Friday, 17 May, 2024
Not many are debating or discussing the real elephant in the room: the massive pension bill of retired armed forces personnel
There has been much debate and controversy, including violent protests over the new Agneepath scheme. Essentially, with immediate effect, the armed forces will hire about Agniveers (soldiers) every year. After four years, 75% of the recruits will have to leaved the armed forces with a one time severance package of about Rs 12 lakh. Much of the debate over the issue is focused on what the Agniveers will do after they are compulsorily “retired” from the armed forces after four years. Under the old system, soldiers used to serve for a period ranging from 15 to 20 years and then retire with all medical benefits, gratuity and a handsome monthly pension. That option will now be open to just 25% of the soldiers who will be hired every year under the Agneepath scheme.
But not many are debating or discussing the real elephant in the room: the massive pension bill of retired armed forces personnel. As the accompanying chart shows, the pension bill has been consistently rising over the last 10 years or so. The actual pension bill for the armed forces was about Rs1.28 lakh crores in 2020-21 which is a little more than one fourth of the total expenditure on defence. The provisions for pensions has been reduced to about Rs1.15 lakh crore in the Union Budget for 2022-23, but experts are convinced the figure will be higher. And it will keep rising. Even if the government sticks to its guns and implements the new Agneepath scheme where 75% of the recruits will not be entitled to apension, the overall pension bill keep rising for at least a decade, if not more.
The reason is simple. An overwhelming majority of the solders retire before they are 40 years of age. Under the existing or old system, they are entitled to a monthly pension for a lifetime if they have served for 15 years; which most of do. Now, even if the trained and fit soldiers live up to an age of 75, they will need to be paid a pension for at least 35 years post retirement. For the next decade or so, about 60,000 of the serving soldiers will retire each year and will need to be lifetime pension. This system was quite simply unsustainable. Incidentally, barring the armed forces personnel, no government servant is now entitled to a lifetime pension. They contribute to their own pension kitty while serving. There is no doubt that the real purpose behind the new Agneepath scheme is an attempt to save and eventually cut down on the ever ballooning pension bill. Already, expenditures on salaries and pensions in the armed forces exceed the money spelt on military equipment and investments in future technology platforms that the armed forces badly need for the future.
For reasons best known to it, the government has not been able to communicate this simple fact that paying tens of thousands of retired soldiers a pension every month for at least 35 years is simply not fiscally sustainable.
