Run-Up To Budget 2003
Finance Minister Jaswant Singh is likely to satisfy himself with outlining the tax benefits for contributing to pension schemes and leave the contentious issue of setting up a social security net for unorganised labourers unresolved in Budget 2003.
The finance minister is expected to meet Deputy Prime Minister LK Advani over the next few days to apprise him of the lack of progress made by the group of ministers on pension reforms to firm up the roadmap for the sector.
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Pension reforms, on one hand, involve shifting new recruits to government services to a funded pension scheme, while on the other hand, a three-tier pension scheme has to be formulated, including a regulator for the sector.
But the budgetary implication for the measures has been holding up the proposals for a long time despite the keenness of private sector funds to enter the sector.
The group of ministers, headed by K C Pant, has not made any significant progress despite promises made in Budget 2001-02. At its last meeting in November 2002, Labour Minister Sahib Singh Verma and Agriculture Minister Ajit Singh had questioned the rationale of a social security net without any budgetary support.
The other option proposed by some sections within the finance ministry was to bring in an element of cross-subsidisation since the cost of fund management would be difficult to meet from the contribution of lower income groups. The Planning Commission has, however, objected to this option.
A high-level committee on government pensions has estimated that the finance ministry will need to make an initial outlay of at least Rs 150 crore, while the Budget support needed for launching even a basic level of social security will be much more.
This is because the level of contribution from workers will have to be supplemented by a contribution from the state.
The decision on a regulator is also proving contentious with the labour ministry and some sections of the finance ministry opposing the appointment of the Insurance Regulatory and Development Authority as the watchdog for the pension sector.