The Hindu : National : Expenditure on pension may exceed salary outgo

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Tuesday, Dec 11, 2007
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Expenditure on pension may exceed salary outgo

Special Correspondent

Increase in life expectancy and retirement age main factors
Non-civilians make up majority in Defence department

NEW DELHI: The Centre’s expenditure on pensions for its retired employees this fiscal is likely to exceed the outgo on salaries and allowances for its existing staff, going by the spending trend witnessed during the past few years.

According to a report of the Comptroller and Auditor-General (CAG) tabled in Parliament recently, the Central government’s spending on pensioners was Rs. 39,074 crore during 2006-07, just marginally lower than the salary bill totalling Rs. 40,047 crore for the working staff.

If the past trend in the Centre’s pension liability, which increased by nearly 58 per cent or over Rs. 14,000 crore during 2006-07, is any indication, the outgo on pension is likely to exceed the pay and allowances of the serving staff this fiscal. In the period 1992-2007, the CAG report noted that the pay and allowances of the Central staff increased annually by 5.47 per cent at an average. On the contrary, the outgo on pensions soared by an average 16.20 per cent each year.

The deterioration, the report pointed out, has been owing to a number of factors such as the increase in life expectancy and the decision to increase the retirement age.

According to a 2001 census by the Directorate-General of Employment and Training, there were 38.76 lakh Central government employees in all as on March 31, 2001. In March 1995, the number declined by 2.6 per cent from 39.82 lakh employees. On the other hand, the number of pensioners is on the increase. In July 2004, a paper prepared for the Planning Commission projected that the number of pensioners would rise to 45.5 lakh in 2006-07 from 38.3 lakh in 1999-2000.

The paper also maintained that pension liabilities, which included payments to retired staff in post, telecom, railways, defence and civilian departments, would soar to Rs. 36,706 in 2009-10.

The CAG, however, clarified that while the salary bill till 2001-02 included non-civilian staff in the Defence sector, these employees were excluded from 2002-03. As non-civilians make up a majority of the Defence department, their exclusion was one of the major reasons for the slower growth in the salary bill as compared to the pension payments in the Tenth Plan period.

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