Orissa pension burden down to 8.4%

Pension payment as a percentage of total revenue receipts has declined in Orissa.

It was 8.47 percent in 2006-07 (budget estimates) while the national average was 9.08 percent during the same period.

The ratio of pensions to the total revenue receipts was 10.63 percent in 2004-05 compared with 10.05 percent for the country as a whole. However, the ratio declined for both the state as well as the nation in 2005-06. The ratio stood at 9.50 per cent for Orissa and 9.28 percent for the nation.

Significantly, prudent fiscal management and the findings of the group constituted by the Reserve Bank of India (RBI) in February 2003 to study pension liabilities of the state governments came in handy to help the finance department, said the state finance minister Prafulla Chandra Ghadei.

The RBI group suggested introduction of Contributory Pension Scheme (CPS) for the state government employees in place of existing non-contributory defined benefit pension scheme.

To make the system more attractive, it suggested exemption of income tax in respect of contributions under the proposed schemes including the earnings from the pensions fund.

Further, it recommended that the proposed new pension scheme should be made mandatory for all new employees of the state governments and the date of applicability was left to the decision of the state governments.

The group suggested for shifting of pension burden relating to the employees of grant-in-aid (GIA) institutions or local bodies to be recruited in future to the respective GIA institutions or local bodies.

A dedicated 'pension fund' in addition to the proposed pension fund designed for new employees was part of the group's proposal.

This measure was expected to make the state government aware of un-funded pension liability which would ultimately sensitize the government employees about the actual cost of providing the pensions.

The group made certain suggestions regarding the determination of pensions.

One of the suggestions was to determine it on the basis of the average pay of last 36 months.

In case of voluntary early retirement, the practice of adding 5 years while calculating the basic pension may be done away with.

In view of the increasing burden of the state governments towards pension payment, the group suggested that there should be regular mutual consultations between the Central and the state governments on this issue of allowing of revision in dearness allowance.

Moreover , the present provision of enhanced family pension for a period of 7 years or until the pensioner attains 65 years may be reduced to 5 years or till the pensioner attains the age of 63 years.

Orissa introduced the defined contributory pension scheme from January 1, 2005, for the new recruits.