NPS-
NEGATION OF NAKRA JUDGMENT
S
Radhakrishna
Introduction
Pensioners in India
celebrate December 17 as Pensioners’ Day.
This was the day in the year 1982 The Constitution Bench of Supreme
Court headed by then Chief Justice Chandrachud delivered judgment in the famous
case known as “Nakra Case” on the goals of pension scheme which stated that:
Ø ‘A
pension scheme consistent with available resources must provide that the
pensioner would be able to live
i.
Free from want and with decency,
independence and self-respect
ii.
At standard equivalent at the
pre-retirement level
Ø Pension
is neither a bounty nor a matter of grace depending on the sweet will of the
employer and that creates a vested right subject to statutory rules;
Ø Pension
is not an ex-gratia payment, but it is a payment for the past service rendered;
Ø It
is social welfare measure rendering socio-economic justice to those who in the
heyday of their life ceaselessly toiled for the employer on an assurance that
in their old age they would not be left in the lurch;
Ø Pensioners’
form a class by themselves and this class is not divisible for purposes of
entitlements and payment of pension to those who retire ‘before’ and those who
retire after a certain date arbitrarily fixed for the purpose.
This
judgment resulted in pay commissions starting from IV CPC onwards looking into
the pensionary benefits of those who had already retired and making
recommendations. As
a result of the judgment today the pensioners have periodical revision of
pension including revision of pension on notional pay as and when pay scales of
serving employees are revised. While we celebrate Pensioners Day we have to
find an answer to the question: By introducing contributory pension system
under National Pension System from 1-1-2004 whether the Nakra judgment has been
negated in letter and spirit? Analysis
of NPS provisions gives answer to this question as YES.
Civil
Service Pension
The concept of pension as old age security in India
dates back to the 3rd century.
According to Sukra niti which lays down guidance for kings in management
of State affairs, a king had to pay half of the wages for people who had
completed forty years of service.
Initially Civil service pension in India was in the nature of
contributory pension. In 1881 the civil establishments under British colonial
rule for retirement benefits employees were contributing 4 percent of their
salary. But this scheme was confined only to European employees in the
establishments. From 1st January 1920
for these employees option was given to switchover to retire on a pension
proportionate to their service and practice of contribution towards pension was
abolished and provident fund scheme was introduced to non-European employees.
Commutation of pension up to fifty percent of the pension was also granted in
1924. Provisions of pension benefits
were further strengthened in the Government of India Act 1935. The civil servant pension system in India
originated on the lines of the UK system.
After independence the pension was further liberalized based on the
recommendations of first CPC when age of retirement was fixed uniformly to all
employees at 58 years and pension was fixed 1/80 of emoluments for each year of
service subject to a maximum of 35 years. This was further liberalized based on
the III CPC to a maximum of 33 years of service and calculation of average
emoluments was reduced from 36 months to 10 months from 29-2-1976. This was further liberalized
from 1-4-1979.
Slab system of calculation of monthly pension was introduced. This was further liberalized from 1-1-1986 when 50 percent of
average emoluments as pension was introduced but linkage with 33 years of
service for full pension were retained. Based VI cpc recommendations from 1.1.2006 linkage of service for full
pension abolished and 50 percent of last pay drawn as pension was
introduced. All these changes in pension
system are for those who are governed by CCS (Pension) Rules 1972. The
Government has introduced ‘New Contributory Pension Scheme’ for those who
joined central civil services after 1-1-2004 Thus reforms in pension which
started in 1920 has come full circle and Government has reverted back to
contributory pension scheme which was in existence and abolished from 1-1-1920.
Contribution from employees has been increased, with no guarantee of any
minimum pension or any commitment to pay pension by Government.
National Pension System:
The India was facing one of worst economic crisis in 1990
with balance payment crisis resulting in our gold reserve being deposited in
Bank of England. To overcome the crisis
the Government introduced new economic policies popularly known as
Globalisation, Liberalisation and Privatisation policy. The Government entered into an agreement for
soft loan with international funding agencies which had imposed various
conditions for granting loan. One of the
condition is reformation in existing pension schemes and extending social
security pension network. On the basis of the decision taken
in the Eleventh Conference of State Finance Secretaries held in the Reserve
Bank of India (RBI) during January 2003, a Group was constituted by the RBI in
February 2003 to study the pension liabilities of the State Governments and
make suitable recommendations. This group was headed by BK Bhattacharjee former
Chief Secretary of Government of Karnataka. The group submitted its report in
October 2003. The report recommended
introduction of Contributory pension scheme to avoid steep increase in pension
liability. It also recommended creation of "Pension Fund" to be kept
completely outside the States' Consolidated Fund and the Public Account. The Government introduced contributory
pension scheme called New Pension Scheme for all those who joined service from
1-1-2004 onwards in Government, Autonomous, and Statuary Institutions. Subsequently different State Governments
opted for the scheme on different states.
As of date all State Governments except West Bengal is under this
scheme. The scheme got statuary backing
by notification of PFRDA Act in the Gazette on 13 September 2013. It is now known as National Pension System.
NPS
Resulted in Negation of Nakra Judgment
1
One of
the important aspect of Supreme Court judgment in DS Nakra case is Pensioners’
form a class by themselves and this class is not divisible for purposes of
entitlements and payment of pension to those who retire ‘before’ and those who
retire after a certain date arbitrarily fixed for the purpose. By introducing NPS two classes of pensioners
have been created by Government as pensioners who had joined service prior to
1-1-2004 and those who joined service after 1-1-2004. Those who joined service
prior to 1-1-2004 and retired are now getting minimum pension of Rs.9000 plus
DR per month. But those who joined
service after 1-1-2004 and retired are not getting minimum pension. Many of the Grameendak sevaks who were
regularised after 1-1-2004 and retired after 10 to 14 years of service are not
getting minimum pension of Rs.9000, and in many cases it is less than Rs.1000
or around Rs.1000 to Rs.1500. Those GDS
who were regularised prior to 1-1-2004 are getting pension much higher than
Rs.9000 but definitely not less than Rs.9000 plus DR.
2
As a result Supreme Court judgment and
continuous pressure by pensioners and serving employees Associations 7th
CPC recommended parity between past pensioners and those who retired after
1-1-2016. Government accepted the
recommendation with modification of notionally fixing the pay in revised scale
at the stage in which one retired. As a
result of this decision pay of all those who had retired/died before 1-1-2016
was notionally re-fixed in the revised pay structure and pension/family pension
was revised from 1-1-2016. This benefit
has not been granted to those who joined service after 1-1-2004 and
retired. This is another aspect where
Supreme Court judgment has been negated.
3
Supreme Court stated that pension is
social welfare measure rendering socio- economic justice to those who in the
heyday of their life ceaselessly toiled for the employer on an assurance that
in their old age they would not be left in the lurch. The NPS has totally annulled this principle.
The NPS does not provide any explicit or implicit assurance of
benefits except market based guarantee mechanism to be purchased by the
subscriber [Section 20(2)(e) of PFRDA Act].
On retirement or exit from NPS at the age of 60 subscriber has to invest
40% of the accumulated fund in annuities and if exit prior to 60 years 80% of
the fund has to be invested in annuities. Based on the market performance of
these annuities the pension amount is determined. If the returns on annuities is not very good
then pension amount would also be less. In
present market trends net asset value of annuity Rs10/ is around Rs.7. Depending on market performance getting pension
means there is every possibility a person being without proper monetary benefit
being left in the lurch. Thus in spirit
and letter DS Nakra judgment has been negated in case of those who are governed
by NPS.
Future Task
The question before us is can we allow a system where a
person has put best part of life in the service of Government and allow the
person after retirement in the evening of life be allowed to be in anxiety of
no pension or very small pension? The
answer is obviously no. Initially when
the scheme was introduced there was doubt in certain sections of employees’
organisations that NPS may be more beneficial than defined pension scheme. With the experience of those who retired
under NPS now every section of employees organisations have realised that they
have to fight back to reverse the NPS and restore old pension system (OPS). At
present about 20 lack out of 32 lack central Government employees and about 37
lack of State Government employees are under NPS. The enormity of problem is
now being realised. As a result employees of both State Governments and Central
Government are coming under common platform to fight for restoration of
OPS. As a result of pressure by
employees State Governments of Kerala, Punjab and Andhra Pradesh have constituted
committees to review the scheme.
Karnataka Government has also announced that they will constitute a
committee. Delhi Government has adopted
a resolution favouring restoration of OPS and forwarded it to Central
Government. Confederation of CGEs has
called upon all Central Government employees to join the General strike of
workers on 8 and 9 of January 2019 on 10 point charter of demands of which
scrapping of NPS is a main demand. The
confederation is also planning for indefinite strike with only one demand of
scrapping of NPS. Pensioners who are
enjoying the benefit of defined pension cannot be silent when future generation
of employees are fighting for restoration of OPS. If the spirit of Nakra judgment is to be restored
pensioners have to extend full support to the struggles of serving employees
for restoration of OPS. Joint intensive
struggle will definitely bring positive results. Let us encourage and involve
in the struggle of workers for honourable retirement benefits as enunciated in
Supreme Court judgment. While celebrating Pensioners day let us take a pledge
to support the struggle of employees for restoration of OPS.
