act had no provision to refund the NPS contributions and the accruals.
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OPS comes as temporary relief to fund starved states
The reintroduction of the Old Pension Scheme while on one hand has come as a major relief to government employees, who after opting for the OPS will not be required to make any contribution towards their pension, the states will also not be required to make any monthly contribution to PFRDA. The state governments and the employees were making 14 per cent and 10 per cent contributions respectively towards NPS.
For instance, the Himachal government stopped paying its contribution towards the NPS in April this year. It paid Rs 1200 crore during 2021-22 and Rs 1,700 crore during 2022-23. Under the OPS the government will pay the pension amount when an employee attains superannuation.
The reintroduction of OPS has also prompted the states to demand a refund of the contributions made towards NPS after 2004. These states will be able to fill their coffers in case the union government makes suitable provisions in the PFRDA Act.
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States, employee unions preparing for a legal battle
The reintroduction of OPS has created confusion among the NPS subscribers who regularly made contributions towards the pension scheme. They are worried about the future of the deposits which they wanted to withdraw as the scheme has been withdrawn by the government.
“We appeal to the union government to let the state governments and their employees withdraw the pension contributions. We are also seeking legal advice to move the courts concerned in case the PFRDA continues to decline the withdrawal requests” says president of New Pension Scheme Employees Union, Shimla Pradeep Thakur.
Sources close to the Punjab government also say that Chief Minister Bhagwant Mann has asked Chief Secretary Vijay Kumar Janjua to seek a legal opinion to pave the way for a pension contribution refund.
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Tension brewing over OPS in neighbouring Haryana
The BJP-led state government in Haryana witnessed a series of employee union protests in February this year over the demand to reintroduce OPS on the analogy of Punjab and Himachal.
The state government was compelled to hold discussions with the Pension Bahali Sangharsh Samiti which during the protests had openly challenged the state government.
No BJP government has accepted the OPS demand so far. The party’s high command was not in favour of the freebies but as the issue cost dear to the party in Himachal, the party, says the employee leaders, had assured them that a favourable step will be taken in future.
Meanwhile, the opposition Congress has already announced that it will reintroduce the OPS in case it is voted to power.
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Haryana introduced the NPS in January 2006. There are an estimated 2.85 lakh government employees in the state.
A recent RBI report said Haryana was among the five highly stressed states and the reintroduction of OPS will further over burden its exchequer.
The Debt-GSDP of many states which reintroduced the OPS was very high. In the case of Punjab, it is 53 per cent, 40 per cent in Rajasthan and 40.49 per cent in Himachal Pradesh. Higher Debt-GSDP means the states were under huge debt and were adding more committed liabilities.
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OPS operational or on papers only
Rajasthan was a pioneer to reintroduce the OPS in April 2022. This was followed by Chhattisgarh, which notified the scheme in December 2022, Jharkhand and Punjab in October 2022, and Himachal Pradesh on April 17, 2023.
In most of the five states which introduced the OPS between April 2022 to April 2023, the employees have been given a choice to either pick OPS or NPS. All the states have notified the OPS but have not divulged how many employees, who retired after the reintroduction of pension, were getting OPS. These states were demanding a refund of NPS contributions. The Rajasthan government has said that it will transfer the NPS contributions in GPF accounts.
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