More states take to new pension plan

Even as the government faces opposition to its New Pension Scheme (NPS), various States, realising that their present pension liabilities are not sustainable, are moving ahead to embrace new scheme.

"We are a deficit-stricken state and would be short of funds if we do not join the scheme," said the additional finance secretary, Uttaranchal. Uttaranchal is the latest state to join the NPS and will apply the scheme to employees who join on or after October 1, this year. Uttaranchal is the thirteenth state to join the scheme.

"Forty per cent of our revenues goes into paying pension," laments a senior official at the Himachal Pradesh government. Himachal Pradesh, which notified its scheme in May 2003, has finalised its process only this year. "We faced stiff opposition from unions and the local media", the official added.

This is true for most states. Jammu and Kashmir is staring at an annual pension outflow of Rs 700 crore against a plan and non-plan wage bill of Rs 4,000 crore. The pension outflow amounts to 50 per cent of its tax revenues. Having joined the scheme, it is currently evaluating the system.

In the NPS, the pension will be linked to the market returns and free the government from funding the pension liabilities for the new employees.

"States like West Bengal are caught in two minds but their financial situation is such that sooner or later they will have to move to a funded system of pension," a government official said, adding that not joining the NPS was hardly an option.

While West Bengal and Kerala are still to decide, Mizoram is actively considering the scheme and Maharashtra is expected to make the scheme effective for employees joining from November this year.

Those who are joining are facing protests from a large number of contractual employees who, while on the government rolls, would not be eligible for the scheme. They can only join on a voluntary basis and their will not be any government contribution for them.

While states are slowly falling in line, there is a lot of confusion. Owing to the lack of a cohesive approach, each state is generating its own unique Ids for employees and dealing with data as per its own plans. This is likely to result in problems when data migrates to a single Central Record Agency (CRA). With an interim CRA to be put in place and a two-digit state code to be assigned, some of these issued are likely to be sorted out, D Swaroop, chairman, Pension Fund Regulatory and Development Authority (PFRDA), said.

"How to maintain the records?," asked a Gujarat state official. Nagaland, on the other hand, is still not clear on how the money would be invested and how the collection of contributions will be carried out. This, despite having joined the scheme.

Delhi, another participant, has not yet started deducting contributions as it does not have a separate public account to deposit the contribution and the matter is stuck at the home ministry and no contributions are being deducted from the employees.

Madhya Pradesh, which notified the scheme in April for employees who join the scheme from June this year, has not seen much action yet as only about 100 people have joined, owing to the lack of recruitment. "The effect will be visible next year," a state official said.

Uttar Pradesh notified its scheme in March this year and has made it applicable for employees joining from April, 2005. Similarly, in Gujarat, the scheme is applicable from April this year. While Orissa joined the scheme in June this year, Goa joined in August. Tamil Nadu, the first state to join the NPS had made the scheme effective from April 2003.