OROP likely to be deferred

The NDA government of India had decided to implement OROP (One Rank, One Pension) and Defence Minister Manohar Parrikar on Monday said the notification on OROP will be issued before Diwali. “Notification on OROP will be issued once Election Commission (EC) code in Bihar polls gets over. I will try to issue notification before Diwali,” Parrikar has said. However, reports now indicate that the OROP scheme, the implementation part at least, may get deferred. Here are top 5 reasons why:

1. The Centre’s weak finances may force it to defer the implementation of the One Rank, One Pension (OROP) scheme for the armed forces to the next fiscal year.

2. Under OROP, a uniform pension will be paid to armed forces personnel, who retire at the same rank after the same length of service, regardless of their date of retirement. Additionally, the government announced that these benefits would be given retrospectively from July 1, 2014, with arrears to be paid in four half-yearly installments, with pensions re-fixed every five years. All of that adds to costs, and it is causing govt to pause for thought.

3. The OROP scheme will add to the government’s fiscal burden due to a higher pension outgo. It estimated that the one-off hit due to arrears could be Rs 10,000-Rs 12,000 crore in FY16, if the scheme is implemented this year. The recurring annual additional cost will be in the region of Rs 8,000-RS 10,000 crore, and could increase in the future after pay structure is revised based on the award of 7th Pay Commission. The Pay Commission report, which is due by December end, would reset the salaries and pensions of central government employees.

4. With a potentially lower divestment proceed (possibly half of the target of Rs 69,500 crore) and an anticipated shortfall in tax collections of about Rs 50,000 crore putting the FY16 fiscal deficit goal of 3.9% of GDP difficult, the government seems to have made up its mind to shift OROP implementation to next year.

5. The government is yet to set up a one-member judicial committee to examine the interests of retirees of different periods, different ranks and address inter-service issues of the three armed forces for OROP. The panel is supposed to give its report in six months.