Context: Pension reforms in the defence sector are inevitable to reduce the rising pension burden in defence spending.
Need for Pension Reforms in the Defence Sector
Rising burden of pension in defence budget: In the past ten years, the share of India’s defence budget going toward pensions has risen from 18% to 28%,
Is slated to be nearly Rs 1.15 trillion next financial year due to One Rank One Pension (OROP)
As per OROP, personnel retiring at the same rank with the same length of service would get the same pension; and any future rise in the pension rate is automatically passed on to them. – (Open-ended and perpetual obligation)
This has led to a decline in the capital spending for modernization and hardware: from 27% to 19% in 10 years.
Early retirementat a young age: Every year, more than 60,000 army personnel retire (in the 35-45 years age) with full pension benefits after 20 years of service.
Less than 3% of the personnel are commissioned officers who make it to the senior-most ranks.
Unlike India, developed economies budget is largely about social security payments recycled from working young to retired elderly.
Way Forward
Lateral and circular flows of servicemen: from internal security forces to armed forces and back.
Army personnel can be deployed in understaffed security agencies such as the National Disaster Response Force, Civil Defence Corps or the Home Guards.
Do not restrict recruitment in security duties only: recruit young retirees in general administration, management, even sales and marketing.
Present pension savings (more than ?1.2 trillion) could be used in meeting challenge without reducing benefits in accordance with the age of retirement.
Non-Lapsable pool of fund: The 15th Finance Commission had included a requisition to make a provision for a non-lapsable fund that could be rolled on from year to year.