Kerala, Tripura come around to pension reform

The West Bengal government may have let down the UPA regime by opposing the interim investment plan for pension funds, but there is hope from unexpected quarters- the other two Left-ruled states of Kerala and Tripura.

The investment plan gives pension fund managers the option of investing 5 per cent of the corpus in the stock market.

Although the three Left-ruled states had opposed the proposal at the chief ministers' conference on Monday, Kerala and Tripura are learnt to have subsequently approached the party leadership to re-think Finance Minister P Chidambaram's proposal.

The two say they cannot afford to reject the New Pension Scheme (NPS) as their finances are weak, unlike West Bengal, which has seen much higher tax collections from the value-added tax (VAT). This explains the studied silence by the CPI(M) top leadership over the proposal.

West Bengal Finance Minister had on Monday said that the UPA regime's concern about increasing the ratio of pension expenditure to revenue collections was not tenable because there had been a significant increase in tax collections after the introduction of VAT in states. The other two Left-ruled states, however, differ.

Kerala Finance Minister Thomas Isaac is learnt to have explained the state's reservation to the opposition to the new pension scheme to CPI(M) Politburo member Sitaram Yechury today.

According to CPI(M) sources, the party will soon meet Chidambaram to discuss the nitty-gritty of his new interim investment plan. Sources said the party was willing to let the government exercise the option of investing 5 per cent of the funds in the stock market "on an experimental basis."

Earlier also, the CPI(M) had agreed to entrust pension funds with public managers with an understanding that the money could be invested in the stock market.

"What happened after the UTI scam? The government has to make up for the losses (in case of bad returns from bourses)," according to a senior CPI(M) leader.

The negotiations were then derailed by the Left-backed trade unions, which could again pressure the party leadership on the new investment plan.