The government on Monday denied that the additional financial burden of Rs 8,000-10,000 crore on account of OROP scheme will hurt the fiscal consolidation programme, saying there was "space" to absorb it.
"We have the fiscal space to be able to absorb this without having any impact of the fiscal deficit target, which is 3.9%. So, we have taken that into account as we have prepared the One Rank One Pension (OROP) scheme," minister of state for finance Jayant Sinha told PTI in an interview.
The government had last week announced that it will implement OROP under which a uniform pension would be given to armed forces personnel retiring at the same rank with the same length of service. The scheme would be implemented from July 1, 2014.
Funding the OROP, the minister said, was never a consideration, but the government took time in finalising the scheme as it wanted it to be "equitable and not half-baked".
Sinha said the actual payout in arrears for implementation of the scheme from July 1, 2014, as well as the recurring burden are being worked out. For the current year, the outgo is estimated at Rs 8,000-10,000 crore, he said. "We are estimating that cost would be between Rs 8,000-10,000 crore at present and it would increase further in future... It is a recurring number. The Rs 8,000-10,000 crore is in this fiscal and there are of course arrears which have to be paid," he said.
As per the OROP scheme announced by the government, the pension for defence personnel would be revised every five years.
The arrears would be paid in four half-yearly instalments. However, all widows, including war widows, will be paid in one instalment.
"We have taken into account what adjustment will be necessary in the Budget to be able to both apply one rank one pension which we have promised to our brave servicemen while at the same time maintaining our fiscal discipline and fiscal target that we have already outlined," he said.
Sinha said there are estimated 6.5 lakh war widows and over 27 lakh ex-defence personnel who will benefit from the OROP scheme.
"We have sufficient ability to be able to find fiscal space for that... As of now, we are quite confident we will be able to find that fiscal space," Sinha said.
In the current fiscal, the government aims to restrict fiscal deficit at 3.9% of GDP. As per the fiscal consolidation road map, the fiscal deficit is to be brought down to 3% of GDP by 2017-18.