ALL INDIA ASSOCIATION OF ADMINISTRATION STAFF (NON GAZETTED)
MINISTRY OF STATISTICS & PROGRAMME IMPLEMENTATION
GOVERNMENT OF INDIA
Hall No. 201 & 205, Vijay Stumbh,
Zone I, Maharana Pratap Nagar,
Bhopal, dated 07/10/2011
Dear friends, To withdraw the PFRDA Bill from the Parliament both in the interest of the Civil Servants and the exchequer Confederation of Central Government Employees & workers has given the call to organise one crores signature campaign and a massive parliament march on 25th of November 2011. Our Association has decided to organize one lakh signatures campaign from the members, members of fraternal Associations, family members and well wishers by 15th of November 2011 so that the same can be submitted to the Confederation by 20th of November 2011. All branches are requested to please take up the work in its own spirit and assign the task of achieving atleast 100 signature per member from their family members and well wishers. Similarly, please do take help of all technical staff in each branch to gather at least 50 signatures per Officer/Staff.
All the readers of this web site can also organise signature campaign for the purpose at their own level and send the same to this Association.
A pamphlet in HINDI is put in the Association e-mail which may please be used for campaigning amongst the Hindi speaking people.
You are aware that the Government of India has introduced a new contributory pension scheme for the Civil Servants, recruited to Government service after 1.1.2004. The scheme is mandatory in as much as the employee is bound to subscribe 10% of his emoluments to the Pension Fund. All the State Governments except the Left ruled have also introduced the New Pension Scheme for the employees in their states.
Pension Fund Regulatory & Development Authority (PFRDA)
The PFRDA was established by Government of India on 23rd August, 2003 and the Government has, through an executive order dated 10th October 2003, mandated PFRDA to act as a regulator for the pension sector. PFRDA has appointed Fund Managers to manage and decide investment of the Fund.
In order to authenticate the PFRDA established through executive order, the Government of India has introduced the Pension Fund Regulatory and Development Authority (PFRDA) Bill, in the Parliament. The first version of Bill was placed before the Parliament by the NDA Government in 2003. The UPA-I brought it again in the parliament which was forced to drop due to the opposition of the left parties, supporting the UPA-I Government. The present Government reintroduced the bill in the parliament recently with an intention to allow the fund managers to invest the amount in speculative share markets wherein the actual quantum of pension one get would depend on the accruals to be decided by the market forces.
Why we oppose the PFRDA Bill?
As per the principle adopted in determining of pay package of civil servants the wages paid out during the work tenure is low in order to effect payment of pension on retirement. As such civil service pension is rightly termed as deferred wage. And then the logic of the constitution of a separate Pension Fund for Civil Servants is not justified.
2. The same wage structure designed for those who are recruited prior to the 1.1.2004 has been enforced to the person recruited after 1.1.2004 and yet denied to enable the liability of pension in future by the Government. By imposing the new contributory pension scheme on the employees who are recruited after the cutoff date the Government not only denies the statutory defined pension benefit to them but also compel them to contribute for earning an undefined pension, which must be characterized as highly discriminatory.
3. It is stated that the prime objective of the introduction of the contributory pension scheme is to substantially reduce the outflow on account of pension liability. Whereas the major pension liability of Government is accounted for by Armed Defence personnel, they are however excluded from the purview of the contributory pension scheme. Of the present pension liability of the Government of India, which in 2004-05 was only 0.51% of the GDP out of which 0.26% is accounted for by the Defence. The study report of the Centre for Economic Studies, the Committee set up by the 6th CPC, has observed that at present the pension liability as a percentage to GDP which is just 0.5% which is likely to decline given the growth rate of Indian economy. The committee concluded that the new contributory pension scheme will increase the outflow from the exchequer from Rs. 14,284 Crores to Rs. 57088 Crores by 2038. The Committee has ultimately recommended that the existing pension scheme which is presently in vogue will be ideal and may be continued.
4. As per the Hon’ble Supreme Court judgment “pension is neither a bounty nor a grace bestowed by the sweet will of the employer, but a payment for the past services rendered. It was construed as a right step towards socio-economic justice and a concrete assurance to the effect that the employee in his old age is not left in the lurch. Accordingly the fifth Central Pay Commission observed (Para 127.6) that " pension is the statutory, inalienable and legally enforceable right earned by the civil servant by the sweat of the brow and being so must be fixed, revised, modified and changed in the way not dissimilar to salary granted to serving employees."
5. In the case of Civil Servants recruited after the cut-off date, the new scheme replaces the existing much better "defined benefit" pension scheme. In the process, the Government has created two classes of civil servants viz. the one with a defined benefit pension scheme and the other with the contributory pension scheme in which the employee is to part with 10% of his emoluments to become entitled for an old age social security subject to the vagaries of share market permits. Since in both the cases, the pay, allowances, perks, and other benefits, privileges, duties and responsibilities are the same it amounts to wanton discrimination of one against another which is not sustainable in law, rather violative of the existing constitutional provisions.
6. Those who are covered by the contributory pension scheme will become entitled for an pension, a portion of the accumulated contribution is able to purchase, basing upon the accretion to the fund from the investment. There is, however, no guaranteed minimum amount of pension for those who are covered by the new scheme, whereas the civil servants covered by the existing scheme do get a defined and guaranteed minimum pension and on his death his family members (wife, widowed and unmarred daughters and unemployed sons below the age of 25) become entitled for family pension. The discrimination factor is thus compounded.
7. The pension fund created by the employees' subscription and the employers' contribution which directly flows from the exchequer ( which is nothing but tax revenue of the Govt.) is made available for the stock market operations which is not only unethical but also blatant diversion of public fund for private profit, both Foreign and Indian capitalists.
8. The PRFDA Bill stipulates that there will not be any explicit or implicit assurance of the benefit except market based guarantee. The subscriber is thus exposed to the following risks at the exit.
a) If there is a major market shock, the subscriber to the New Pension scheme may end with no ability to purchase an annuity.
b) Since annuity is and cannot be cost indexed, the real worth of the annuity might fall depending upon the inflationary pressure on the economy.
c) As per the scheme, the subscriber is to make the choice of investment portfolio. The Civil Servant being mostly uninformed in finance and investment related matters, he might end up in making wrong choices which would eventually rob him of the old age pension.
d) The subscriber is perforce to contribute to the charges of the investment managers, whose priority often is as to how much profit they could make through investment of the huge corpus of pension fund in the volatile share market.
9.. The collapse of pension fund in the western capitalist countries in the year 2008-09 illustrate how the market recession and meltdown in the financial markets affect the lifelong savings of the working people. According to a study the private pension funds lost around 30% in the western capitalist countries which make an estimated US$ 5.4 Trillion. In the given the circumstances no one can be sure that the money of the subscriber deposited in the pension fund will get them back. And yet IMF in their work paper advocated for the creation of New Pension Fund in place of old Defined Benefit pension scheme, which can be treated as the voice of the capitalist and market brokers who want to bring the pension fund to the share market.
From the above it is clear that the Civil Service pension is the deferred wages of the employees and the same should be paid from the consolidated fund of India under the ‘defined benefit’ of pension scheme. In the given circumstances, in order to oppose the PFRDA Bill, a National Convention under the leadership of Confederation of Central Government Employees & Workers; All India Railway men Federation; All India State Government Employees’ Federation; School Teachers Federation of India; Bharat Sanchar Nigam Employees’ Union; All India Defense Employees Federation and allied Unions, was organized at New Delhi on 22/7/2011.
The convention unanimously decided to organize a mass signature campaign to be submitted to the Prime Minister (Copy of the petition is enclosed); to approach the Standing Committee for a hearing by the participating organizations; to organize state level conventions; to organize march to Raj Bhawan at all State Capitals; to organize march to parliament on 25th of November & to organize a day’s strike.
With warm regards
Dr Manmohan Singh,
Hon’ble Prime Minister,
We submit this petition to bring to your kind notice certain aspects of the re-introduced PFRDA Bill which will have an extremely adverse impact on the pension and retirement benefits of the Government employees. We may also state in this connection that the contributory pension scheme will be a drain on the exchequer.
The guiding principle adopted in determining the pay package of civil servants is to spread out the wage compensation over a long period of time because of which the wages during the work tenure is low to enable pension payment on retirement. This makes the pension a “deferred wage”, which the Supreme Court has upheld as such in their landmark judgment in the case of D.S. Nakara Vs. Union of India. As the bill does not provide implicit or explicit assurance of a minimum pension except marked based guarantee, the civil servant even after contributing huge sums to pension fund may end up with no annuity if the invested company become bankrupt or the equity market crashes. Moreover the annuity which would be the pension under the new scheme being not cost indexed will make it difficult for the pensions to make the both ends meet.
The Committee set up by the 6th CPC has concluded that the new contributory pension scheme will increase the outflow from the exchequer from Rs. 14,284 Crores to Rs. 57088 Crores by 2038. The Committee has also observed that the pension liability of the Government which was 0.5% of the GDP in 2004-05 under the defined benefit scheme is likely to decline if the same is not replaced by the contributory pension scheme as envisaged in the PFRDA bill. The Committee has ultimately recommended that the existing “Pay as you go” pension which is presently in vogue will be ideal and may be continued.
Since the new scheme is neither in the interest of the country as it increases the outflow on account of pension liability nor to the Civil Servants for it does not guarantee a minimum pension, we appeal to you kindly cause withdrawal of the PFRDA Bill from the Parliament immediately.
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