Himachal govt reinstates old pension scheme

The decision to restore the old pension scheme was taken at the first cabinet meeting of the new government, and was launched with immediate effect.

More than a month after he stormed to power in Himachal Pradesh, chief minister Sukhvinder Singh Sukhu on Friday announced he was reinstating the old pension scheme (OPS) for retired government officials — a promise that was seen as key to the Congress’s election victory but one that several experts say will lead to severe fiscal hardship for the government.

Employees celebrate after the state announced implementation of Old Pension Scheme, in Shimla. (PTI)

The decision to restore the old pension scheme was taken at the first cabinet meeting of the new government, and was launched with immediate effect. The decision will impact about 136,000 employees of state, who are presently covered under a contributory pension scheme referred to as new pension scheme (NPS).

The cabinet also decided to constitute a subcommittee headed by agriculture minister Chander Kumar to finalise the road map to create 100,00 new job opportunities in the state.

The cabinet constituted another subcommittee, headed by industries minister Harshwardhan Chauhan, to prepare a blueprint to implement the manifesto promise of giving an allowance of ₹1,500 to all women every month.

“The state government has decided to provide OPS to all its NPS employees to ensure that they live a respectable life after retirement. This was one of the 10 guarantees given by the Congress during the Vidhan Sabha elections,” Sukhu said. “Affordability of OPS expenditure will be achieved through financial discipline and cutting down on expenses.”

Sukhu blamed the previous government for the poor financial condition of state. “Congress inherited a ₹75,000 crore debt from them,” he said.

The NPS vs OPS debate has gathered momentum in recent months, with several non-BJP ruled government deciding to revert to OPS, demanding return of the money collected under NPS (which the Centre has rejected), and making it a political issue.

NPS allows employees to decide where they want to invest their money by contributing regularly in a pension account throughout their career. After retirement, they can withdraw a part of the pension amount in a lump sum and use the rest to buy an annuity for a regular income. OPS was defined as opposed to the investment return-based NPS.

In NPS, the government and employees contribute an equal portion towards the pension fund. The old scheme provided 50% of the last drawn salary as the pension The minimum payment to retired employees as pension is ₹3,500 in NPS, with those above 80 getting an additional pension between 20% and 100% of basic pensions.

Recently, economist and former deputy chairman of Planning Commission, Montek Singh Ahluwalia, said that going back to implementing OPS was a “recipe for financial bankruptcy”.

State BJP chief Suresh Kashyap accused the government of misleading the employees and said the Congress failed to implement the guarantees promised by it in 10 days.