People's Democracy

CPI(M) MPs Dissenting Notes On PFRDA Bill

Chittabrata Majumdar and Rupchand Pal Members of Parliament, CPI(M) had submitted their dissenting notes separately to chairman, Parliamentary Standing Committee on finance on Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2005. Because of space constraint, we have decided to publish below an abridged version of Majumdar’s dissenting note prepared by the M P himself. 

THE PFRDA Bill is for operationalising the New Pension System.

My party’s objections to the New Pension System are on the following grounds:

1. It marks a forced transition from defined benefit to defined contribution concept; the PFRDA Bill categorically provides that ‘there shall not be any implicit or explicit assurance of benefit’.

2. It seeks to privatise social security pensions through pension fund managers, which denotes only mutual funds.

3. The contributions of the workers will be diverted, in different proportions, to the speculative share market, which could put them in great jeopardy.

4. It will be followed up, as announced by the government, by allowing ‘FDI in pension sector’, which will result in foreign operators garnering the contributions of the workers and deploying the funds for speculative purposes in international markets.

The government of India seeks to abdicate its responsibility to provide for subsistence of its retired employees and to throw them to the mercy of ‘market forces.’

A question is being posed: “if the PFRDA Bill is not enacted, what is to be done with the contributions of 40,000 or so new recruits (after January 1, 2004), which had already been collected?” Here, the question of ‘alternative’ is also raised.

If the PFRDA Bill is not enacted, the New Pension System will stand withdrawn and the new employees will also stand covered by the same earlier pension scheme applicable to existing employees (as on December 31, 2003). The earlier Pension Scheme has not vanished into thin air. It is important to keep in mind that the new recruits to the armed forces after January 1, 2004, even according to the proposed legislation, will also be covered under the same earlier Pension Scheme.

The contributions collected from these 40,000 employees may be credited to their General Provident Fund (GPF) Accounts and the government may take the matching contribution back. Even otherwise, the moneys collected are now only lying with the government in its public account and continue to remain credited in the same account, while attempts can be made to resolve a well related issues by engaging the central trade unions and associations of central and state government employees and workers in an in-depth dialogue process.

Alternatively, the government may choose to start building up a separate fund for meeting the contingent pension liability. After all, the basis of the present fiscal related problems cited by the government for the un-sustainability of the present Pay You Go (PAYG) pension scheme.

It is also worth nothing that several autonomous institutions under various ministries of the central government have extended to their employees the pay scales and other service conditions, including the pension scheme, on par with those applicable to central government employees. Such institutions have also built up separate funding mechanism to meet the pension liability. The Employees ‘Provident Fund Organisation itself is an example of this case.

Our objections to the New Pension System cannot be addressed by proposing any amendment to the PFRDA Bill.

Section 20 (f) of the Bill provides: “there shall not be any implicit or explicit assurance of benefits except market based guarantee mechanism to be purchased by the subscriber.” If this is deleted, the whole bill will become infructuous. In the event, the whole Chapter V titled ‘New Pension System’ will stand deleted.