OROP arrears announced: the real work begins now

Political promises once made need to be honoured. In 2014, when the then Union Finance Minister P Chidambaram promised the One Rank, One Pension (OROP) scheme for defence personnel, hoping to wean the electorate away from Narendra Modi’s rising political graph, a path full of financial thorns had been well and truly laid.

On December 23, the Union Cabinet approved the revision of the pension of armed forces pensioners and family pensioners under OROP, with effect from July 1, 2019.

``The pension of the past pensioners would be re-fixed on the basis of the average minimum and maximum pension of defence forces retirees of calendar year 2018 in the same rank with the same length of service,” an official release said.

According to it, armed forces personnel who have retired up to June 30, 2019, (excluding premature retirement — PMR— with effect from July 01, 2014) will be covered under this revision.

Amit Cowshish, a former Financial Advisor (Acquisition), Ministry of Defence (MoD), told Moneycontrol: ``It was a government commitment and it had to be met. That is what has happened. Now it is for officials and experts to figure out where the money is going to come from. There is no clarity on it as such.”

Over and above the ongoing expenditure on account of OROP, arrears to be paid from July 2019 to June 2022 will amount to another Rs 23,638 crore.

Earlier this year, the Supreme Court (SC) had directed the government to quickly carry out the OROP re-fixation exercise following the expiry in July 2019 of the five-year timeframe that the government had given in July 2014. The government was also told to pay the consequent arrears to the veterans and their families.

The ministry said that over 25.13 lakh (including over 4.52 lakh new beneficiaries) armed forces pensioners / family pensioners will be benefitted.

Those drawing above the average pension (for their rank and length of service) shall be protected. The benefit would also be extended to family pensioners, including war widows and disabled pensioners.

Arrears will be paid in four half-yearly instalments. However, all family pensioners, including special / liberalised family pension and gallantry award winners, shall be paid arrears in one instalment, the announcement said. Special / liberalised family pensioners are the next of kin of those who have die or been gravely injured on duty.

In November 2015, the government had issued the policy letter to implement OROP for revision of pension with effect from July 2014.

As per the MoD’s charts, a retired sepoy’s monthly pension stood at Rs 17,699 in January 2016. It was increased to Rs 19,726 with effect from July 2019. So his likely arrears between 01/07/2019 to 30/06/2022 will amount to approximately Rs 87,000.

The comparative figures for a retired colonel are Rs 92,855 (2016), and Rs 1,03,700 in 2019, with arrears amounting to about Rs 4.4. lakh.

The figures for a Lt General are Rs 1,01,515 in 2016; Rs 1,12,316 in 2019, with about Rs 4.32 lakh in arrears.

Lt General Satish Dua (Retd), former Corps Commander in Kashmir, who retired as Chief of Integrated Defence Staff, said the government has fulfilled a long-standing demand of armed forces veterans. ``Overall, it is a very positive step,” he told Moneycontrol.

Pensions are computed as a proportion of a worker’s last drawn salary, which is based on a pay scale. The Pay Commission determines government pay scales in India and revises and increases pay scales on a decadal basis, as well as pensions.

According to a government policy brief on OROP, defence personnel who retired before pay scales were revised received a smaller pension. Once the pay scales are revised, personnel of the same rank who served the same amount of time would receive roughly the same pension.

In Cowshish’s assessment, apart from organising funds, there is also the question of the OROP's logistical implementation. “It will be challenging to revise the pension of all the existing pensioners, especially when trying to align the pensions of personnel who retired from the same rank with the same length of service at different points in time. Developing flawless algorithms for revising the pension of more than two million pensioners every year without anomalies is an enormous undertaking,” he said.

Pension is a major component of the defence budget, accounting for about 23 percent of the MoD’s allocations. Together with salaries, it consumes over 60 percent of the overall defence spend.

In the 2022 Union budget, out of the Rs 5.25 lakh crore allocated to defence, Rs 1.19 lakh crore was allocated to pensions. The share taken up by pensions leaves lesser monies for equipment modernisation and maintenance.

Given the security concerns, the Modi government has prioritised military reform, with the modernisation expenditure increasing by 60 percent between FY 2018-19 to FY 2022-23.

As of 2021, the army comprised 53,569 officers and 11,35,799 soldiers; the navy had 11,100 officers and 63,515 sailors, and the air force had 12,048 officers and 1,38,792 airmen.