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Whistle blow: why OROP in the armed forces will be disastrous

Aditya Menon | Updated on: 13 February 2017, 3:46 IST

The demand

  • Ex-servicemen are demanding one rank one pension (OROP). Narendra Modi had promised it in his election campaign
  • Modi has been non-committal on the matter after coming to power
  • The proposal will place a huge financial burden on the government

Financial burden

  • Govt needs to spend Rs 18-20,000 crore every year to implement OROP
  • This will take the total expenditure on pensions to Rs 75,000 crore per year
  • This is not much less than the total salary expenditure of Rs 93,216 crore

The threats

  • Implementing OROP for armed forces could give rise to similar demands from crores of government employees
  • Paramilitary forces face dangers similar to those faced by the armed forces. How can they be treated differently?
  • The only justification for the demand is an emotive one

One Rank One Pension (OROP) for the armed forces was perhaps the first electoral promise made by Narendra Modi in the run-up to the 2014 Lok Sabha polls. He made this promise on 15 September 2013 at a huge rally of ex-servicemen in Rewari, Haryana. This was just a day after Modi was chosen as the BJP's prime ministerial candidate.

Accompanied by former army chief General VK Singh, Modi accused the UPA government of disrespecting the armed forces by not implementing the OROP. Nearly two years later, the UPA is having the last laugh. Today, Modi is squarely in the firing line of ex-servicemen, who accuse him of going back on his word.

Modi is faced with the reality that no government in its right senses can implement OROP. Here's why.

Huge cost

  • Rs 93,216 crore - this is what the defence ministry presently spends on salaries every year.
  • Rs 54,500 crore - the pension bill for this year.
  • Rs 18-20,000 crore - the amount required to meet the ex-servicemen's demands.
  • Rs 75,000 crore - the annual expenditure on military pensions, after implementing OROP.
  • The expenditure on pensions will be 80% of what the government pays its active army. And this is a conservative estimate.

Therefore, by agreeing to OROP, the government will be maintaining the equivalent of two armies, two air forces, and two navies. Can it afford such a huge expenditure?

Economic logic

The rationale behind OROP is that a soldier who retired three decades ago should be eligible for the same pension as a soldier of the same rank who retired last year. Prima facie, the demand isn't unjustified as both veterans as well as their families need to make ends meet according to today's economic realities.

But the concept of OROP is based on a wrong understanding of what pensions actually are. Pensions are inherently based on the salary one draws at the time of retirement. It cannot be linked to the salary being paid for the same post 20 years later. How justified is it to base past pensions on present salaries?

Pensions, like salaries, are subject to the growth in a country's GDP. So in a country like India, where GDP growth has accelerated only in the past two decades, people who retired in an earlier period will be at a disadvantage. Pension's relation to GDP growth is an unfortunate fact that pensioners across the world have to face. It isn't specific to Indian ex-servicemen.

The government does address this, to a significant extent, through the dearness allowance provided to pensioners as well as to those presently in service. This factors in the rate of inflation in the salaries and pensions given.

Retirement age

Unlike other government services, the bulk of the armed forces retires between the age of 35-40 years. According to figures provided by Ajay Shah, who writes for The Economist, about 80% of the military retire between the age of 35-40, 18-19% retire between the ages of 54 and 60 and only about 1% retire at 60.

This means that compared to other services, the government has to pay pensions to the armed forces for a much longer period.

Govt pays military pensions for a longer period. 80% of the forces retire at 35-40 years. Only 1% retire at 60

No one disputes that India needs to have a young military and the retirement policy has been designed towards this end. But it is well known that servicemen, especially those who retire at a young age, often get absorbed into other jobs after retirement. Depending on their rank, the jobs range from security guards to high ranking corporate professionals.

Of course, this may exclude soldiers who are permanently injured in the line of duty. But there are separate allowances for such cases and it cannot be used as a justification for OROP.

Another issue in this context is the number of years that a soldier has put in before he retires. Surely, it isn't fair to consider someone who retires after 30 years of service at par with someone who put in five years.

Shah says that we may be stuck with a situation that for every person who is serving in the armed forces, there may be four who would be drawing a pension from the government.

Unlike other services, the armed forces don't contribute to their own pension. The national pension scheme should have been extended to the army.

Why not other services?

The economic cost and administrative challenges of OROP are only part of the problem. The danger is that implementing it could open a pandora's box of similar demands by other services.

For instance, if soldiers are given the benefit of OROP on the justification that they safeguard the nation's borders, why should a force like the Border Security Force be deprived of it? This also holds true of the CRPF which is deployed in the Naxal-affected districts of Central India.

Even police forces in insurgency affected states like Jammu and Kashmir, Chhattisgarh and Manipur can put forward similar demands. Such demands have already been made by railway employees unions and representatives of paramilitary forces personnel.

Why should armed forces be considered an exception?

According to former bureaucrat Avay Shukla, the root of the problem lies in the fact that the upper echelons of the civil services have awarded themselves the benefit of an OROP-like system.

"The highest pay scale in government (currently) is Rs 80,000/fixed. It was decreed that all who retire in this scale (known loftily as the Apex Scale) would get OROP - that is, their pensions would always be linked to whatever revised Apex Scale the subsequent Pay Commissions decided," Shukla writes.

Since every single IAS or IFS officer retires in the Apex Scale this forever ensured OROP for themselves. The Apex Scale has also been provided to the top brass of the armed forces, Shukla writes.

It is this inequitable decision that is the cause of the trouble.

If the government is not in a position to bear the financial burden of providing OROP to 22 lakh ex-servicemen and 6 lakh widows, how will it be able to deal with crores of central and state government employees?

The only justification for OROP is an emotional one. But it is only the emotive aspect that is dominating the public discourse. As a PM aspirant, Modi used it to mobilise anger against the UPA. Now at the helm of affairs, the complete non-viability of his promise has come back to bite him.

With inputs from Suhas Munshi.

First published: 19 August 2015, 12:06 IST
Aditya Menon @AdityaMenon22

An incurable addiction to politics made Aditya try his luck as a political researcher as well as wannabe neta. Having failed at both, he settled for the only realistic option left: journalism. Before joining Catch as associate editor, he wrote and reported on politics and policy for the India Today group for five years. He can travel great distances for a good meal or a good chat, preferably both.