DRAFT COMMON MEMORANDUM OF PENSIONERS & DRAFT SECTIONAL MEMORANDUM ON POSTAL PENSIONERS
Dear Comrades / Colleagues,
The Draft Common Memorandum on Central Government Pensioners and the Draft Sectional Memorandum on Postal Pensioners are placed hereunder for the purpose of study by all our leaders and membership.
All are welcome to send your suggestions, improvements, modifications needed, additions if any to the CHQ in our email ID aiprpachq@gmail.comwithin ten days. A meeting of all Pensioners Federations and Organisations to be called by the BCPC (Bharat Central Pensioners Confederation) at Chennai will be hosted by our AIPRPA soon will discuss all suggestions and modifications etc and finalize the memorandum to be submitted to the 7th CPC well before 30th June, 2014.
K.Ragavendran
General Convenor
MEMORANDUM ON PENSION AND OTHER RETIREMENT BENEFITS
CHAPTER – I
Introduction
The Government of India, Ministry of Finance, Department of Expenditure, Resolution No.1/1/2013-EIII(A) dated 28th February, 2014 in its Para 2(f) has included the following terms of reference of the 7th Central Pay Commission:
"(f) To examine the principles which should govern the structure of Pension and other retirement benefits, including revision of pension in the case of employees who were retired prior to the date of these recommendations, keeping in view that the retirement benefits of all Central Government employees appointed on and after 01.01.2004 are covered by the New Pension Scheme (NPS)."
1.2 The principles that should govern the structure of pension etc have to be evolved taking into account the relevant constitutional provisions as well as judicial pronouncements by the Supreme Court of India in this regard.
1.3 Article 366(17) of the Constitution of the Country defines pension as under:
" Pension: Pension means a pension whether contributory or not, of any kind whatsoever payable to or in respect of any person and includes retired pay so payable; a gratuity so payable and any sum or sums so payable by way of the return, with or without interest thereon or any other addition thereto, of subscription to a Provident Fund."
From this what is to be inferred is that the gratuity as well as commutation are also part of the pension as a whole. These are also to be treated as pensionery benefits.
1.4 The IV CPC went into the conceptual question of pension in detail. Some of the observations contained in their report are relevant in understanding the purport in the background in which the Central Government employees are placed today.
" Para 2.13: Part II: But the concept of 'pension' however old in its origin, had the latent and real desire to provide for an eventuality – known and unknown. The known eventuality was old age and probable reduction in earning power, while the unknown eventuality was disability by disease or accident or death. Its real purpose was security, even though the beginning was oblique, indiscernible and faint. But the germ of an effort to provide security ran through the provision and it is natural that it should have grown and flowered with the development of human understanding and desire to look after and provide for those who deserved it for man has constantly been seeking means by which to enhance his economic security. But the extension of the pension provision from military service to civilian public employment, resulted largely from consideration for the employees and the pressure of their organisations. Some benevolent employer goes to the extent of regarding pensions as an absolutely indispensable complement of wages – a terminal benefit. That however, is apart from another aspect bearing on pension – the social aspect. The demographic structure of the population is changing because of the greater expectation of life. Thus, those who are now in middle age are going to be nearly twice as big as economic burden to their children as their parents are to them. The problem in such cases, has been tackled as a social obligation, including social insurance for citizens generally."
"Para 2.17: In the very nature of things, every employee, who lives long enough, reaches a stage of diminished outturn of work or what may generally be called non-productive years. That may, speaking generally again, be set to be the responsibility of his employer for whom he has spent the best years of his life. In a welfare state that may also be set to be the responsibility of the Government (where he is not in his employment) and, in more modern society, it may also be set to be the responsibility of the individual. So all three namely, the employer, the Government and the employee or one or the other of them, may be expected to contribute towards the pension according to the social or administrative set up of the country or society where the individual undertakes the service but the one common feature and object of pension is to provide for the old age of the employee for the simple reason that time has eroded his capacity to earn and he is unable to provide for himself. In a country like ours, where we have solemnly resolved to constitute it into a"Socialist" Republic and to secure to us all social and economic justice (Preamble), it behoves the Government to take care of its employees by providing terminal benefit like retirement pension when they become entitled to them. We may refer to the directive principle of the State Policy enshrined in Article 39 (a) of the Constitution that the State shall in particular direct its policy towards securing that the citizens have the right to an "adequate means of livelihood" ….. If, such a citizen is an employee of the State, is it out of ordinary, and not as of a Constitutional directive, that the State should appreciate its duty to provide for him by means of a pension and/or other terminal benefits?(emphasis added) …. The concept of pension, therefore carries within it the germ of certainty, periodicity, and "adequacy". ……. Ours is a Socialist State and the fundamental aim of Social security is to give individuals and families the confidence that their level of living and quality of life will not, in so far as, be greatly eroded by any social or economic eventuality, including the age of superannuation or oncoming disability"
1.5 The concept of pension has been explained more precisely in the Encyclopaedia of Social Sciences,Vol.11 as under:
"administrators and civic leaders interested in the improvement of Government services formulated the idea of pension as an efficiency device necessary for the orderly and humane elimination of superannuated and disabled employees no longer able to function efficiently for the proper operation of the system of promotions, for the attraction of better type of employees and for the improvement of working morale"
1.6 On the doctrinal approach the Encyclopaedia further states that:
" A doctrine recently advanced and more far reaching in its implications regard the Public Service as the logical pioneer in the meeting of the old age problem as it affects wage earner in modern society. This doctrine considers a pension as a compensation paid to the employee for the gradual destruction of his wage earning capacity in the course of his work. Retirement being a proper charge against the employees, entire period of active service, the employer should make contribution towards the employees eventual retirement during each year of service of the employee, in a manner similar to that in which he annually sets aside a reserve against depreciation and obsolescence of his plant and machinery. Pensions, according to this doctrine, are an absolutely indispensable compliment of wages."
1.7 In para 2.20 the IV Pay Commission has observed:
"but even though the Government service pension scheme in our country is non-contributory, it has been contended again by way of doctrinal approach, that this is not really so and that some allowance is made for the missing contribution while determining the salaries"
1.8 The Supreme Court in their Landmark Judgment (which has been approvingly quoted by the 5th CPC in D.S.Nakara and others Vs Union of India (AIR 1983 SC 130) held that Pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer. It is not an ex-gratia payment but payment for past services rendered. It is a social welfare measure rendering socio economic justice to those who in the hey-days of their life ceaselessly toiled for their employer on an assurance that in their old age they would not be left in lurch. The 5th CPC paying due respect to the above observation of the Honourable Apex Court in Para 127.6 of its report has stated that the pension is the statutory, inalienable, legally enforceable right of employees which has been earned by the sweat of their brow. As such the pension should be fixed, revised, modified and changed in ways not entirely dissimilar to the salaries granted to serving employees.
1.9 While examining the goals that a pension scheme should seek to sub-serve, the Honourable Apex Court held that "a pension scheme consistent with available resources must provide that the pensioner would be able to live:
(i) free from want, with decency, independence and self respect, and
(ii) at a standard equivalent at the pre retirement level"
The Court observed that we owe it to the Pensioners that they live, not merely exist.
1.10 From the above observation of the Supreme Court it is clear that pension is payable by the employer i.e., the Central Government to its retired employees which is their statutory and legally enforceable right from which they cannot be deprived. That the amount of pension must be enough to enable a pensioner to live free from want with decency, independence, and self-respect and at a standard equivalent at the pre-retirement level.
1.11 Keeping the above observations and principles and judicial pronouncements in view, we submit below our suggestions for restructuring the existing pensionery scheme in appropriate chapters. We have made our submissions only in respect of issues where we want Commission to consider improvements in the existing provisions.
CHAPTER – II
New Pension Scheme (NPS)
2.1 The contributory pension system brought in by the GOI through their notification dated 22.12.2003, now renamed as National Pension System under PFRDA Act, has been imposed on Government employees who entered service on or after 1.1.2004.
2.2 This is an illegal act in as much as the Supreme Court of India had held Pension as an enforceable inalienable fundamental right. Therefore it should be scrapped or at least not made applicable to Government employees. This has also divided the CG employees into two categories and therefore it is discriminatory in respect of persons who have entered service on or after 1.1.2004 who had been denied the statutory pension. Any discriminatory scheme is illegal and ultravires of Article 14 of the Constitution. On this count also the NPS cannot be made applicable to the Government employees.
2.3 The Centre for Economic Studies and Policy, Institute for Social & Economic Change, Bangalore in a Study of Terminal Benefits of the Central Government Employees sponsored by the VI CPC had also observed that Civil Services Pension is in the nature of a deferred wage. It is well known that the principle guiding the pay package of civil servants is one of intentionally spreading out the compensation over a long period of time, thereby the wages paid out during the course of the work tenure is kept low by design, and the pension payments made during the retirement phase compensate for the low working wages.
2.4 The above mentioned study under the heading "Arguments against pension reforms" states as follows:
"Deferred Wage: In the context of civil servant pension payments, it is argued that, the principle guiding the fixation of pay package is one of intentionally spreading out the compensation over a long period of time, where by the wages paid out during the course of work tenure is kept low by design, and the pension payments made during the retirement phase compensate for the low working wages. The Supreme Court of India held that pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer. It is not an ex-gratia payment, but a payment for past services rendered. It is a social welfare measure, rendering socio-economic justice to those who in the heyday of their life ceaselessly toiled for the employer on an assurance that in their old age, they would not be left in the lurch."
"Larry Williams observes "Actually, civil service pensions, because they are not based on contributions, are best described as deferred wages. Civil servants accept a lower current wage in exchange for the promise of a pension in their old age. If this pension were contributory, they would insist on a higher wage and government would have to either increase taxes or borrow (issue debt) to pay it. The real cost of civil servants is thus much higher than recorded under the current system of cash accounting. A good reform would be to move to a system of accrual accounting setting up at least a notional fund to pay these deferred wages" (Larry Wilmore, 2004)"
"Public and private sector pay differentials: A comparison of the public and private sector wages reveals that while the public sector wages for the lower grades compares well with that of the private sector, the salaries of the employees belonging to the higher grades are highly unfavourable to the public sector employees. The post-retirement benefits that the government employees are entitled to act as some incentive to retain them in government sector."
2.5 The above study had pointed out that expenditure on pensions of civil servants of high income OECD countries on an average is 2% of GDP (less than 1% in Ireland and more than 3.5% in Austria*)(* Source: OECD Social Expenditure Database). But in the 8 South Asian countries it is less than 1% of GDP (Source: World Bank Data base). However, in India between 1964-65 and 2004-05 on an average pension payments (Civil Service pension paid by Central Government) have constituted 0.51% share of GDP. The Pension liability would continue to increase and reach 0.54% level by 2019-20 and remain at that level till 2014-25 after which they would decline as a percentage of GDP according the the same study conducted by Dr.Gayatri at the instance of VI CPC. These figures argue themselves in favour of continuation of the Defined Benefit Pension Scheme for all Central Government employees instead of throwing a section of them to market based NPS.
2.5 The above study had submitted the following estimated pensionery outgo which tends to increase during the period from 2014-2038. It is only after 2043 that it starts declining and will be reduced to zero only in 2088. The table is given below:
Table showing estimated pensionery outgo
Year
|
Employee Pension
Payout (in Rs Crores)
|
Family Pension Pay out (in Rs.Crores)
|
Total pension payout (in Rs.Crores)
|
2004
|
11300.69
|
2983.38
|
14284.07
|
2008
|
13532.84
|
3572.68
|
17105.52
|
2013
|
16549.07
|
4368.94
|
20918.02
|
2018
|
21862.54
|
5771.79
|
27634.33
|
2023
|
27723.68
|
7319.11
|
35042.80
|
2028
|
34076.27
|
8996.13
|
43072.41
|
2033
|
39321.68
|
10381.01
|
49702.69
|
2038
|
45164.50
|
11923.41
|
57087.90
|
2043
|
41747.23
|
11021.30
|
52768.53
|
2048
|
35011.92
|
9243.18
|
44255.10
|
2053
|
25405.44
|
6707.07
|
32112.51
|
2058
|
16303.15
|
4304.07
|
20607.22
|
2063
|
8179.51
|
2159.39
|
10838.90
|
2068
|
3159.88
|
834.19
|
3994.07
|
2073
|
800.68
|
211.34
|
1012.02
|
2078
|
110.26
|
29.17
|
139.43
|
2083
|
3.52
|
0.97
|
4.49
|
2088
|
0.00
|
0.00
|
0.00
|
2.6 From the above projection it is very clear that the benefit of NPS will commence only after 44 years i.e. in 2044. And during the period it will increase exponentially as because in addition to the Statutory pension liability the Government will be contributing to the NPS also @ 10% of annual salary bill of the CG Employees who have entered service on or after 1.1.2004.
2.7 The final conclusion of this study team has been as under:
"Mainly given the fact that the future liability although may be large in terms of the absolute size is not likely to last very long and does not constitute an alarmingly big share of the GDP which is also on the decline, it appears that pursuing the existing Pay As you Go to meet the liability would be an ideal solution."
2.8 Applying this conclusion we may suggest that the NPS may not be made applicable to the Government employees and all those who had been covered under NPS may be reverted back to statutory pension scheme. The Government may be asked to study the experiences of this scheme in several other countries in the world. In Chile such a scheme has been reversed as because the return which the low paid employees got out of the annuity purchased was not as good as 50% of LPD but as low as 20% of LPD. The UK Government had to pay out of the exchequer large amount by way of subventions in order to ensure that that annuities purchased yield 50% of LPD as pension. It is well known that in USA where there were similar pension schemes dependent upon the market had collapsed during the financial melt down from 2008 onwards. It is estimated that more than 3.5 trillion $ worth of pension wealth was lost. The workers not only lost their pension but also their jobs. Our respectful submission is that taking into account the demographic considerations the India which is a country of young do not need any such market oriented pension scheme, particularly when the international experience is that such schemes had failed and our country can afford to pay pension to civil servants which stands at level of 1% of the GDP.
Pensionable service of Casual and GDS: Recent judicial pronouncements have directed the Government to take into account the date of entry in the service as a casual labourer or a temporary status Mazdoors etc into criterion and not the date of regularisation to determine as to whether he or she is to be brought under the CCS (Pension) Rules, 1972 or under the NPS. Therefore we propose that all casual labourers, Gramin Dak Sewaks in the Department of Posts etc are to be brought under the Defined Benefit Pension Scheme under the CCS (Pension) Rules, 1972 for grant of pension on their regularisation in the services, even though they are getting regularisation after 1.1.2004 because they should be treated as having entered the services before 1.1.2004 as per the judgment of Court. We therefore propose that entire service rendered as a casual labour irrespective of the fact whether he was granted temporary status or ultimately regularised should be treated as pensionable service and the service rendered as GDS in Department of Posts also should be treated in the similar fashion.
Chapter – II
Gramin Dak Sewaks and Casual Labourers
Defined Pension to GDS Promotees on retirement
2.1 The new entrants on or after 1.1.2004 in the Central services are not covered by the Defined Pension benefit scheme but attached to NPS only. However, if any Casual labourer like the temporary status Mazdoors etc are regularised even after 1.1.2004, they should be treated as entered in service prior to 1.1.2004 only as per the judicial pronouncement of Honourable High Court of Madras. In a recent judgment the Madras High Court has held that 16 temporary status Mazdoors who were regularised in the Kalpakkam Atomic Energy Department after 1.1.2004 should be brought under Defined Benefit Pension Scheme and not under NPS by virtue of their entering the services as a Casual labourer well before the cut of date of 1.1.2004.
2.2 In the background of the above judgment we submit that there are thousands of casual labourers with or without temporary status in the Department of Posts without any scope of regularisation for years. Therefore when they get the opportunity to be regularised, they should not be placed under the contributory NPS Scheme but should be brought under the CCS(Pension)Rules, 1972. We request the 7th CPC for a positive recommendation to the Government in this issue.
2.3 Due to wrong interpretation of the DOPT as well as the Department of Posts, hundreds of Casual labourers who have become eligible to be considered for grant of temporary status Mazdoors as per the scheme worked out by the DOPT in line with the Supreme Court of India's directive are deprived of the benefit. The DOPT order facilitates grant of temporary status to those casual labourers who have completed 240 days of service in a year (206 days in the case of casual labourers working in administrative offices) provided they had entered into the service as a casual labourer on or before the cut off date viz., The wrong interpretation made by the DOPT / DoP being that only those casual labourers who have completed 240 days of service on the cut off date itself will be entitiled for the grant of temporary status and that the scheme is not a running scheme for those who completes the eligibility on a subsequent date to the cut off date. This is not only an arbitrary interpretation against the spirit of the Supreme Court directive but also against regularisation of casual labourers themselves in the services. They will be able to be regularised only if they are granted with the temporary status and only if they get regularised they will be able to be made eligible for the defined benefit pension as discussed in the foregoing paragraph. We request the 7th CPC for a recommendation by the Pay Commission for set righting a glare injustice to pave way for converting the period of casual nature as pensionable service.
Defined Pension to GDS Promotees on retirement
2.4 There are roughly three lakhs of Gramin Dak Sewaks in the Department of Posts who were recommended by the Justice Talwar Committee for the grant of pension by the Government by treating them as civil servants. This was not accepted yet by the Government. Meanwhile as per the analogy of the judgment of the Honourable Madras High Court, which directed to treat the period of casual nature rendered by the temporary status Mazdoors regularised after 1.1.2004 as employees entered in service prior to 1.1.2004, these Gramin Dak Sewaks also are to be treated as entered in to Postal Services before 1.1.2004 even though they get regularised in the posts of MTS / Postman / Mailguard etc after 1.1.2004 by virtue of their long service as GDS that gives them the eligibility to regularisation.
2.5 In some cases there are judicial pronouncements to the effect that if there is any shortage of service in a regularized post for the eligibility to pension (10 years service) to those employees who were promoted to those posts from the cadre of Gramin Dak Sewaks, then the shortage should be adjusted from the long service rendered by them as GDS. The above judgment has not been extended to all similarly placed employees resulting in them retiring without any pensionery benefit. This is totally unjustified and against the legal pronouncements. We therefore suggest that the 7th CPC may recommend to the Government for allowing such retirees to get pension by treating their shortage if any in the qualifying service from the long service rendered by them as GDS in the past
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