It is clear that Old Pension Scheme (OPS) among other issues cost Bharatiya Janata Party (BJP) two seats during the recently held polls for teachers and graduate constituencies. Even if there were internal conflicts among the BJP’s state and local leaders and there was anti-incumbency against the party’s sitting MLCs in Nagpur and Amravati, the party’s official stance on the OPS was a big factor in the defeat of the BJP.
The loss of BJP candidates has already emboldened Congress-Nationalist Congress Party (NCP)-Shiv Sena. But it has offered traction to the demand `by government employees and teachers for pension scheme that Maharashtra has shunned since 2005, especially after Congress-ruled states of Chhattisgarh, Rajasthan, and Himachal Pradesh for their announcement to restart the OPS.
It was a bold move that the then Congress-NCP government led by chief minister Vilasrao Deshmukh had taken when it decided more than 17 years ago to introduce an employee contributory fund in place of the current pension scheme for new employees, in an attempt to tide over a worsening financial crisis.
When the government in power decided this, Maharashtra was spending about ₹ 33,000 crore of the total budget of ₹ 60,000 crore on wages through the financial year of 2005-06. Of this, the pension expenditure alone worked out to ₹ 11,000 crore, the government had then said.
The rise in the pension burden was frightening. The outgo on pension had gone up by eight times, whereas the salary expenditure had tripled during the past decade.
{{/usCountry}}The rise in the pension burden was frightening. The outgo on pension had gone up by eight times, whereas the salary expenditure had tripled during the past decade.
{{/usCountry}}As the issue resurfaced once again during the campaigning for teachers and graduate constituencies polls, Deputy Chief Minister Devendra Fadnavis tweaked his earlier position saying the government is not “negative about it OPS”. Fadnavis changed stand came after Chief Minister Eknath Shinde indicated to state employees that his government was positive on the issue.
This was a more nuanced stand from the position he had taken a month before when Fadnavis, also a finance minister, while speaking in the state legislative assembly asserted that OPS will lead Maharashtra to bankruptcy.
In Fadnavis’ own words, Maharashtra returning to the old pension scheme would burden the exchequer with a sum of ₹ 1.10 lakh crore and cause the state to go bankrupt.
In 2005, when Deshmukh government took the bold move, Maharashtra had a debt of around ₹ 1,10,000 lakh crore. By financial year 2022-2023, the debt stock of the state increased to ₹6.50 lakh crore, up from ₹4.51 lakh crore in FY 19-20 — a difference of ₹1.99 lakh crore.
The old pension plan provided defined pension benefits to employees. A pension equal to 50% of the last salary received is the employee’s legal entitlement under this. The National Pension System (NPS), which went into effect in 2004, however, makes the pension amount contributory.
Experts have termed OPS a money-guzzling scheme that eats into the revenue of the state and is unsustainable over the long run. NPS on the other hand is market-linked with both the government and the employee making monthly contributions, to be invested in pension funds.
In 2005, Maharashtra employed about 1.6 lakh people in various departments. By 2021, Maharashtra government’s total expenditure on paying salaries and pensions went up to ₹1.55 lakh crore as the number of people employed by state went up to nearly 19 lakh in 2020-21.
As the government, going by previous attempts, looks keen to reduce this cost so that more money could be spent on infrastructure development, a rising wage bill is the last thing the state wants even as OPS has the potential to offer immediate political gains.
On the political front, those who were in power and shunned the OPS way back are now demanding its reversal. If Maharashtra does revert to the old pension scheme, it will be the first BJP-ruled state in the country to do so when pension and interest payments are part of the revenue expenditure of the government, seen to be non-productive and sticky.