07 Sep 2015 15:37 IST

OROP: Finance Ministry looking at menu of options to fund scheme

May raise cess, collect more dividend from profitable PSUs

The Finance Ministry will be looking at ways to generate resources to fund the One Rank, One Pension (OROP) scheme when it begins work in the next few days on revised estimates for the current fiscal year.

Savings from already allocated funds of various government departments and more dividends from profitable public sector enterprises are some of the resource options that the Finance Ministry has set its sights on to fund the scheme.

“Resources have to be found to fund OROP. The government will have to look at long-term solutions. A possible mechanism could be changes in cess amounts…. A call has to be taken from which resource pool funding will happen,” said an official.

One of the options could be to utilise Swachh Bharat cess funds to part-finance OROP, said the official. If need be, the rate could also be increased for an additional mop up.

Indications are that the government may rely on a supplementary demand for grants to fund the scheme in case the options already before it are not enough.

Huge outgo

OROP is a scheme where all veterans who retired at the same rank and had the same length of service become eligible for a uniform pension, regardless of their date of retirement. At the beginning of this fiscal year, the Defence pension bill was budgeted at ₹54,000 crore. If one were to add the OROP spend, including arrears, the overall Defence pension bill is estimated to go up to about ₹75,000 crore.

For the current fiscal year, the overall OROP outgo is estimated at ₹8,000-10,000 crore. This is besides the arrears of ₹12,000 crore.

While widows will get arrears in a lump sum, the others will be paid in four half-yearly instalments.

On an overall basis, the additional spend on OROP will put a strain on the finances as fuel subsidy savings from the sharp fall in global oil prices have already been earmarked for expenditure on infrastructure, the official added.

There is also fear among the authorities that other sectors will now start seeking a similar dispensation.

“If similar demands start coming from other sectors also, we do not know from where we will provide funding,” the official said.