People's Democracy

NEW PENSION SCHEME

Defeat This Nefarious Conspiracy

Sukomal Sen

IN order to face the economic crisis which is of their own making, neo-liberal regimes are hatching conspiracies in several ways to bleed the workers. Pension privatisation and the privatisation of banks and other public sector institutions are parts of this conspiracy. 

The Pension Fund Regulatory & development Authority (PFRDA) Bill is now slated for introduction and passage in Lok Sabha --- at a time there are only a few members in the house, mainly from the Left parties, who are opposed to this anti-employee bill. This poses a serious threat to the government employees and other categories of employees who are covered by the statutory pension system.

Why is the UPA government so much bent upon pushing the bill through?

RETROGRADE

CHANGEOVER

In an unwarranted intervention in the statutory defined benefit pension system, the IMF, in its work paper WP/01/125,(2001), stressed the creation of a pension fund by eliciting contribution from the wage earners at the earliest stage of their employment so as to fetch for them a decent (?) enough annuity to sustain them in old age. However, in fact, it was a suggestion for a retrograde changeover from the defined benefit pension scheme to a defined contributory system. While suggesting so, the IMF categorically stated that India did not suffer the demographic pressure the major countries experienced, for India’s population beyond the age of 60 was about 7 per cent in 2004 which rose to 8.6 per cent in 2010 and is estimated to be 13.7 per cent in 2030 and 20 per cent in 2050.

During his recent visit to Washington, union finance minister Pranab Mukherjee assured the US secretary for treasury, when pressed by him, that the government would hurry up economic reforms (!) like privatisation of pension, privatisation of banking industry and more FDI in insurance sector. Naturally, it was under US pressure that our government bowed down to hurry up implementation of economic reforms (!) including privatisation of pension. Why are the US government, the World Bank and IMF showing so much interest in getting such measures adopted in haste? Is it not dictated by international corporate world?

The new contributory pension scheme, enunciated by the government of India and adopted by most of the state governments, marks the PRFDA bill. The bill, inter alia, envisages a social security scheme for all who desire to have an annuity in old age, but it is voluntary and not mandatory. However, in the case of civil servants, who are recruited to government service after the prescribed cut-off date (January 01, 2004), the scheme is mandatory in as much as such employees are bound to subscribe 10 per cent of their emoluments to the pension fund while the government, as the employer, would contributes an equal amount.  No employee is entitled to opt out of the scheme.

Despite its inability to bring in a valid enactment, the government of India has thus decided to impose the new pension system arbitrarily on the central government employees and teachers, while excluding the personnel in the armed forces and paramilitary establishments. Also, all the state governments except the Left-led governments of West Bengal, Kerala and Tripura, did the same in regard to the state government employees and teachers in pursuance of illegal executive orders from the government of India. The governments of the Left ruled States of West Bengal, Kerala and Tripura consciously continued the defined benefit pension system existing earlier.

PRFDA BILL’S

STIPULATIONS

The PRFDA bill stipulates that there will not be any explicit or implicit assurance of a benefit except the market determined return. A subscriber to the new pension scheme is thus exposed to the following risks after retirement.

a) If there is a major market shock, (s)he may end with no ability to purchase an annuity and the entire money contributed by her or him may be lost

b) Since annuity cannot be cost indexed, its real worth may fall, depending upon the inflationary pressures in the economy.

c) As per the scheme, a subscriber is to make the choice of investment portfolio. As civil servants are mostly uninformed in finance and investment related matters, one might end up in making wrong choices which would eventually rob her or him of the old age pension.

d) A subscriber is to perforce contribute towards the charges of investment managers, whose priority often is as to how much profit they could make through investment of the astronomical corpus of pension fund in the volatile share market.

The pension fund thus created by the employees’ subscription and the employers’ contribution --- the latter directly flows from the exchequer which is nothing but tax revenue of the government --- will be made available for the stock market operations which is not only unethical but also a blatant diversion of public fund for private  profit --- to both foreign and Indian capitalists.

It is rightly feared that, when enacted, the PFRDA bill will empower the government to alter or even deny the present employees and pensioners the statutory defined pension benefit, as has been done in the case of those who are appointed after the cut-off date.

While considering the agenda of contributory pension scheme, the 6th central Pay Commission (CPC) asked the Bangalore based Centre of Economic Studies and Policy to examine the issue. The study conducted by the institution concluded the following:      

“Since most of the state governments have chosen to switch over to “contributory pension scheme,” in fairness (from the study conducted by the Centre for Economic Studies and Policy) it can be concluded that the pension liability of all the state governments are bound to increase to three times of what it is today, by 2038.” This plainly means huge losses of government revenue for the benefit of Indian and foreign capitalists.

We may, in fine, quote the conclusion reached by the committee set up by the 6th CPC to judge the issue. This paragraph appears on page 76 of the report by the Centre for Economic Studies and Policy, Institute for Social and Economic Change:

“Mainly given the fact that the future liability although may be large in terms of absolute size is not likely to last very long and does not constitute an alarmingly big share of the GDP which is also on the decline. It appears that pursuing the existing ‘Pay as you go’ to meet the liability will be an ideal solution.”

We must therefore strongly demand of the government of India that for the reasons adduced in the foregoing paragraphs by an expert research institute, the new pension scheme enshrined in the PFRDA bill must be withdrawn forthwith --- in the interest of the civil servants as well as the exchequer.

WHY PENSION

PRIVATISATION

The toiling people of the world cannot forget the second biggest world shaking deep capitalist crisis, after that of 1929, one which began in September 2008 with the crash of New York’s Wall Street, the nerve centre of world capitalism. The catastrophic effects of this crisis are still operating in respect of the working class and the poor in particular.  

Immediately after the collapse causing crisis, political leaders of major capitalist states in the world got together several times and harped on the same theme --- that public expenditure has to be drastically curtailed and austerity measures have to be strictly followed by all the governments to tide over the crisis. Along with it, they granted bailout packages to the bourgeoisie, spending tremendous amounts of money from their state exchequers. In other words, they transferred the common people’s money to the same collapsing industries and companies whose limitless greed for profit was the chief cause of the system’s breakdown. 

What they actually meant by curtailing public expenditure and by austerity measures? In fact, they wanted to hoodwink the people by some apparently innocent terminologies. But, in reality, cutting public expenditure and adopting austerity measures, means cuts in workers’ and employees’ social security measures in the form of privatisation, cutting down pensions, stopping recruitments, promotion of contract basis or piece-rate basis employment, cuts in medicare and educational benefits, cuts in wages and salaries to cripple the already deteriorating economic condition of the workers and the poor by all possible means.

The sharply rising unemployment and the rising trend of the number of contract employees overtaking that of regular employees are the main features of this so-called austerity.

To be sure, such policy measures impacting the workers and the poor were already there, and also the mass and class struggles against them were rocking Europe and other parts of the world, including India. What happened after the Wall Street crash was that additional economic attacks were launched against employees and workers, and their trade union rights. These now became backbreaking for the workers and the poor.

That is why the international trade union movement, and the World Federation of Trade Unions (WFTU) in particular, raised the slogan that workers must not be forced to pay for the crisis; it is the capitalists and their governments who created the crisis, who are responsible for it, and it is they who must pay for this crisis. It means the governments and the capitalists cannot be allowed to augment the workers’ hardships. On the contrary, governments must mop up a part of the enormous profits the capitalists are gaining and increase the taxes on the rich to generate resources in order to meet the deficit.

Which governments have followed the course suggested here? None of the governments, including that of India, has cared a hoot to follow it. On the contrary, they are merrily imposing further backbreaking burdens on the workers and the poor people while the rich are wallowing in their sharply increasing wealth.

WHOSE MONEY

IS AT STAKE?

Pension privatisation is an attempt of the same kind. In India, more than one crore of people are in government employment --- in states, centre, railways, defence and other public sector units like the BSNL. Privatised pension means deduction of 10 per cent of a worker’s pay every month, following which the government will contribute an equal amount to the pension fund, and this astronomical sum will be handed over to capitalists, both Indian and foreign. The fund managers selected for the purpose would invest this fund in the share market and the capitalists would garner fabulous amounts on this investment when the share market index rises. But whose money they are to invest in the share market? Not theirs but of the poor employees, while the benefits will go to the pockets of these Capitalists and not of the employees. Employees may get a portion of it only when the share market rises. In case the share market falls, the employees’ money would get drowned in the sea.     

In addition, the government intends to make a ‘pension plan’ for poor workers as well. The project is alluringly named ‘Swabalamban,’ which means self-dependence. But what self-dependence? The government will take a certain amount from the wages of the poor workers and that money too would be invested in the share market to help the capitalists reap huge profits. In the process, a poor worker may lose every pie of her/his life-time savings as (s)he would be at the mercy of an unreliable share market.

How employees and workers can tolerate such a heinous and criminal policy of the government that is intent upon committing a dacoity on the income of the poor employees and workers?

Capitalists are like vultures in the sky, searching for an animal carcass lying below. The PFRDA bill intends to help them.

During the recent debt-limit crisis in USA, President Obama’s Democratic Party and the opposition Republican Party came to agree on a formula --- the rich would not be touched by further taxation; on the contrary, medicare and other public expenditure would be cut and the money, meant for the common people’s benefit, would be utilised to meet the deficit and tide over the crisis.

This process of rescuing the ailing and collapsing corporate houses is calculated to transfer the burden from their shoulders to the government’s. This may set in a sovereign crisis that would engulf the entire economy of a country. The poor would be its biggest victims.