In Big Move, Himachal Restores Old Pension Scheme: 10 Points

In a landmark move that fulfils one of his party’s key campaign promises, Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu on Friday reversed changes to the pension programme for government employees.

Here is your 10-point guide to this story:

Before the Himachal Pradesh elections in November, the Congress had promised to restore the so-called Old Pension Scheme (OPS) in its first cabinet meeting – a popular demand that would affect some 1.36 lakh people and was seen as a key reason for the BJP’s defeat.

The order was effective immediately with benefits rolling out Friday, Mr Sukhu told reporters, calling it a “Lohri gift” to honour workers who have helped in the development of Himachal Pradesh.

“The matter has been studied in depth and despite some reservations by finance officers, the issue has been settled and all the employees under the New Pension Scheme would be covered under OPS,” he was quoted as saying by news agency PTI.

The cost to implement the OPS for this year will be about ₹ 800 to ₹ 900 crore, which would be offset with measures like a ₹ 3 hike in Value Added Tax or VAT on diesel, Mr Sukhu said.

The Chief Minister also said the government would fulfil its promise of providing ₹ 1,500 per month to women and a panel of ministers has been formed “to prepare a roadmap within 30 days”. A committee has also been formed to execute the promise of creating one lakh jobs.

He attacked the opposition BJP, saying that the state is under a debt of ₹ 75,000 crore because of the “financial mismanagement and wasteful expenditure” by the previous government. “Hard decisions will have to be taken as the government cannot run under huge debt,” he said.

The Old Pension Scheme had been a key demand of many employees who joined government service from January 1, 2004, and were covered by a reformed programme that came to be known as the New Pension Scheme (NPS).

Before Himachal Pradesh, a reversal to the Old Pension Scheme had been announced by Rajasthan, Chhattisgarh, Jharkhand and Punjab. While celebrations broke out in several areas after Mr Sukhu’s announcement, state BJP chief Suresh Kashyap accused the government of misleading government employees.

The new scheme was a long due change because the OPS, designed after independence, had no funding plan – there was no corpus for the scheme and the liability was set to grow continuously. Under NPS, government staff had to contribute a part of their salary for retirement benefits.

While under the old system employees with 20 years of service used to get 50 per cent of their last drawn salary as pension, under the NPS, the government and employees had to contribute 10 and 14 per cent of the salary respectively towards a pension fund.