New Delhi, September 7
The establishment of a stringent regulatory mechanism is of paramount importance for ensuring that the desired objectives are achieved from the proposed contributory pension scheme for government employees, Union Labour Minister Sahib Singh Verma has said.

He, however, hastened to add prima facie he “did not find any fault” in the scheme as it would reduce the increasing burden on the government exchequer.

“I do not find fault in the scheme. But loopholes, if any, need to be plugged”, he said. The scheme critically depended on the safeguard mechanisms that would be made available to the subscriber as “risk is more with higher returns”.

Mr Verma, acknowledged that the cost of running the scheme was higher as it would be operated through private fund managers.

Under the proposed scheme, the government would be a matching contributor equivalent to 10 per cent of the employees basic pay and dearness allowance.

This was different from the existing scheme as it was entirely the liability of the government to provide pensions to its employees after they achieved superannuation. The economic logic behind the decision to draw fresh recruits into a contributory pension scheme was that in the long run, it would substantially ease the liabilities of the Centre accruing to pension expenditure.

Mr Verma said this was a fiscally prudent step, but the lacunae as pointed out by some quarters needed to be addressed, and if necessary, redressed through an appropriate institutional intervention.

Pension liabilities of the Centre had increased from Rs 15,346 crore in 1998-99 to Rs 21, 172 crore in 2002-03 and was estimated to be to the tune of Rs 23,158 crore in 2003-04. The pension expenditure of the Centre had grown at an compound annual growth rate of 21 per cent during 1990 to 2001. Mr Verma said a 100 per cent safe return option could also be included in the scheme. “A 100 per cent assured return option could be included in the scheme which will expand the choice set for the subscriber”, he said.

Under the proposed scheme which was approved by the Union Cabinet recently, new government employees would have the choice of opting for any one of the three plans — safe income, balanced income and growth.