Left yields on use of pension funds

The Left parties have no objection to the deployment of pension funds in the stock market so long as the funds are managed by public sector banks and financial institutions.

The UPA allies, however, are firm on their demand for guaranteed returns to employees on their pension, which is set to thwart the government's plan to push through the Pension Funds Regulatory and Development Authority (PFRDA) Bill in the winter session of Parliament.

The fate of the bill now hinges on a political agreement between the UPA and the Left. The government's position is that it is not possible to guarantee a fixed return. If a fixed return is what employees desire, they can purchase a fixed income plan by paying extra money, it says.

Allowing investment in the stock market is a significant compromise for the Left parties, especially as its affiliated trade unions had earlier rejected the proposal, arguing that workers' money must not be used for speculative activity.

So, the Left now has to overcome the reservations of its trade unions on the issue. The government is trying to find ways to sweeten the deal so that pension reforms can move forward, even if incrementally.

At the last UPA-Left Coordination Committee meeting early this month, the Left parties had agreed to entrustment of pension funds with public fund managers like UTI, SBI and LIC, even as they cautioned the government against their deployment in the stock market.

However, when asked today what would be the Left's response if public fund managers put pension funds in the stock market, CPI(M) Politburo member Sitaram Yechury said, "What happened after the UTI scam? If they (fund managers) make a mistake, as in the case of UTI, the government will have to bail the people out. That is why we want only the public sector to manage this money."

Softening by the Left on this score does not serve the government's purpose fully as the UPA allies continue to resist the government's move to privatise the management of pension funds.

The biggest hurdle in the way of the PFRDA Bill is the Left's demand that the government ensure employees continue to get a guaranteed pension (50 per cent of their monthly salary calculated on the basis of the average of the monthly salaries in the previous three years). The government has rejected the demand saying that pension is no more a statutory benefit, but a contributory one.

Although the government is hopeful of pushing the Banking Regulation (Amendment) Bill in the current session, the Left offers no hope on this count. UPA allies maintain that the proposed removal of the 10 per cent cap on voting rights would allow foreign banks to take over private Indian banks, which is not in the interests of the country.

Asked what could be a compromise formula for this Bill to see the light of day, Yechury told Business Standard, "The government should bar foreign banks."

Meanwhile, the CPI(M) today reiterated its resolve to take up the issue of Special Economic Zones in the winter session of Parliament. Apart from other oft-repeated demands, the Left party has come up with some fresh demands, viz., central directives to states to implement labour laws in SEZs and payment of compensation one and a half times the market price to farmers.