INDIA DEFENCE CONSULTANTS

WHAT'S HOT? –– ANALYSIS OF RECENT HAPPENINGS

OROP - THE SAGA CONTINUES

An IDC Analysis

New Delhi, 20 Sep 2015

Who is Afraid of the Truth in OROP?

 Why the Government Must Tell 125 Crore Indians 
The Simple Truth about One Rank One Pension (OROP)

"Satyameva Jayate" (Sanskrit: सत्यमेव जयते satyam-eva jayate; literally "Truth alone triumphs") is a mantra from the ancient Indian scripture Mundaka Upanishad. It was adopted as the national motto of independent India.

On 14th August 2015, the Delhi police, which functions directly under the Central Govt, and the NDMC, by their action provided the much needed media exposure to the ESM agitation. It also united the other ‘sitting on the wall’ ESM organisations.

On 11th September 2015, in Chandigarh, the PM, by those few words re-invigorated the reportedly ‘factionalised’ ESM into protesting with much more vigour. Proof is the attendance at ESM rally on 12th September 2015 and the myriad photographs doing the rounds on social media. Most print media, with the exception of The Hindu, either blanked off or covered desultorily and the usually voluble TV channels did not cover the rally but also did not consider the impact of the social media. 
The PM’s words achieved one aim. It may have been a political speech, as some retired BJP supporters amongst ESM said, or it was the PM’s anger at the continuing agitation by ESM in New Delhi or their statements about campaigning in Bihar, but the words reinforced the feeling that the Govt’s professed love and respect for the Jawan conceals disdain for ESM and widows of ESM. 
But, all ESM, and their widows to a large extent, are a literate lot, and they ask many questions. They find answers to most questions on the Govt’s websites, but they ask more questions that only the Govt can answer. The ESM and widows ask 

Do 125 crore Indians know what OROP really is and why it was being requested, and isnow demanded? 

Does it mean that two different Governments led by two different political parties, aided by a phalanx of bureaucrats misunderstand the reasons, the concept, the aim, and the implications – financial, administrative, and legal – of OROP?

If approving OROP was a desperate UPA’s electoral death throes, then what was the BJP’s repeated “committed to OROP” about?    

Do 125 crore Indians know how much the widow of a sepoy, or a Subedar Major or of a Brigadier draw as Family pension?

How has the Govt given away Rs 1, 23, 000 crore from the money of the poor (Rs 63, 000 crores as tax exemptions to rich corporates in 2014-15, Rs 20, 000 crores to offset losses of Public Sector Banks (PSB) by their bad loans of poor people’s money to offenders, and Rs 40, 000 crore of the poor to Foreign Portfolio Investors (FPI) in 2015-16), 

If outgo of Rs 8300 crore or Rs 10, 000 crore or Rs 12, 000 crore for OROP will drive India into a Greece like situation, as some learned commentators, editors and retired bureaucrats predict, then what about the amount stated above?

Pension for Government’s Civilian Employees vis-ŕ-vis ESM

The minimum eligibility period for receipt of pension is 10 years. A Central Government servant retiring in accordance with the Pension Rules is entitled to receive superannuation pension on completion of at least 10 years of qualifying service (see qualifying service for Defence Forces personnel above) [emphasis supplied].

Compare this with 15 years for ORs and 20 years for Officers of the Defence Forces to be eligible to draw pensions.

In the case of Family Pension for a Govt’s civilian employee the widow is eligible to receive pension on death of her spouse after completion of one year of continuous service or before even completion of one year if the Government servant had been examined by the appropriate Medical Authority and declared fit for Government service [emphasis supplied].

PCDA (Pension) states that a Family Pensioner of the Defence Forces (source: http://www.pcdapension.nic.in/gen/faq.htm), inter alia, states, “No family pension is admissible in cases where the ex-servicemen was not a pensioner on the date of his death.”

For civilians to draw family pension, there is nothing to do with dying in the first year of continuous service or even within 15 years or 20 years of service, like many of the jawans and officers are shot dead by terrorists before they are eligible for pension! 

The widows (nearly 6 lakh) of ESM are near penury as they are paid just 30% of the last pay drawn by their husbands as family pensions. The family pension for a Group X (the highest paid) Sepoy’s widow is Rs 3672 + 113% Dearness Relief (DR) = Rs 7822 per month (Rs 260 per day) to Rs 6507 +113% DR = Rs 13859 per month (Rs 462 per day) for the widow of a Gp X Sub Maj who served 30 years but whose pension reached the top of the pension table at 28 years? 

Compare the above with the MGNREGA daily wages for 2015-16 for unskilled, unemployed labourers for some States: -Haryana – Rs 251; Chandigarh – Rs 239; Punjab – Rs 210; lowest Madhya Pradesh and Chattisgarh Rs 159. (Complete text of F No. J-1011/1/2009-MGNREGA (Pt III) dated 31st March 2015, atnrega.nic.in.)    

Widows of Lt Col, Colonel, Brigadier draw Rs 15759, Rs 16677 and Rs 17487 + 113% DR as family pensions, respectively.

The ESM amongst Officers cadre are no better – Lt Col’s pension Rs 21490 at 20 years of service, Colonel’s pension Rs 26265 at 26 years of service and Brigadier’s pension Rs 29145 at 30 years of service. It is all taxable and that is why they have to find employment outside. 

(Source: Circular Nos. 501 & 547 for Other Ranks Pensioners and No. 500 & 548 for Officers’)

Pensioners issued by PCDA (and updated on 11th September 2015).  Defence Forces Pensioners are Income Tax Payees

Of the 30 lakh ESM pensioners, including family pensioners, a majority pay income tax, and many uninformed (sic?) trolls think defence pension is income-tax exempt. 

ESM contributed part of the Rs 63, 000 crore tax exemption & incentives gifted to the corporate sector, and part of the first tranche of Rs 20, 000 to re-capitalise PSBs’ for the irrecoverable loans they handed out, and part of Rs 40,000 crore the Govt has exempted the FII from paying MAT, and the several hundred crore that is paid to Air India for Air India One’s flights and Rs 40 crore spent of the PM’s 15 trips abroad. Or why the poor are being deprived to pay OROP of Rs 10, 000 crore to ESM but are not deprived when the Govt foregoes Revenue (taxes) of Rs 63000 crore, gives Rs 20000 crore to PSB and Rs 40000 crore FPI of the poor peoples’ money in 2015-16? 

In this context it would be educative for all to read what Shri Uttam Gupta, a financial analyst, has written in the Deccan Herald, 14th September 2015, in his comment titled Minimum Alternate Tax (MAT), Don’t Override the Judicial Process, inter alia, “After Justice Shah Committee recommended… He (FM) has also promised to come out with an amendment to Section 115J of the Finance Act to exempt all FPIs nt having permanent establishments in India from levy of MAT…….By giving these assurances the Narendra Modi Govt has not only gone back on the principle espoused by the Govt but also pre-empted the judicial process….

OROP Commitments and Implementation Issue

Then PM-candidate, by his now famed his oratorical flourishes, raised the forlorn hopes of ESM in Rewari in September 2013, and with his every subsequent assurances and statements of implementation of OROP, kept those hopes high. 

Are 125 crore Indians aware of subsequent and recorded on file statements by the UPA’s Raksha Mantri (RM) and the Finance Minister (FM) that “Rs 500 crore was just a token amount and more would be forthcoming as soon as the amount could be worked out?”  

Those pre-election speeches might also have been the reason for the otherwise slow moving Defence Minister of the UPA to constitute a Joint Working Group (JWG), engrave the definition of OROP (equal pension for those with the same rank and same years of service and automatic future enhancements) in the pages of MoD’s files with alacrity, even haste, and set what now seems to be the OROP fireball on its way.  

Jean Paul Sartre said, “Commitment is not just a word. It is an act.” So, the newly formed NDA Govt had its chance of converting that commitment of OROP into fulfilling a promise in the Budget 2014-15. 
Though 125 crore Indians, of whom 30 lakh are ESM and widows of ESM, may think that Budgets are made by the FM and his (sealed up in the North Block) bureaucrats, they are by norm, prepared in consultation with the Prime Minister. FM (also the RM till November 2014) must have been aware of the PM’s priorities when he framed the Budgets 2014-15 and 2015-16. 

The Budgets for 2014-2015 & 2015-16 make it clear that Ex-Servicemen (ESM) were led up the commitment path till 5th September 2015 by repeated announcements. 

If the 125 crore Indians, the poor and income tax paying ESM & widows, do not believe it, they just need a cursory reading of Demand No. 22, available on the Ministry of Finance website [Source: Notes on Demands for Grants, 2015-2016, MoD, Demand No. 22, and Defence Pensions at indiabudget.nic.in/ub2015-16/eb/sbe22.pdf]. 

The extract of Demand No. 22 below shows that the FM did not project any demand for OROP and so FM (also the RM) made no provision in Revised Budget 2014-2015, in fact he deducted the Rs 1000 crore he grandly set aside for OROP: -

 

Budget 201314

Budget 2014-15

Revised
2014-15

Budget 2015-16

Total (in crore rupees)


45493.75


50966.95


49959.79


54466.95


 Note: -1. Pensions and Other Retirement Benefits:. Defence Pensions provides for pensionary charges in respect of retired Defence personnel (including civilian employees)of three Services viz. Army, Navy and Air Force and also employees of Ordnance Factories, etc. It covers payment of service pensions, gratuity, family pension, disability pension, commuted value of pension and leave encashment. The increase in BE 2015-16 is mainly due to normal growth in pensionary benefits and increase in provision towards payment of Gratuity, Commuted Value of Pension and Superannuation and Retirement Benefits. Increase of higher provision is also due to increase in number of pensioners and anticipated provisions of Dearness Relief” (emphasis supplied).

The Note below the table in Demand No. 22 makes one realise the jumla as it shows a conspicuous absence of OROP in thought, word, or deed, in contradiction, if one needs it, to the repeated “assurances and commitment.” 

So, the FM (also RM from 27th May 2014 to 8th November 2014) did not even plan for the OROP in Budget 2015-16 and hence the misery of depriving the poor to pay the tax paying ESM & widows. 
It took the UPA Govt that never works faster sixteen months to realise that it can pay the Class A Services to reward their incompetence with the Non-Functional Financial Upgradation (NFU), so that performance and promotion of one is presumed to be windfall for the others, even though 2 years later, non-performance notwithstanding! Funnily, no department, the ubiquitous Department of Expenditure included, is aware, in replies to RTI, of how much of the income tax paying ESM and widows and the poor people’s money goes towards that NFU.      

The truth is that in the OROP case, 16 months or so after May 2014, while the Govt gave away as revenue foregone an amount of Rs 62, 398 crores (see Annex 12 on MoF website for more details), the Govt made no realistic provision for OROP either in Budget 2014-15 (wherein the additional Rs 1000 crore earmarked for OROP was deducted in the revised budget when the FM was also the RM. The evidence is there on MoF website but extracted here for ready reference From Implementation of Budget Announcements 2014-15(pages 33 and 34): -

One Rank One Pension (Position reported on 30th January, 2015)

S No. Para No.   125      140                        Budget Announcement       

We reaffirm our commitment to our brave soldiers. A policy of "One Rank One Pension" has been adopted by the Government to address the pension disparities. We propose to set aside a further sum of Rs 1,000 crore to meet this year's requirement [Nodal Ministry/Department: Ministry of Defence] (emphasis supplied).

Status of Implementation

A working Group was constituted under the Chairmanship of CGDA for examining the proposal. The Working Group after deliberation suggested some possible options for implementation of One Rank One Pension (OROP). Meetings were held on 26.8.2014under the Chairmanship of Defence Minister (emphasis supplied), with Defence Secretary, Secretary (ESW), FA (DS) and CGDA on the implementation of OROP. The modalities are under consideration.                                                                Work in progress

(Note: FM was also RM from 27th May 2014 to 8th November 2014).  For 2015-16 the RM must have apprised the FM (who was the former RM) of the funds required for OROP.

Now that the Govt is to implement OROP, a process which will be complete when the implementation orders are issued, there is that bogey of the costs and “at the expense of the poor” that is being spoken about.   
Don’t the 125 crore Indians, deserve to be told why the demands of the ESM for OROP deserves so much of their Govt’s disdain? 

ESM hope that the PM will tell the truth about OROP in his future speech(es) and uphold the national motto - Satyam Ev Jayate.

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