The announcement of One Rank, One Pension (OROP) by Prime Minister Narendra Modi’s government — a huge thanksgiving occasion for millions of veterans and their families — also focuses attention on the issue of pension costs.
Pensions are a long-term liability for any government and increasing life spans create significant challenges in long-term fiscal planning for establishments the world over — as is the case with India. The OROP decision by the Modi government was a particularly gutsy one, given that its real costs of Rs 8,300 crore per year were far higher than the estimate (or guesswork) of the UPA government of Rs 500 crore per year.
This marks an almost 15% increase in the existing defence budget of Rs 54,000 crore per year. The recent decision of OROP also stipulates a five-year normalisation and not annually, as is the purist definition because of the need for the government to understand and study how pension costs evolve after OROP.
The justification for OROP lies in the peculiar way armed forces personnel are made to retire early. Jawans are made to retire as early as 35 and officers as early as 54. This would seem to be an anachronism at a time when people are working late in life.
But this requirement is because of the trying service conditions that historically wear out soldiers very early in life, combined with the need to always have a fighting-fit armed force. This early retirement practice, in turn, creates a large number young pensioners — which is the root cause of the high defence pension costs.
This needs taking a relook at pension reforms. This also highlights the need to reform the way armed forces service conditions are structured — which in turn have an effect on their pensions. For starters, it is a national waste to allow a 35-year-old jawan or a 54-year-old officer to retire in the prime of his life. With better medical facilities and fitter soldiers, it is probably a good time to rethink the retirement age of soldiers.
Also the re-skilling of armed forces personnel must be intensified so that instead of retirement they are provided lateral opportunities in government institutions like paramilitary forces, the police or at different levels of state administration. The US is a good example of how veterans find themselves serving in police forces and the government around the country after their tour of duty.
In India, such lateral placements would achieve two objectives.
One, skilled, dedicated and professional men and women will be available to government organisations, and two, this will reduce the pension bill and costs to the government. Lastly, looking to the future, the defence forces must start restructuring and transforming into a smaller, nimbler and more mobile force and reduce numbers over the medium and long terms. This is the norm all over the world as forces reduce their size whilst retaining their offensive capabilities with mobility and technology.
Veterans are human capital that represent national service at its highest. For reasons that are inexplicable, they find very little representation in the government machinery post retirement. One explanation is the age-old hostility that the bureaucracy has to the culture of the armed forces. But the political leadership of this government can take the lead on this initiative and make this part of sweeping government reforms.
Using human capital like veterans fully is good for the economy and, in this case, it will mark a reform of the dreary old habits of the past, marking real reforms in pension costs. The time for this is now!
(Rajeev Chandrasekhar is an MP. The views expressed are personal)