Money matters: States' pension bill growth slowed in FY23, says RBI report

Seven states even saw decline, says RBI's 'Handbook of Statistics on Indian States'

Growth in the pension bill of states and union territories (UTs) slowed in 2022-2023 (FY23), showed the latest Reserve Bank of India (RBI)’s Handbook of Statistics on Indian States, which was released on Monday. Besides, as many as seven states saw a decline in their pension bills during FY23.

 

Data available in the handbook for 31 states and UTs showed that the pension bill rose by 11.7 per cent to Rs 4.67 trillion (revised estimates) in FY23 from Rs 4.18 trillion in FY22. Previously, the pension bill had increased by 13.4 per cent in FY22.

 

The states that saw a decline in their pension bills are: Assam (Rs 16,903 crore), Chhattisgarh (Rs 6,741 crore), Jharkhand (Rs 7,348 crore), Odisha (Rs 15,976 crore), Kerala (Rs 26,689 crore), Telangana (Rs 11,385 crore), and West Bengal (Rs 25,494 crore).

 

Data also showed that the pension bill rose sharply for major states like Uttar Pradesh (Rs 59,577 crore), Maharashtra (Rs 46,614 crore), Tamil Nadu (Rs 31,950 crore), and Bihar (Rs 25,468 crore), among others.

 

Meanwhile, the total amount budgeted by the states for pensions during FY24 is expected to rise by 11.7 per cent to Rs 5.22 trillion, which is nearly double the amount that was spent by the states on pensions in FY18 (Rs 2.75 trillion).

 

Provision of pension by state governments remains mired in controversies as employees continue to oppose the New Pension Scheme (NPS) and demand restoration of the Old Pension Scheme (OPS), which guaranteed a pension equivalent to 50 per cent of the last-drawn salary of an employee. 

 

Last month, the All India NPS Employees Federation (AINPSEF) voiced its discontent with the NPS in a public rally in the national capital and demanded restoration of OPS.

 

Earlier in August, the central government had announced the Unified Pension Scheme (UPS) for its employees, to be implemented from April 1, 2025, which, like the NPS, is a contributory scheme, but it guarantees a pension equivalent to 50 per cent of the last-drawn salary, similar to the provisions of the OPS.

 

Maharashtra became the first state to offer UPS to its employees after the announcement, with other states expected to follow suit once operational details become available.

 

The RBI had in a paper last year cautioned states against reverting to the OPS after several opposition-ruled states like Himachal Pradesh, Chhattisgarh, and Jharkhand abandoned the NPS. The central bank had said that it would add to the fiscal burden of states in the coming years.

 

“The annual saving in fiscal resources that this move entails is short-lived. By postponing the current expenses, states risk the accumulation of unfunded pension liabilities in the coming years,” the RBI had said.