The UPA is trying hard to get the Left to support the Pension Fund Regulatory and Development Authority (PFRDA) Bill, arguing that it's necessary to set up the Authority to tide over the increasing financial stress that the current pension plan is putting on central and state revenues.
In a note that the UPA submitted to the Left at Monday's coordination committee meeting, it said that the government's pension liabilities have grown faster than the normal GDP growth rate.
"In the last 17 years, while nominal GDP grew by a compound rate of 14.5 per cent, the central government's outgo on pension increased at the compound rate of 17.8 per cent," the note said. It added that state pension payments increased from Rs 1,598 crore in 1987-88 to Rs 38,370 crore by 2004-05.
The UPA cited the Standing Committee on Finance's comments on the necessity of "setting up of the PFRDA as a statutory regulatory body for managing the NPS (new pension scheme) mainly on account of burgeoning fiscal stress of pension payments on the central and state revenues".
One recommendation was that subscribers could invest 100 per cent of their funds in government securities. The second recommendation, according to the note, is to provide that at least "one of the pension funds shall be a government company or wholly owned by a government company or government companies. It can be further provided that the first three fund managers shall be LIC MF (mutual fund), UTI MF and SBI MF."
The UPA's note was in response to the arguments that the Left had put up against the Bill. The UPA also responded, at the meeting, to two other issues that the Left had raised earlier, SEZ and reducing petrol prices.
The UPA dismissed the Left's demand for amending the SEZ Act and Rules but also attempted to allay its fears that SEZs will be turned into a real estate bubble by investors.
The 20-page note on SEZ said that there should be no amendment to the Act for at least two years "as it would also dilute the very basic objective of the scheme to attract fresh investment into the country." It added that even minor amendments to the Rules would be made in the "larger interests of facilitating implementation of the Act and the Rules."
Contrary to the Left's fear that workers rights would be compromised in SEZs, the government note said, "The SEZ Act through an amendment brought about by the Parliament envisages that the central government shall have no authority to relax any law relating to the welfare of the labour in SEZs."
The government also dismissed the Left's demand to reduce prices as price of international crude oil has softened. The note on the issue categorically states that at this "juncture any reduction in domestic prices of petrol and diesel will be short-lived."
It added that international price of oil is likely to increase as winter approaches. "The OPEC resolve (to cut output by 1.2 million barrels per day), growing geo-political risks, strong demand forecast in 2007, anticipated decline in winter stocks are all expected to put pressure for further increase in the international price," the UPA argued.