OROP: Oversight leads to logjam, heightening financial stress

One Rank One Pension (OROP) scheme

To understand the gargantuan complexities of disbursing pensions to government employees in general and how an official oversight can trigger a logjam, the One Rank One Pension (OROP) scheme for 1.6 million Indian army beneficiaries, provides an ideal window.

In December 2022, when the Union cabinet approved the revision of pension of ex-servicemen and family pensioners under OROP, with effect from July 1, 2019, with arrears to be paid for the period July 2019 to June 2022, it was seen as a major step forward.

The problem, however, lay in the fine print and on the Union government’s massive financial liabilities.

On March 13, the government told the Supreme Court that “it may not be in the larger interest of the nation” to clear all dues accrued under OROP in one go, as this could disturb allocations made for other public purposes.

Instead, it sought to disburse outstanding arrears to ex-servicemen in four half-yearly instalments, citing a general practice of the government to pay any arrears in instalments as a “prudent fiscal measure.”

A huge financial burden, says government 

“Upon taking the overall stock of the position as it exists, it is apparent that the number of pensioners in whose cases appear to be dispersed is 25 lakh ex- servicemen and the amount comes to approximately Rs 28,000 crores. It is submitted that such a huge financial burden in one stroke will disturb the allocation already made for other public purposes which may not be in larger interest of the nation particularly at the fag end of the financial year 2022-23,” the government said in an application moved before the apex court.

It came in the wake of the strictures passed by a bench headed by Chief Justice of India, Dhananjaya Y Chandrachud, on February 27, when the court asserted that all the arrears must be cleared by the government by March 15.

A ministry of defence (MoD) official told Moneycontrol on condition of anonymity that only the government knows its financial position and hence its request to the court is justified.

“With all due respect, money would be paid. The government has to also take into account that Dearness Allowance (DA) is to be paid soon, and there is huge financial juggling that is needed,” he said.

The central government is likely to increase DA for its over 10 million employees and pensioners by four percentage points to 42 percent from the existing 38 percent, sources have indicated.

Experts believe the government is, therefore, valid in asking for time.

Amit Cowshish, former financial advisor (acquisition), ministry of defence, told Moneycontrol: “While there is no dispute about the entitlement, prospective beneficiaries ought to be a little more magnanimous.”

Business as usual for all but ex-servicemen? 

It was not a point appreciated by senior advocate Huzefa Ahmadi, representing the petitioner association of ex-servicemen in the apex court, who lamented that the central government was conveying its inability to pay the soldiers their dues while it was business as usual for every other expenditure.

The MoD official, however, said that if all dues are to be paid in one instalment under OROP, then the government will have to halt all major programmes, including infrastructure projects, to pay defence pensioners. He also pointed out that of the 2.5 million pensioners, payments to more than 700,000 have already been cleared, “but the task is huge, requiring a lot of calculation and provisions.’’

Clearly then, managing finances is the key but as the countdown to the general elections in 2024 has begun, the government can scarcely be seen to be vacillating on financial prerogatives. Adding to its troubles is the fact that Revised Estimates (RE) are already notified, making any course corrections damnably difficult now.

What seemed to have upset the apex court is an apparent lack of communication. On January 9, the Supreme Court directed the government to clear the pension arrears of ex-servicemen by March 15.

However, on January 20, a statement was issued by the ministry, stating that the arrears will be released in four half-yearly instalments to former servicemen, and in a single tranche to gallantry award winners and those availing of family pension.

The January 9 order was the third extension granted to the Centre, following the March 2022 judgment of the top court affirming the OROP scheme, which entailed equal pension to military personnel retiring in the same rank with the same length of service, regardless of the date of their retirement.

The first extension of three months was granted in June 2022 and the second for the same length of time in September.

Apex court’s stand 

Demanding an explanation from the secretary concerned in the defence ministry, the bench, on February 27, took strong exception to the January 20 letter. Now, the bench has made it clear that any request by the government for more time shall be entertained only after this letter is withdrawn.

Laxman Kumar Behera, a research fellow at the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi, says that some “communication gap” between the government and the court has led to this “uncomfortable” situation.

“The government, which knows its finances, has made it clear that the arrears would be paid, only a new via media needs to be found out,” he told Moneycontrol.

The secretary of the department of ex-servicemen welfare also submitted an affidavit this week that the letter was issued in terms of the 2015 policy and that the government should be allowed to make the payment in instalments.

The Defence Accounts Department (DAD), which comes under the Controller General of Defence Accounts (CGDA), is working overtime to disburse the arrears. Officials also say that some arrears could have been dispensed if all pensioners were on the new online pension disbursing system called Sparsh - System for Pension Administration (Raksha) - which involves crediting pensions directly into the accounts of former servicemen without relying on any external intermediary.

While Sparsh and the Defence Pension Disbursement Offices (DPDOs) come under CGDA, the latter is working closely with other agencies like banks and state treasuries, who also disburse pensions, to meet the rather stiff deadlines.

India has around 3.3 million defence pensioners. About 2.2 million of them have been moved to the new system and the migration of the remaining 1.1 million will be complete in the coming months.

For the moment, though, the battle seems to have shifted to March 20 since the MoD’s application was not on record. It is only then that a via media, as Behera suggests, could be arrived at.