People's Democracy

CITU Condmens Diversion Of Pension 

Contributions To Stock Market

The following is the text of the statement issued by the CITU secretariat on January 23, 2007

THE UPA government decision to arbitrarily notify an interim investment pattern for the contributions under the New Pensions System (NPS), including a 5 per cent investment in stocks, is a retrograde move, with ominous portents for the social security of the government employees. 

Firstly, the NPS is a unilateral and arbitrary measure brought in by the NDA government, which has met with stiff opposition from the organisation of government employees and the central trade unions. The move by the UPA regime to carry it forward has also met with the same resistance. 

Secondly, the NPS is yet to secure legislative nod from parliament, as the Pension Fund Regulatory and Development Authority (PFRDA) Bill is still awaiting passage. Resort to an executive notification – and not even an ordinance – to introduce this measure is in scant respect of accepted parliamentary norms.

Thirdly, the government has chosen to gloss over the opposition, in principle to the NPS itself by the three Left-led state governments, emphatically voiced by the finance minister of West Bengal. In this context, the assertion by the finance minister that the ‘PFRDA Bill is a necessity and should be passed as soon as possible’ woefully ignores the ground reality of the crucial majority needed for passage of the bill.

Fourthly, though the government claims the move would be on the lines of the existing pattern for non-government provident funds, the present proposals envisage drastic departures therefrom. To cite the example of the Employees’ Provident Fund (EPF), which is the major non-government provident fund, it has the following safeguards in place: 

• There is a tripartite Central Board of Trustees (CBT) vested with the authority to decide on investments.

• The investment pattern applicable for the EPF provides for investment in equity only as an option to be exercised by the CBT that too limited to 5 per cent only of the future accretions in the Fund. The CBT has, unanimously, decided against exercising such an option. 

• The Fund Manager is the leading Public Sector Commercial Bank (State Bank of India) and not any public sector fund manager, which may include a mutual fund or insurance company dealing with stocks. 

Here it is pertinent to recall certain of the commitments in the National Common Minimum Programme (NCMP) adopted by the UPA regime. It unambiguously stated: “The UPA government firmly believes that labour-management relations in our country must be marked by consultations, cooperation and consensus, not confrontation. Tripartite consultations with trade unions and industry on all proposals concerning them will be actively pursued”. It is deplorable that the government has not even attempted either to hold consultations or evolve a consensus on this important measure concerning the social security pension relating to its own employees.

Even in the case of the capital markets, the NCMP assured: “Interest of small investors will be protected and they will be given new avenues for safe investment of their savings”. In this backdrop, it is beyond comprehension how the government is attempting to divert the social security contributions of its own employees to the risk prone speculative investment in stocks. 

The CITU condemns this arbitrary move by the government and urges that the proposed notification be dropped. 

The CITU demands the government to hold proper dialogue with the central trade unions and organisations of the government employees (state and central) on the whole gamut of the social security pension system, including the demand to scrap the NPS. 

(Note: The text of West Bengal finance minister’s speech delivered at the chief ministers meeting convened by the prime minister to discuss this issue will be carried in the next issue – Ed) (INN)