Labour, Finance Ministries Cross Swords Over Pension Reforms

The labour and finance ministries have locked horns over the introduction of pension reforms.

While the labour ministry has suggested that the reforms be introduced in a phased manner and group-wise, the finance ministry wants a nationwide implementation of reforms at the earliest.

Senior officials close to the ministry said the pension reforms are likely to be part of the budgetary address for 2002-03.

The report on pension reforms by the Insurance Regulatory and Development Authority was submitted late last year to a seven-member committee, which was set up to look into pension reforms for the unorganised and self-employed sectors.

The dissent note of the labour ministry is, however, likely to be set aside in view of the government being hard pressed for long-term funds to finance the infrastructure sector.

It is all a money game, the officials said. While the North Block is in need of infrastructure funding, the labour ministry is apprehensive that the introduction of pension reforms would see many of those covered under the employee provident fund organisation (EPFO) going for the proposed individual pension plan. To that extent the funds in the EPFO could be affected. This explains the ministry's involvement in the seven-member committee, as the Centre is looking at reforming the EPFO.

Initially, however, the focus will be on self-employed. "Eighty nine per cent of the population is not covered under any provident fund. This is a grave situation considering that there is no social security scheme and nor can the country afford one," officials said.