Railways must not allow demand for the old pension scheme to gather steam

The Central and the state governments must get the OPS monkey off their backs, or else risk their fiscal spine.

On August 10, railways unions will join hands with several of their counterparts representing the employees of the Central and the state governments in holding a rally at the Ramlila Ground in Delhi. The unions have claimed that several thousands of the employees, including rail workers and teachers, will take part in the ‘Maha Rally’. They will be raising demands for the restoration of the Old Pension Scheme (OPS).

The New Pension Scheme (NPS) regime had come into force in 2004 after getting support across the political class. The consensus within the political class, endorsed by the Bharatiya Janata Party and the Congress, during the ideation and the subsequent rollout of the NPS, was that the Central and the state governments must get the OPS monkey off their backs, or else risk their fiscal spine may, in a few years, break under the weight of bloating pension burden.

NPS vs OPS

The first batch of retirees who will avail of NPS benefits is not likely before 2034. But the favourite past-time of employees in places such as Rail Bhavan in New Delhi these days is to indulge in loud thinking on the likely corpus of the pension or the monthly payouts that they would be getting after their superannuation. They claim that they would get just a fraction of what the ‘lucky ones’ with the OPS would be availing as the monthly pension.

Indeed, the OPS with assured guarantee, with the burden on the state exchequer, still remains attractive for the employees — as a pension equivalent to 50 per cent of the last drawn salary has been the biggest pull to join the government sector. This assurance is missing in the NPS, which is contributory, and the size of the pension corpus is incumbent on contributions made as well as the prevailing market factors. Employees are dreading the risk of uncertainty, and thus they have thrown in their lot with the unions.

But the Railways need to watch out. The risk of not countering the growing chorus for the OPS is huge. Until a few years ago, the Railways was the most sought after employer due to the benefits the national transporter gave to its employees. Also, the political class treated the Railways as a place to send the job seekers who petitioned ministers and MPs. As the Railways became a bloated organisation, a large part of earnings (revenue) was spent on salaries and pensions.

Huge Salary And Pension Bill

The Railways has close to 13 lakh employees and almost 15 lakh pensioners. The pension bill of the Railways has almost been an albatross around the neck of railways ministers in the last few decades. For 2022-23, the Railways pension fund bill was Rs 60,000 crore which was about 25 percent of the estimated internal revenue of Rs 2.40 lakh crore in the revised Budget Estimate. The figure is only ballooning. For 2023-24, the pension obligation is estimated at Rs 70,516 crore against the estimated internal revenue of Rs 2.65 lakh crore, which again translates into almost 26 percent outgo on the pension liabilities.

With such obligations towards pension payments, spending on critical aspects such as safety is only expected to suffer. It’s noteworthy to recall that the Comptroller and Auditor General in its report had charged that the Railways was not able to meet its contribution for the Rashtriya Rail Suraksha Kosh (RRSK), which was mandated to have Rs 1 lakh crore over five years to meet obligations for spending on safety-related works.

The Ministry of Railways rebutted the CAG report with its own set of numbers. It claimed that the total expenditure on track renewal, which is within the scope of RRSK, has been Rs 58,045 crores in the five years period (2017-22). It also said that Rs 1.78 lakh crore was spent on safety-related works, including track renewal, bridges, railway crossing, road over bridges)/road under bridges, signalling works, etc between 2015-16 and 2022-23. Even while the Railways claims to have met the safety-related mandates as enshrined in the RRSK, the fact remains that an operating ratio above 98 percent leaves little for the national transporter to contribute from the internal source of revenue to undertake capital expenditure, which is being funded with loans.

The Railways must nip the campaign for the restoration of the OPS in the bud with effective communication with the employees. The pension fund managers roped in by the Railways must speak in layman’s language to inform the employees about the way the NPS works and the way the corpus can be enhanced by higher contributions. It must not be forgotten that due to the financial stress faced by the Railways, several thousand posts of safety personnel are lying vacant. While the railways unions’ leaders would speak convincingly against the NPS, the Railways must match the intensity in communication on the benefits of the NPS for the employees.

Manish Anand is Delhi-based journalist. Views are personal, and do not represent the stand of this publication.