Servicemen of same rank will get uniform pension after Government caves to long-standing demand

PUBLISHED: 15:52 EST, 24 September 2012 | UPDATED: 15:55 EST, 24 September 2012

After the stick of reforms comes the carrot of sops.

The UPA government has decided to soften the blow of the harsh decisions it took recently to pump up the economy by announcing a major relief to government employees and ex-servicemen.

The Union Cabinet on Monday approved the long-pending demand for a one rank, one pension scheme for ex-servicemen.

Victory: Before the announcement, ex-servicemen had returned their gallantry medals over the fight for equal pensions

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In another decision that brought cheer to central government employees, their dearness allowance (DA) has been enhanced by 7 per cent to help them beat the price rise.

However, the Cabinet did not take up the agenda item on PDS restructuring and increasing the price of sugar, as the minister concerned was not present.

Men in uniform, especially retired personnel, have been fighting a protracted battle for a one rank, one pension scheme, and its approval is bound to help the beleaguered UPA government earn some goodwill.

Before the decision, some of the army veterans had even gone so far as to return their gallantry medals.

Under the new move, the government will bear the financial burden of Rs 2,300 crore per year to pass on the benefits of one rank, one pension to 12 lakh-strong pensioners.

Interestingly, this was not on the Cabinet agenda and was added at the last moment.

The decision means a uniform pension will be paid to the armed forces personnel retiring in the same rank with the same length of service, irrespective of their date of retirement. Any future enhancement in the rates of pension will be automatically passed on to those who retired earlier.

The decision has come on the recommendations of a committee, headed by ex-cabinet secretary Ajit Seth. Even defence minister A.K. Antony had written to the Prime Minister saying that the growing
discontent among service personnel because of the anomalies in fixing salaries and pension could
have serious consequences.

In another relief, the government decided to enhance the dearness allowance of central government
employees from the existing 65 per cent to 72 per cent.

The decision will be implemented with effect from July 1 2012, and will benefit 80 lakh employees — about 50 lakh employees and 30 lakh pensioners.

This would mean that the benefit of enhanced DA would flow to the employees as the festive season
sets in next month.

The combined impact of this decision on the exchequer will be Rs 7408.24 crore per year.

In another key decision, the Cabinet Committee on Economic Affairs cleared the debt restructuring
scheme for state power companies. The scheme, seen as a bailout package, will be effective as soon as it’s notified and will remain open up to December 31.

MAIL TODAY had first reported that reforms in the power sector were on their way. The scheme will help the power distribution companies (discoms) tide over their accumulated losses of over Rs 1.9 lakh crore, as on 31st March, 2011.

According to the new scheme, 50 per cent of the outstanding short-term liabilities up to March 31,
2012 will be taken over by the state governments. These would be converted into bonds to be issued by discoms to participating lenders, duly backed by state governments’ guarantee. The governments will also take over liability from discoms in the next 2-5 years by way of special securities and repayment and interest payment.

However, restructuring of loans is to be accompanied by concrete and measurable actions by discoms or states to improve the operational performance of the distribution utilities.