Finance Ministry Announces A 4-Member Committee To Review The Existing Framework Of NPS

On April 6, 2023, Thursday late evening, the finance ministry announced about setting up of a four-member committee under finance secretary TV Somanathan to review the existing framework of National Pension Scheme (NPS) as per reporting in Economic Times.

The committee will be chaired by TV Somanatan, and would consist of Secretary in Departmentof Personnel Training (DoPT), a Special Secretary in Department of Expenditure along with the Chairman of Pension Fund Regulatory and Development Authority (PFRDA) as its members, according to an office memorandum issued by the finance ministry.

Last month, the finance minister Nirmala Sitharaman had announced that the government would set up a committee to look into the issue of pensions and evolve an approach that addresses the needs of employees while maintaining fiscal prudence to protect the citizens.

"The approach will be designed for adoption by both the central and state governments," she had said.

According to the terms of the reference stated in the memorandum, the panel will look if the existing framework and structure of NPS, as applicable to government employees, warrants any change.

"If so, to suggest such measures as are appropriate to modify the same with a view to improving upon the pensionary benefits of government employees covered under the NPS," it said, adding that the committee will keep in mind the fiscal implications and impact on overall budgetary space.

The announcement cawas made aagainst the backdrop of several non-BJP states deciding to opt to the DA-linked Old Pension Scheme (OPS) and also employee organisations in some other states raising demand for the same.

The state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have informed the Centre about the decision to revert to the old pension scheme and requested a refund of the corpus accumulated under the NPS.

However last month, Finance Ministry informed the Parliament that it is not considering any proposal to restore the OPS in respect of the central government employees recruited after January 1, 2004.

Under the OPS, retired government employees received 50 per cent of their last drawn salary as monthly pensions. The amount keeps increasing with the hike in the DA rates. OPS is not fiscally sustainable as it is not contributory and the burden on the exchequer keeps on mounting.

NPS has been implemented for all government employees except those in the armed forces joining the central government on or after January 1, 2004. Most of the state/ Union Territory governments have also notified the NPS of their new employees.

The office memorandum issued by the ministry regarding setting up of the committee does not provide a timeline for finalising the report.