O.R.O.P. : HAS SOLDIER'S PENSION BILL BECOME UNAFFORDABLE

Per Capita Soldiers in India  

      The lead story in a national daily has made a fervent plea for a debate on military pensions. The plethora of figures given in the editorial published in the Indian Express on 09 March 2015 has obviously been ‘planted’ by someone in the ministry, since they are not available in the public domain. The subject must indeed be discussed, since it affects a large section of people, but the statistics must be seen holistically and viewed in the right perspective. 

       As per the Internet, the population of our country in March 2015 has been estimated at 1278 million. The total number of soldiers, sailors and airmen on active list is reported to be 1.3 million. These two figures reveal that the number of combatant personnel for every 10,000 Indians is 10.17. This ratio is a lot higher, in other countries.

   The figures are : India 10.17; Pakistan 37.1; SA 47; Russia 59; China 17; Sri Lanka 75; Iran 65 and Israel lead the pack with a figure of 214! These statistics reveal that a tax payer in our country has to support the least number of soldiers.

        Let us now compare this proportion with the situation as it obtained in our own country 35 years ago. Our armed forces were comprehensively re-structured and expanded after the 1962 debacle, but their strength leveled off at a figure of around 1.25 million by 1981. Our population at that time was 683 million. The resultant per capita ratio works out to 18.3 military personnel for every Indian. Thus, in the last three decades, the number of soldiers for every 10,000 Indians has dropped to 55% of this figure.

        For those who have an aversion to statistics let us put it in words.  Our country has a very large population. But the size of our military is not as big. Therefore, our people have to pay less to pay the soldiers. Further, during the last forty years, the population has more than doubled. But the size of the military has not been increased. Consequently, our defence spending on a pro- rata basis has been reducing slowly, but surely.  

        The ratio of pensioners to serving personnel in India is, indeed, a matter of great concern. This truth had been comprehended as early as 1983, and a series of studies were ordered by the Army Headquarters to arrest the trend. To maintain a youthful age profile, combat soldiers have to be retired in the prime of their lives, and that bloats up the number of pensioners. The service headquarters have written innumerable papers on this subject. In fact if all the files that were created on this issue had not been destroyed, there would be no place left for anyone to sit in concerned sections of the Ministry of Defence.

       Almost all the thinkers came to the conclusion that the only solution to this problem was lateral shift of soldiers to police and Para-military forces. Unfortunately, this impinges on the cadre structure and promotion prospects of the worthy officers currently heading these forces. Consequently, all these meticulously conducted studies were first shelved and later consigned to flames. The incinerators in South Block are so effective that even the ashes are destroyed, so that posterity does not get a wind of these prickly suggestions. The military top brass are not alone in suggesting lateral absorption of soldiers into other departments of the government. Successive Pay Commissions have recommended that ex-servicemen be absorbed into police and Para-military forces. My friend, J Thomas feels that ex-servicemen be given the necessary skills for them to be laterally shifted to Defence establishments like the DGOF, MES, and defence PSUs. (RATHER) As a rule, five years military service should be a pre-requisite for a job in all Defence Establishments.

        The Sixth Central Pay Commission devoted a full chapter (No.2.4 of their Report) in which they gave details of how lateral absorption should be carried out. Towards this end they even went to the extent of abolishing the pay group structure of the armed forces, so that lateral shift would not lead to a loss of pay. During implementation of the report of the 6^th CPC, the government is believed to have stated that ‘this issue will be examined at a later date’.  And of course, that ‘later date’ never came, and as of now, the problem continues to stare at us, and show its ugly face whenever we look at the pension bill.

(LOSS OF JOB MEANS) 

         Let me mention here that the loss of job in the prime of life leads to loss of earning potential. In addition, it results in a person denied the opportunity to work, and therefore feel ‘needed’. Even the family does not value a man who is idle, and seen hanging around the house all day long. There is no punishment greater than being unemployed, with no skill to sell! The pension is small consolation and a poor substitute for work.

        We now turn to another issue which is related with this subject. Between 1991 and now, a great deal has happened to our economy. When we were children, food was the main concern. The 2nd Pay Commission (1957-59) devoted a considerable part of their report in devising a ‘need based’ pay as the minimum wage to ensure that the humblest paid government servant could afford to provide 2700 calories of food recommended by Dr Aykroyd to his family of three. This factor became the corner stone of their report.  

         The economic situation has undergone a sea change since then. Our GDP has been rising at healthy pace especially after 1991, and goods and services which were the exclusive preserve of the rich and the mighty are now in the reach of even the lower middle class in India. Merely thirty odd years ago, a residential telephone was a luxury. In the army only officers above the rank of Colonel were entitled to a phone in their residence, and that too, without the ‘trunk dialling’ facility. Today, even an unskilled daily wage earner owns a mobile phone.

        The improvement in the quality and supply of these creature comforts by way of ‘white goods’ is similar. The soldier is an integral part of the society. Therefore, if a neighbour has fancy smart phone, and our man cannot afford it for his child, he feels belittled. There is enough evidence to suggest that the size of the national cake has increased. The basket of goods and services which constitute the shopping list of the householder has undergone a sea change. The compensation package has to cater for this fact of life. Or, as my friend K Aggarwal puts it, ‘If the size of the national cake has increased, then the soldier and also the veterans are justified in seeking a larger slice. In all fairness, this should not be denied to them’

         Philosophically, I observe that life was a lot simpler when we were children. Our needs were limited to ‘roti, kapda aur makaan’. Today, if a person does not have a cell phone for a few hours, he might die of asphyxiation!

        To sum up, let me state with full conviction that compared to other countries, our per capita soldiers are much less in number. To help them give of their best, it is our bounden duty to provide them the means to buy all that they need to live with grace and dignity. There is a crying need to review the terms of engagement of the soldiers to bring the number of pensioners down. I am convinced that it is possible to do so, if the government has the will. The ground work for this has already been done by the 6^th Pay Commission. The MHA and the MoD have to shed some of their unfounded reservations to implement this highly overdue reform.(Maj Gen Surjit Singh. VIA- e-mail surjit97eme@gmail.com)

An Addendum 

I was about to send this piece out when I discovered some interesting facts. I found that soon after our independence, defence received a much larger share of the national budget than now. In Feb 1951, Shri CD Deshmukh presented a budget in which the total expenditure was estimated at Rs 375.43 crores, of which defence was allocated 180.2 crores. This works out to about 48% of the government spending.
 

This year, in 2015 Shri Arun Jaitley has granted 2,46,727 crores to defence out of the total expenditure of Rs 17,77,477 crores. That is 13.8% of the total outflow. Therefore, those who believe that defence was neglected during the early days of our republic are mistaken.

Defence is, in fact, receiving a raw deal now! 

From these statistics, I also derived some more inferences. Assuming that the budgetary figures have a direct relationship with the GDP, it can be seen that during the last 64 years, our national income has increased by a factor of about 4740 times. Now, since prices of essential items such as food grains, sugar, milk, cloth and building materials have risen by a factor of 100 during this period, the actual increase in the size of the national cake at fixed prices is of the order of 47.4. Since the population of the country has gone up from 36 crores in 1951 to 127 crores now, it is evident that the average Indian today has at least 13.4 times more money to spend than his grandfather, six decades ago. And this fact does not really need all this statistical analysis. Just take a good look at all the vehicles you see on the road and then go into a shopping mall. Compare the goods and services you see there and then recall what we possessed when we were children. 

Now, take a look at the defence budget. View it in the light of the revenue of some of our major corporate houses. You will find that the annual turnover of several companies exceeds our defence spending. If you add the net worth of just two Indians, Mukesh Ambani and Azim Premji, you will discover that it exceeds the budget of our army, navy and the airforce! I am sanguine that our men in uniform will discharge their duties with utmost commitment, always and every time. (Surjit)

(SOURCE: VASUNDHRA BLOG)

Thursday, March 26, 2015

CONTROLLER GENERAL OF DEFENCE ACCOUNTS - CENTRALISED PENSION DISBURSEMENT SYSTEM CONCEPT PAPER

  Ministry of Defence disburses appx Rs. 51,000 crore every year as

pension benefits to 24.16 lakh defence pensioners – both service personnel as well as defence civilians. While pension sanction is being done in a centralised way – by PCDA (Pension) Allahabad in r/o Army and defence civilians; by PCDA (Navy) in r/o Navy personnel and by JCDA (AF) Subroto Park, New Delhi in r/o Air Force personnel, pension disbursement is being carried out by a number of agencies who are working as PDAs (Pension Disbursing Agencies) – 28 Public Sector and 4 Pvt Sector Banks, 63 DPDOs, State Treasuries and Post Offices. Banks have the largest number of pensioners on their roll – appx 18.06 lakh pensioners or 75% of the total number of defence pensioners. And they disburse Rs. 3800 crores every month (or Rs. 45,600 crores per annum which is almost 90% of the total pension disbursement to defence pensioners) as pension to these pensioners. Instances have come to notice where different practices have been followed by banks or where different interpretation have been arrived at and implemented for one government order, resulting in complaints from pensioners. An analysis of grievances received at the Ministry or at CGDA office or at PCDA (Pension) office reveal that more than 95% of the complaints pertain to pensioners drawing their pension from the banks. The task of addressing these grievances and providing services to pensioners to their complete satisfaction is an arduous one. This, however, could be changed by adopting a new paradigm for pension disbursement.

2. This new paradigm is centralised disbursement of pension. This simply means disbursing pension from a central agency viz. Centralised Pension Disbursement Agency (CPDA) to all the pensioners. The Existing Pension Disbursement System

PDA - (CPPC) - Bank A/c

PDA  - (DPDO) -  Bank A/c - Cash Payment

PDA (Treasury) - Bank A/c- Cash Payment

3. The present system of pension imbursement is an opaque one in the sense that it does not easily provide details reg. no of pensioners, category wise distribution of pensioners, amount of pension disbursed in a month and govt's pension liability. Collation of the information from various sources is quite difficult and the output is not always accurate.

4. Further, in the existing system, there is a multiplicity of PDAs ‐ 29 Banks, 63 DPDOs and a large number (500+) of State Treasuries. As mentioned earlier, many a times PDAs tend to interpret Govt. Orders differently. This, in some PSA cases delays the implementation of the order itself and in some other cases the order gets to be implemented differently by different PDAs. In both cases, generally, pensioner is the sufferer. There are other issues/difficulties in the existing pension disbursement system:‐

I. With multiple PDAs, the system is not amendable to effective monitoring as well as grievance handling. It makes the task of all decision makers including the Ministry, a very difficult one.

II. There is a delay in booking the pension amount to Govt. account. This also makes it relatively difficult to know the exact pension liability.

III. Even at a given time, it becomes an arduous task to exactly find out the number of active defence pensioners (including categories‐wise) as the information is to be collated from a large no. of PDAs.

IV. Maximum pensioners are drawing pension from banks. It has been experienced that they (Banks) do not have dedicated staff to deal with pensioners' issues. Also, they are not well conversant with orders/issues peculiar to Defence pension.

The Proposed System

5. The proposed system of Centralised disbursement of pension is not only transparent but easy for information processing and retrieval (PPO & pension (Pension amt) documents).

PSA - CPDA - Pensioners - Bank A/c

6. Under the proposed system, after sanctioning pension and issuing Pension Payment Order (PPO), the pension sanctioning authority will forward the PPO and other details – including bank details – of the pensioner to the Centralised PDA (CPDA) on soft format through a secured channel. It could be on the CGDA intranet and for enhanced security could also be with digital signature. The CPDA will process the papers and will initiate first payment as well as subsequent monthly pension payments for credit to the pensioners’ bank accounts (as given by the PSA along with the PPO) through the NEFT/RTGS or the CMP (on‐line payment mechanism with SBI). Since the CPDA is making payment of pension – he can directly book the amount to the government account, avoiding any delay or suspense head booking. For the pensioners, there will be no change as they would receive pension in their bank account, as is the status presently. The proposed system only replaces the multitude of PDAs with a single PDA without affecting the pensioners’ interest and rather bringing about a focused delivery mechanism. There are a number of benefits of the proposed system –

i. Uniform interpretation and implementation of govt orders

ii. Instant booking of pension payment to govt accounts – giving authorities a true picture of the pension liability and payment.

iii. Better grievance monitoring system can be instituted with a single PDA. Easier for everybody.

iv. Centralised database will help in better exploitation of information and communication technology for the betterment of services to the pensioners.

v. There will be no change as far as pensioners are concerned. They will continue to receive their pension in their given bank accounts.

vi. No loss to the banks in terms of accounts maintenance as they will continue to be the final pension paying agency.

vii. Future scalability is possible and relatively simple. For example, a centralised call centre could provide solutions to the pensioners for their queries or complaints.

7. In addition to these benefits, the proposed system will also result into a large saving to the Ministry of Defence (MoD). Presently, MoD pays Rs. 60 per transaction to Banks; and with 12 regular payments and 4 DA payments in a year, MOD pays Rs 960 per pensioners per year. For 18.06 lakh Bank pensioners, this amounts to almost Rs. 180 Cr. every year. If all pensioners are brought under the centralised PDA system ‐ where CPDA will credit pension in pensioners Bank A/c through NEFT/RTGS ‐ saving of Rs. 180 Crore could be achieved.

Implementation Modalities

8. Phase I can cover all new pensioners – appx. 80,000 per year – coming into pension fold. This can be done from a particular date which can be decided after taking decision on centralised pension disbursement and creating necessary IT and Communication infrastructure.

9. In Phase II all DPDO pensioners can be covered. All original files may be shifted to the CPDA DPDO‐wise. Given that out of 63 DPDOs, 52 have been centralised under Project Ashraya (Pension disbursement system), this is likely to be smoother phase wherein shifting of files and their appropriate indexing will be the main activity / focus.

10. In Phase III existing bank pensioners can be covered depending upon the response of the banks. This would be the toughest phase both in terms of making banks agree to the new model and in database management Banks revenue loss will also be a big issue from their perspective. As such this phase will require perseverance

and a different strategy (including for database management) which can be derived and decided later from the success of the first two phases.

11. An issue which may require a conscious decision would be whether the centralised disbursement should be from one location or multi‐location. It is considered that in a networked environment, location may not be an important factor from the view‐point of users. However, for the ease and adaptability with the existing pension set‐up, it is recommended to have three centres associated with the existing pension sanctioning authorities, viz. PCDA (P), Allahabad, PCDA (N), Mumbai and JCDA (AF), New Delhi. It is also recommended to have a centralised call centre, which can have access to the complete database of the three centres of CPDA. The call centre can be colocated with one of the three centres for the purpose of administrative convenience.

Role of DPDOs in the proposed centralised system

12. DPDOs are Pension Disbursement Agencies (PDAs) in the exiting set‐up. Each DPDO is a distinct PDA. Presently, 63 DPDOs – 51 in northern India and 12 in Southern India (Eastern central and Western India have no DPDOs) – are working as PDAs for 4.7 lakh pensioners.

13. If we divide the role of a DPDO in terms of (i) processing of monthly pension payments and (ii) identification exercise (which is not restricted to any specific month (e.g. November for bank pensioners) and continues for the whole year) then it can be stated that in the proposed CPDA paradigm, role of DPDOs will not be there for first part (i.e. payment processing). However, they can be effectively used for the second part ‐ identification of pensioners. This would mean that DPDOs would need to be remodelled as service centres for pensioners/ which will carry out their annual identification, accept change requests/applications on behalf of CPDA (for cases related to re‐marriage, re-employment, death, Bank account changes etc.) and can also act as grievance handling /settlement centre as they would be linked with the CPDA server and can have a higher protocol communication with the CPDA call centre. It is considered that in the proposed model ‐ one DPDO may only require one AO, one AAO (or two AAOs) and one MTS ‐ all proficient on the new system. Savings achieved in manpower (to be assessed) can be used for opening up a few more service centres in areas where pensioner concentration is relatively very high or in existing offices of DAD or even with the Zila Sainik Board Offices.

Infrastructure requirements

14. To start the work at the CPDA, it is assessed that manpower strength of one IDAS, One AO, two AAOs, 4 Adrs and 2 MTS would be sufficient and can even last for the first two phases with 2‐4 additional Adrs. It is assessed that this manpower can be spared from the existing resources of the organization of CDA (PD). Hardware requirement would include the following:‐

Two Blade Servers of latest specification 8 PCs, 8 Printers including one line printer

2 10 KV UPS

LAN

Wan connectivity with 4 MBPS Bandwidth

15. Software requirements would include operating system, Application software, and Anti‐virus. While OS and anti‐virus can be bought off the shelf, Ashraya can be used as application software with modifications amenable to centralised processing as well as call centre type information retrieval. In the medium term, however, there will be an unavoidable requirement of a professionally designed & developed integrated system and action for the same would need to be taken.

16. Other office equipment will include furniture, phones (including highend communication system for call centre purposes), photo‐copiers, Genset etc.

17. Similar hardware requirements would be there for setting up the call centre. While call centre manpower can be outsourced, monitoring can be effected by the CPDA officers, as call centre is proposed to be established colocated with the CPDA.

Costing

18. It is estimated that total fixed cost for establishing the CPDA will be in the range of Rs. 80 – 100 lakh. This will include Computer Hardware, Office Equipment, Communication system, LAN and WAN connectivity (as detailed out above) and other Misc expenses as per following details –

Servers Rs. 35 lakh

Printers Rs. 4 lakh

PCs Rs. 4 lakh

UPS Rs. 4 lakh

Gen Set Rs. 3 lakh

Photocopier Rs. 3 lakh

Furniture Rs. 10 lakh

Communication Rs. 15 lakh

Misc. Rs. 2 lakh

Total Rs. 80 lakh

Thus, for the establishment of three disbursement centres and one call centre, total one‐time cost is estimated to be in the range of Rs. 3 – 4 crores.

19. Running Cost excluding manpower cost but including maintenance of all hardware, communication expenses and WAN connectivity rentals (and hired manpower for call centre) is estimated to be Rs. 25‐30 lakh per year per centre or Rs. 1 to 1.5 crore for the four centres.

20. Manpower cost has not been estimated because it has been considered that the immediate requirement can be met by drawing the required manpower either from the savings which may be achieved in the existing DPDOs or even from the ZO (PD) / CDA (PD). It is, however, estimated that cost will be involved – both for hardware as well as for manpower – if service centres are required to be opened at new locations. While the one‐time establishment cost is estimated to be in the range of Rs. 15 lakh, running cost (including manpower cost for 1 AO+1 AAO+2 MTS, rental charges and other maintenance charges) could be appx Rs. 40 lakh per annum per service centre. For opening of say 50 new service/liaison centres, a one‐time expenditure of Rs. 7.5 crore would be required whereas total running cost would be Rs. 20 crore per annum.

Issues

21.The following issues are expected to emerge in the new set‐up :‐

i. From the feedback received from various quarters, the biggest issue that is likely to emerge in the new set‐up would be the lack of an agency which could provide the pensioners a forum for personal interaction/contact at their nearest place. In the exiting set‐up, DPDOs and bank branches provide this and associated services to their respective pensioners. In the proposed set‐up, as discussed above, DPDOs can continue to play this role for all pensioners in their areas. However for bank pensioners (particularly in areas where DPDOs are not operating), this issue will need resolution as this will have a bearing on other associated issues like identification at the time of first payment, annual identification, change requests, intimation of re‐employment & re‐marriage, death cases & life time arrears payment etc. To address these issues, different models can be considered:‐

I. For first payment, in r/o PBORs, respective PAOs may be authorised to identify the pensioners on the next day of their retirement (since the PBORs are attached with their respective Record Offices till the last day of their retirement). The PAO may log into the CPDA system and do the needful. System would need to provide this facility and necessary rights for the same. Jeevan Praman website can also be an option for this purpose.

II. Officers may also approach Defence Pensioners Liaison Centre for this purpose. Jeevan Praman website can also be an option for this purpose. (Since, original document in the proposed set‐up are to be with CPDA, it is presumed that it may not be possible to assign this responsibility to the pensioners bank branch.) Similar process may be followed for annual identification also, for which even periodical camps may be organised at some of the locations. Further, for inquiries as well as grievance redressal, establishment of a centralised call centre, as discussed in preceding Para, would be a vital and unavoidable requirement. The call centre can also appropriately guide the pensioners about many of their issues and about course of action they need to take regarding any particular activity.

iii. Processing of 25 Lakh pension payments every month could be another challenging issue which would require robust infrastructure ‐ hardware, software, communication, and human ware.

22. It is perceived that this challenge is not insurmountable and could be overcome with a mix of planning, implementation and exploitation of Information & Communication Technologies and also adequate resources as discussed above.

Conclusion

23. The proposed system of Centralised Disbursement of Pension far outweighs the existing distributed system in terms of benefits to the Ministry, to the Pensioners and to the overall system per se. It is easier to implement, to monitor and to maintain. The system is positively susceptible to current grievance management and to future scalability. It would be possible for the Ministry to get information about total number of pensioners, category wise distribution, exact pension liability etc. from a single source. Finally, the system, if fully implemented, can result into a huge saving of Rs. 150 crore every year to the Ministry of Defence.

(SOURCE CENTRAL GOVT EMPLOYEES BLOG)