Unable to diagnose Punjab's grim fiscal health and left with thin cash reserves to release payments to retiring employees, the Shiromani Akali Dal-Bharatiya Janata Party coalition government on Tuesday decided to raise the retirement age of its employees to 60 years from October 1.
At the core of the state government's decision is the worrying salary, wages and pension bill, which is proving to be a huge burden on the state exchequer and eating up the bulk of the state's revenue receipts. The step to increase the superannuation age will temporarily help the government contain the fast-deteriorating fiscal health as it is expected to save about Rs 1,000 crore annually.
As per official figures, the annual salary, wages and pension bill is about Rs 20,750 crore. This consumes a majority of the state's revenue receipts as Rs 20,000 crore come from value-added tax (VAT), the biggest source of revenue for the government.
Government sources say chief minister Parkash Singh Badal on Tuesday formally approved the proposal to raise the retirement age, mooted by the finance department with the objective of overcoming the precarious financial position.
During the cabinet meeting here on Tuesday, this issue was hotly debated, albeit informally, by the ministers after chief secretary Rakesh Singh brought it up.
As increasing the retirement age of employees was an executive decision, the matter was not placed before the cabinet formally as no approval was needed, a government functionary said.
Speaking to Hindustan Times, finance minister Parminder Singh Dhindsa said: "Though not many (leaders) in the government are in favour of raising the retirement age, we have decided to bite the bullet due to the precarious fiscal health."
Dhindsa candidly admitted that raising the retirement age had become imperative due to "certain financial compulsions" as the move would help the government in "saving some money", which otherwise had to be released to superannuating employees in the form of gratuity and general provident fund.
Now, the personnel department will amend the rules. "Yes, from October 1, the retirement age will be increased from 58 to 60 years," Dhindsa added.
The government has also decided to increase the recruitment age by one year, from the present 37 to 38 years.
In September 2012, the government had decided to offer the option of re-employment for a period of one year to all its retiring employees, while declining the finance department's proposal to increase the retirement age from 58 to 60 years.
Under the re-employment option, the employees will continue to retire at the age of 58 years. But they will have an option of re-employment for two years.
"The superannuation age will be increased on the pattern already in place. But the rules will be amended accordingly," the finance minister said.