People's Democracy

Central TUs Oppose Increase In Pension Contribution

ALL central trade unions opposed the government proposal to enhance the contribution of workers to the pension fund from the existing 8.33 to 10.33 per cent. In a meeting of the central trade unions convened by the union labour ministry to consider this proposal, they criticised the government of India for its refusal to treat pension scheme as a social security measure and trying to link up the pensionary benefit to the concept of market economy.

Oscar Fernandes, minister of state for labour presided over the meeting held on November 15, 2006 in New Delhi.

According to the Central Provident Fund Commissioner, the surplus of the PF organisation was continuously getting eroded due to reduction of rate of interest by the government of India on the Special Deposit of the PF by the government of India. The rate of interest which was earlier 12 per cent was gradually brought down to 8 per cent initially by the ministry of finance. As reported by Central PF Commission the surplus/ deficit was as follows:

Since 2000 there was no upward revision of the pension of the workers though contribution of workers was increased due to rise in pay and dearness allowance. The following reasons were given by the government:

1. Raising wage ceiling from Rs 5000 to Rs 6500

2. High withdrawal rate

3. Generous benefits

4. Falling interest rate

5. Delay in remedial action

The main reason for the fall was the reduction in the interest rate by the government. The other reasons cited are of no consequence. The entire scheme was prepared by the actuaries and they determined the benefits. And now the government is saying that the deficit occurred due to “generous benefits” given to the employees. It is a clear indication of the government’s intention of reducing the benefits on the plea of making the scheme viable. This proposition was also opposed by the trade unions unitedly in the meeting. 

Regarding high withdrawal rate of the workers, the trade unions pointed out that the central government has been continuously pressurising the public sector undertakings to reduce the manpower through the offer of voluntary retirement scheme. Similar schemes were also floated by the private sector undertakings in their efforts to reduce the manpower in the units and increase the workload on the remaining workers. While the regular manpower was reduced, their plan is to take cheap contractual labour who will not be covered by the PF scheme.

The trade unions therefore pointed out that the policies of the government of India were primarily responsible for the high withdrawal rate. It is for the government of India to change this draft and correct the situation, the trade union representatives underlined. 

Among the proposals advanced by the government to solve the present impasse are to increase the contribution of workers towards the pension fund; to increase the age of retirement from 58 to 60 in view of the growing life expectancy; to put a brake on increasing wage ceiling for coverage of the pension scheme or to reduce the pensionary benefits.

As noted earlier, the trade union representatives with one voice resolutely opposed the enhancement of the contribution to the pension fund. They demanded that the government of India should not treat pension funds as mere bank deposits. They should be treated as the social security measure and the government should consider pension funds as special deposits and higher rate of interest should be paid towards these funds. They pointed out that banks are already giving 8 per cent or more as the rate of interest for a three-year deposit. The pension fund remains with the government for 40 years and the workers have a right to expect higher return for their deposit.

The ministry of finance is determined to pay a lower rate of interest. The trade union representatives requested the union labour minister to take up the matter with the finance minister or if necessary even to represent the matter to the prime minister so that higher rate of return is paid to the pension deposits.

The union minister of labour agreed to consider the matter.

Regarding the proposal to increase the age of retirement from 58 to 60 years, the trade union representatives pointed out that already most of the public sector undertakings are having 60 years as the age of retirement. In view of this, the trade union representatives expressed the opinion they would agree to increase the age of retirement to 60 years subject to the condition that existing benefits provided in the schemes with workers contribution be increased by two years.

The trade union representatives vehemently opposed any curtailment in the quantum of pension in view of the artificial deficit due to reduction in returns from the government of India. They criticised the government for low pensionary benefits which was highly inadequate for a retired worker to maintain necessary standard of life. Therefore they actually made out a case for increasing the pensionary benefits to the workers. 

The representative of the INTUC, G Sanjeeva Reddy proposed that the contribution to the PF should be enhanced from 12 to 15 per cent in order to divest more funds to the pension. It was noted that the employers would not accept it and the government of India would not agree to take such a step. Similarly, a proposal was made by some trade unions to increase only the employers contribution to the pension fund to meet the budgetary deficit. However, since the law provides equal contribution both from the workers and the management, the proposal is not likely to be accepted by the Board of Trustees.

The CITU criticised the basic character of the scheme itself which does not work as a genuine social security measure. The family pension scheme formulated in the year 1973 was strongly criticised by the CITU on the ground that it was taking more from the workers than what it was offering to them as family pension. The CITU’s point was proved correct by the fact that when the government of India closed the scheme, it had a surplus of over Rs 14,000 crores!

Another undemocratic feature of the Board of Trustees of PF highlighted by the CITU in the meeting was that the Board with a total strength of 43 members contains only 10 trade union representatives. Bureaucrats dominate the Board. The government decision can be easily carried through as the Board decision because non-workers’ representatives are in a majority. The workers should have the final say in the matter. However what is happening today is that the ministry of finance is practically controlling policy decisions in this regard. So much so that even the labour minister, who is the chairman of the Board of Trustees, has to follow the dictates of the finance ministry. The CITU demanded that the back-seat driving by the ministry of finance must come to an end and workers representatives on the board should have more authority to decide the policy of the Board of Trustees.

The labour minter agreed to call another meeting before final decision is taken on the question. M K Pandhe, president CITU attended the meeting on behalf of CITU. (INN)