PFRDA BILL: EMPLOYEES, TEACHERS HOLD CONVENTION: ‘WITHDRAW PFRDA BILL OR FACE INDUSTRIAL ACTIONS’

K K N Kutty

SEVERAL organisations of central and state government employees, as school, college and university teachers, and pensioners have come together to press for the urgent demands of the sections they represent and, as a part of this process, they organised a national convention at New Delhi on July 22. These organisations, represented through their delegates at the convention, included the All India State Government Employees Federation (AISGEF), Confederation of Central Government Employees and Workers (CONFDN), All India Railwaymen’s Federation (AIRF), All India Federation of University & College Teachers Organisations (AIFUCTO), BSNL Employees Union (BSNLEU), School Teachers Federation of India (STFI), All India Defence Employees Federation (AIDEF) and Bharat Central Pensioners Confederation (BCPC).

STRIKE ON ANVIL

AISGEF’s senior vice president Sukomal Sen presented the declaration for consideration by the house; CONFDN president S K Vyas supported it. A presidium consisting of R G Karnik (AISGEF), S K Vyas (CONFDN), N Narayana (STFI), P R Menon (AIRF), Sardara Singh (AIDEF) and V A N Namboodiri (BSNLEU) conducted the proceedings of the convention. Besides the leaders of the participating organisations, those who addressed the convention included Basudeb Acharia, Tapan Sen (general secretary, Centre of Indian Trade Unions), M K Pandhe (senior vice president, CITU), Bhatnagar (All India Insurance Employees Association) and Pradeep Biswas (Bank Employees Federation of India).

More than 700 delegates representing various organisations participated in the convention. The declaration adopted unanimously by the convention urged upon the central government and state government employees as well as the teaching community to participate in a series of programmes, culminating in a strike, to compel the government to withdraw the Pension Fund Regulation and Development Authority (PFRDA) Bill. On this issue, these organisations will submit a memorandum to the prime minister, signed by a million people and detailing the reasons as to why the bill needs tot be withdrawn. After a series of state level conventions, these organisations will hold a huge rally in front of the parliament, and rallies in front of the respective Raj Bhawans, between August 1 and September 6, 2011 when the parliament is expected to be in session.

The convention set up a steering committee, consisting of leaders of the participating organisations, to spearhead the movement. This will meet in the first week of August to decide upon the date of the proposed strike.

Taking serious note of re-introduction of PFRDA Bill in the last session of parliament, the national convention’s declaration said this is a most dangerous conspiracy dictated by the IMF and World Bank which would demolish the social security to the employees and workers in their old age and would work only to fatten the private profit at the cost of savings of employees and contributions from the national exchequer.

The convention noted that the neo-liberal globalisation has been aimed to advance the interest of global capital at the cost of a majority of the world’s population who are faced with falling incomes, greater social and economic insecurity and greater restriction on the democratic rights. India adopted the neo-liberal economic policies in 1991, since when our economy underwent a thorough restructuring to advance free trade, unrestricted foreign investment, deregulated market, unhindered foray of finance capital, privatisation of public enterprises, changing work structure, free say for entrepreneurs in the matter of employment, gradual reduction of all welfare measure, annulling of labour welfare measures, withdrawal from all social security measures, privatisation of pension funds etc. But resentment over these policies, especially from the working people, has also grown and the Indian working class has assiduously built up united resistance against these policies. Virtually total unity of the Indian working class was brought about on September 7, 2010, when they organised a one-day general strike and later on February 23, 2011 when half a million people staged a rally in front of the parliament. But insensitive to the growing pauperisation of the working people and emboldened by its electoral victory, the UPA-2 government has continued unabated its pursuit of the pernicious policies and introduced various bills in the last session of parliament, including the resurrection of the PFRDA bill, to marshal the pension fund for maximising private profit.

PERNICIOUS PFRDA BILL

An important point the convention notes is that the Supreme Court of the country proclaimed as an enforceable right the concept of defined and adequate pension as deferred wage, capable of providing socio-economic justice to the employees after their retirement, but now this concept stands dismantled. For, under the new dispensation, pension would be fluctuating and not defined, or it may even be a vanishing phenomenon depending upon the vagaries of stock market. The terms of reference for the study group set up by Sixth Central Pay Commission (CPC) to go into the pension structure amply indicates a future migration even of the existing employees to the new contributory pension regime.

The wage structure of government employees has been designed on the premise that it is to be depressed in order to enable the government to meet the pension liability in future. A corollary flowing from this fact is this that the pension liability as a deferred wage is inherent in the existing wage structure. Therefore, the imposition of the new, contributory pension scheme on the employees who have entered service on or after a cut-off date is illegal because it would deny them their deferred wage as pension which was to be earned by them on account of a depressed wage structure. They are now being compelled to contribute in order to earn an undefined and uncertain annuity.

The pension fund created by the employees’ subscription and the employers’ contribution which directly flows from the exchequer (which is nothing but tax revenue of the government) is thus to be made available for the stock market operations. This is not only unethical but also a blatant diversion of public fund for private profit to foreign as well as Indian capitalists.

It is feared that, if enacted into a law, the PFRDA Bill will empower the government to alter or even deny the existing employees and pensioners the statutory defined pension benefit, as is to be done in the case of those who are appointed after the cut-off date.

It is stated that the prime objective of the introduction of a contributory pension scheme is to substantially reduce the outflow on account of pension liability. The major pension liability of the government is accounted for by the armed defence personnel. They and the paramilitary forces are, however, excluded from the purview of the contributory pension scheme, and rightly so. Thus the government is bound to meet their pension liability from the Consolidated Fund of India.

FALLACIOUS RATIONALE

The study commissioned by the Sixth CPC has found as unsustainable the government’s argument about covering the civil servants in the ambit of the new pension scheme. In a report, S Chidambaram, actuary, has pointed out that over a period of 34 years (2004-38) the government’s liability on account of the contributory pension scheme would in fact increase from the existing Rs 14,284 crore to Rs 57,088 crore and is likely to taper off only from 2038 onwards. The exchequer is bound to have an increased outflow for the next 34 years and will be called upon to bear the actual pension liability of the defence personnel and the personnel of paramilitary forces, besides making the contribution to the pension fund of the civil servants recruited after the cut-off date. The specious plea that the exchequer is bound to gain due to the contributory pension scheme is thus not borne by facts.

Since most of the state governments have chosen to switch over to the contributory pension scheme, their pension liability too is bound to increase three times by 2038.

The first version of the PFRDA Bill was placed before the parliament by the NDA government in 2003. The Sixth CPC set up in 2006 a committee to go into the financial implications of the increasing number of pensioners and suggest alternative funding methodology. In its report submitted in 2007, the committee came to the conclusion that “the existing systems of pension are increasingly becoming complicated after the introduction of the new pension scheme” and warned that “caution has to be exercised in initiating any further reforms.” In the light of this conclusion, the rationale of the reintroduction of PFRDA Bill in 2011 is fallacious. When enacted into a law, the bill will make the existing pensioners’ future financially insecure and put them at the mercy of the stock market’s vagaries.

This is the reason the said organisations are opposing the new pension scheme and PFRDA Bill, and are demanding that the defined pension benefit must be extended to all the government employees, whether regularly appointed or not.

The national convention urged upon all organisations of central and state government employees and teachers to unite and organise a signature campaign on a petition to be submitted to the prime minister. In case the PFRDA Bill is not withdrawn and government employees are not brought under the statutory pension scheme, it would be imperative for employees and teachers to organise industrial actions including a strike.

Courtesy: People’s Democracy

THE REALITY BEHIND THE PFRDA BILL

Tapan Sen

When the 2005 bill was introduced, there had been murmurs and opposition among government employees as it had a direct bearing on the pension prospect of central government employees who joined service on or after January 1, 2004 for whom the government already notified a new contributory pension scheme on December 22, 2003.

The new pension scheme notified in December 2003 envisaged a contribution of 10 per cent of wages by the employee with a matching contribution from the central government as employer, which together will form the pension account for the concerned employee. The fund will be managed and handled by fund managers appointed by the PFRDA, the employees will get pension by the end of their service life and the pension amount will be determined by the return on investment of their pension fund made by the appointed fund manager.

PARADIGM SHIFT

Originally, government employees used to get pension at 50 per cent of the last pay drawn and the pension amount used to get revised with the changes in price indices. It was thus an assured amount. To get this system of assured pension system in place, government employees had to forego their right to contributory provident fund, i.e., the employer’s matching contribution to the PF. In lieu of that surrender of right, assured pension was granted to them to be paid from the Consolidated Fund of India. This system of assured pensionary benefit is called the “benefit defined” pension system.

The new pension scheme brought about a paradigm shift in the entire concept of pension as a social security measure. Now the pension will be based on the “defined contribution,” meaning thereby that the pension amount will be governed by what the employee’s “pension fund account” can earn from investment in the market. The NPS does not ensure any assured amount of pension to an employee despite her or his life-long contribution to their own pension fund. Both the pension scheme notified by the government and the PFRDA Bill (both 2005 and 2011) mentioned in clear terms that “There shall be no implicit or explicit assurance of benefits, market based guaranteed mechanism to be purchased by the subscriber” (Sec 20(2)(g) of the PFRDA Bill).

Can the market ever guarantee any assured return on investments? In the present day situation with extreme volatility in both the money market and the share market, the return on investment of public funds like pension funds is destined to be uncertain as well as low. Moreover, the fund managers appointed by the PFRDA will handle the fund not for charity but for their own profit. Hence whatever return on pension fund investment will reach the pensioner, will be the net amount after ensuring the profit of the fund managers. In the context of natural uncertainty of the market, fund managers are naturally expected to neutralise their risk first and then take care of the risk of the pensioners who actually supply capital to the fund managers through their life-time savings in pension fund. Therefore the PFRDA Bill has introduced the new regime of replacing assured pension by a pension system governed by market forces, playing with the employees’ life-time savings. Thus the PFRDA Bill and the pension system it enforces is an onslaught on the social security right of the government employees, a loot of their pension fund.

Efforts for investing a part of the provident fund accumulations of the workers in the stock market are being made since long by the government but owing to resistance by the unions this could not be done as yet. The whole system of taking into consideration the opinion of the workers through their representatives in the matter of investment of their own fund in their social security corpus has been given a go by in the new dispensation of the PFRDA regime and the fund-managers and brokers will have the last say on how the employees’ savings will be invested.

DANGEROUS DIMENSIONS

But the situation under which the PFRDA Bill 2011 has been put in place has opened another dangerous dimension. It is no more limited to the pension earnings of the central government employees alone or the state government employees in the states where the state government has also adopted the new pension scheme. The bill empowers the government to extend the ambit to all the existing pension schemes. Most alarmingly, through the PFRDA Bill the government now plans to attract the savings of the 46 crore unorganised sector workers for investment in the stock market on the same scheme of market based uncertain returns.

The government has introduced a new pension scheme, now named the “National Pension System” for unorganised sector workers. As per the scheme, which is now known as “Swavalamban” and being advertised a lot, the workers will have to contribute to pension fund a minimum of Rs 1,000 per year and maximum of Rs 12,000. After making a contribution for 30 years or so, at the age of 60 years, the worker will be eligible to get 60 per cent of his contribution as lump sum and a pension of not less than Rs 1,000 per month, provided the rest of his fund can ensure such return from the market. If his fund earns less, then the portion of lump sum receipt after retirement will go down and if his/her entire fund (100 per cent of his contribution) fails to earn the minimum stipulated amount of pension (Rs 1,000), he/she has to make more contribution to be eligible for getting the minimum pension. To attract people to this scheme, the government has announced that it will contribute Rs 1,000 per year for five years, till 2015-16. Already, the government has started making aggressive efforts to enroll workers in the so called Swavalamban scheme. Anganwadi workers who have been struggling since long for pensionary benefit are now being pressurised in many states to accept “Swavalamban” by the respective state governments.

How far are the unorganised sector workers going to be benefited by this scheme? As they do not have any pension benefit at present, it is but natural that a good section of them will be attracted towards the scheme. Will they get any assured pensionary benefit after making contribution for the scheme? No.

The scheme is silent on the situation if there would be a break in continuity of contribution, which is but natural for the unorganised sector workers frequently losing jobs and changing employment. What will happen if the worker contributes for five years, thereafter for one year he fails to make contribution, or after making contribution for say, ten years, becomes incapacitated to earn, say at forty years of age, and cannot continue contribution? Will he have to wait up to sixty years to claim either pension or lump sum payment? All these possibilities are not exceptional cases but a natural phenomenon in the life of unorganised sector workers.

As per calculation, a worker, after making a contribution for 30 years at the rate of Rs 100 per month (Rs 1200 per year) will accumulate Rs 1,49,035 which, if fully invested at 8 per cent return can ensure a monthly return of Rs 993 to him. Now, as per the scheme, if he is to get the minimum stipulated pension amount of Rs 1000, he will not get anything as lump sum. And there is no guarantee whether the investment of his fund will continue to fetch him 8 per cent return at all points of time. If it does not earn 8 per cent in any year, what will happen to his pension earnings? The scheme is not clear about such situations.

ACTUAL GAME PLAN

However, one thing is amply clear. The new pension system will not ensure any secure pension amount for unorganised workers despite their continuous contribution to pension fund. The pension amount will be governed by the return earned through investment in the market. And the investment will not be merely in the form of credit at assured rate of interest but also in the form of equity market, as decided from time to time by the fund managers. And such type of investment can in no way ensure assured return.

The whole game plan is altogether different. The share market needs a continuous flow of liquidity to keep up its profits for the speculators and brokers to earn. Pension fund can be one such source for such liquidity as it belongs to none but the poor workers, who can be put at risk for speculative purposes. In the name of providing pension to unorganised sector workers who do not have any social security benefits, the present scheme of Swavalamban has got the potential to attract crores of hapless workers to contribute for their old age security. It has a propensity to garner lakhs of crores of rupees from a market in which 46 crore unorganised sector workers will be the customers. Obligation for paying the pension will come after twenty or thirty years. The PFRDA Bill has already provided for an exit route for the fund managers and aggregators through section 20(2)(g) as quoted in the earlier paragraph and also by giving wide arbitrary powers to the PFRDA to decide. It has denied the trade unions any say on the investment and delivery of the benefit to the workers as is the practice in case of the Employees Provident Fund.

So far as the experiences of pension fund investment in the stock market in various countries in the world are concerned, on all occasions, workers’ money in pension funds was used to raise the temperature in the stock market to make the brokers and speculators gain and workers always lost in that exercise.

Therefore it is no more a case of pension for a few crore workers in the government sector whose rights and money are being looted. It is a much bigger case of 46 crore unorganised sector workers who are being allured to pay for their old age security, even by remaining half-fed, a case having immense potential of garnering several thousands of crores for fuelling the stock market. Whether the poor contributors will really get old-age security is as uncertain as the stock market. But that question will arise after twenty years. Till that time the dacoity and plunder can go on and that is precisely the game plan of the speculator-captive government at the Centre.

Pension will no longer remain a secure social security; it will become a funding source for unscrupulous investors, both domestic and foreign, which will be used in the speculative share market. In order to please the foreign pension fund operators in the USA, the government has kept the avenue fully open for FDI investment. With this bill, if passed, the hard earned money of crores of unorganised sector workers will be utilised for speculation. Can the working class and the country as a whole tolerate such an open and shameless fraud being perpetrated in the name of social security of millions?

Courtesy: www.citucentre.org/

PFRDA BILL: THE REALITY BEHIND

Tapan Sen

THE Pension Fund Regulatory & Development Authority Bill 2011 (PFRDA Bill) is almost the same bill as was introduced in parliament in 2005, with minor changes.

When the 2005 bill was introduced, there had been murmur and opposition among the government employees as it had a direct bearing on the pension prospect of the central government employees who joined service on or after January 1, 2004 for whom the government already notified a new contributory pension scheme on December 22, 2003.

The new pension scheme notified in December 2003 envisaged a contribution of 10 per cent of wages by the employee with a matching contribution from the central government as employer, which together will form the pension account for the concerned employee. The fund will be managed and handled by fund managers appointed by the PFRDA, the employees will get pension by the end of their service life and the pension amount will be determined by the return on investment of his pension fund made by the appointed fund manager.

PARADIGMSHIFT

Originally, government employees used to get pension at 50 per cent of the last pay drawn and the pension amount used to get revised with the changes in price indices. It was thus an assured amount. To get this system of assured pension system in place, the government employees had to forego their right to contributory provident fund, i.e., the employer’s matching contribution to the PF. In lieu of that surrender of right, assured pension was granted to them to be paid from the Consolidated Fund of India. This system of assured pensionary benefit is called the “benefit defined” pension system.

The new pension scheme brought about a paradigm shift in the entire concept of pension as a social security measure. Now the pension will be based on the “defined contribution,” meaning thereby that the pension amount will be governed by what the employee’s “pension fund account” can earn from investment in the market. The NPS does not ensure any assured amount of pension to an employee despite her or his life-long contribution to the own pension fund. Both the pension scheme notified by the government and the PFRDA bill (both 2005 and 2011) mentioned in clear terms that “There shall be no implicit or explicit assurance of benefits, market based guaranteed mechanism to be purchased by the subscriber” (Sec 20(2)(g) of the PFRDA Bill).

Can the market ever guarantee any assured return on investments? In the present day situation with extreme volatility in both the money market and the share market, the return on investment of public funds like pension funds is destined to be uncertain as well as low. Moreover, the fund managers appointed by the PFRDA will handle the fund not for charity but for their own profit. Hence whatever return on pension fund investment will reach the pensioner, will be the net amount after ensuring the profit of the fund managers. In the context of natural uncertainty of the market, fund managers are naturally expected to neutralise their risk first and then take care of the risk of the pensioners who actually supply capital to the fund managers through their life-time savings in pension fund. Therefore the PFRDA bill has paved the new regime of replacing assured pension by a pension system governed by the market forces playing with the employees’ life-time savings. Thus the PFRDA Bill and the pension system it enforces is an onslaught on the social security right of the government employees, a loot of their pension fund.

Efforts for investing a part of the provident fund accumulations of the workers in stock market are being made since long by the government but owing to resistance by the unions that could not be done as yet. The whole system of taking into consideration the opinion of the workers through their representatives in the matter of investment of their own fund in their social security corpus has been given a go bye in the new dispensation of PFRDA regime and the fund-managers and brokers will have the last say on how the employees’ savings will be invested.

DANGEROUS DIMENSIONS

But the situation under which the PFRDA Bill 2011 has been put in place has opened another dangerous dimension. It is no more limited to the pension earnings of the central government employees alone or the state government employees in the states where state government also adopted the new pension scheme. The bill empowers the government to extend the ambit to all the existing pension schemes. But most alarmingly, through PFRDA Bill the government now plans to attract the savings of the 46 crore unorganised sector workers for investment in the stock market on the same scheme of market based uncertain returns.

The government has introduced new pension scheme, now named as “National Pension System” for unorganised sector workers. As per the scheme, which is now known as “Swavalamban” and being advertised a lot, the workers will have to contribute to pension fund a minimum of Rs 1,000 per year and maximum of Rs 12,000. After making a contribution for 30 years or so, at the age of 60 years, the worker will be eligible to get 60 per cent of his contribution as lump sum and a pension of not less than Rs 1,000 per month, provided rest of his fund can ensure such return from the market. If his fund earns less, then the portion of lump sum receipt after retirement will go down and if his/her entire fund(100 per cent of his contribution) fails to earn the minimum stipulated amount of pension (Rs 1,000) he/she has to make more contribution to be eligible for getting the minimum pension. To allure people towards this scheme, the government has announced that it will contribute Rs 1,000 per year for five years till 2015-16.

Already, the government has started making aggressive efforts to enroll workers in the so called Swavalamban scheme. Anganwadi workers who have been struggling since long for pensionary benefit are now being pressurised in many states to accept “Swavalamban” by the respective state governments.

How far the unorganised sector workers are going to be benefited by this scheme? As they do not have any pension benefit at present, it is but natural that a good section of them will be attracted towards the scheme. Will they get any assured pensionary benefit after making contribution for the scheme? No.

The scheme is silent if there would be a break in continuity of contribution which is but natural for the unorganised sector workers, frequently losing jobs and changing employment. What will happen if he contributes for five years thereafter for one year he fails to make contribution or after making contribution for say ten years becomes incapacitated to earn, say at his forty years of age and cannot continue contribution? Will he have to wait up to sixty years either to claim pension or lump sum payment? All these possibilities are not exceptional cases but a natural phenomenon in the life of the unorganised sector workers.

As per calculation, a worker after making a contribution for 30 years at the rate of Rs 100 per month (Rs 1200 per year) will accumulate Rs 1,49,035 which, if fully invested at 8 per cent return can ensure a monthly return of Rs 993 to him. Now as per the scheme, if he is to get the minimum stipulated pension amount of Rs 1000, he will neither get any thing as lump sum. And there is no guarantee whether the investment of his fund will continue to fetch him 8 per cent return at all point of time. If it does not earn 8 per cent in any year, what will happen to his pension earnings, the scheme is not clear about such happenings.

ACTUAL GAMEPLAN

But one thing is amply clear. The new pension system will not ensure any secure pension amount for the unorganised workers despite his continuous contribution to pension fund. Pension amount will be governed by the return earned through investment in market. And the investment will not be merely in the form of credit at assured rate of interest but also in the form of equity market as time to time decided by the fund managers. And such type of investment can no way ensure assured return.

The whole gameplan is altogether different. The share market needs a continuous flow of liquidity to keep up its profits for the speculators and brokers to earn. Pension fund can be one such source for such liquidity as it belongs to none but the poor workers who can be risked for speculative purposes. In the name of providing pension to unorganised sector workers who do not have any social security benefits, the present scheme of Swavalamban has got a prospect of attracting crores of hapless workers to contribute for their old age security. It has a propensity to garner lakhs of crores of rupees from a market in which 46 crore unorganised sector workers will be the customers. Obligation for paying the pension will come after twenty or thirty years. The PFRDA Bill has already provided for the exit route for the fund managers and aggregators through section 20(2)(g) as quoted in the earlier paragraph and also by giving wide arbitrary powers to the PFRDA to decide. It has denied the trade unions to have their say on the investment and delivery of the benefit to the workers as is the practice in case of the Employees Provident Fund.

So far as the experiences of pension fund investment in the stock market in various countries in the world are concerned, on all occasions, workers’ money in pension funds was used to raise the temperature in the stock market to make the brokers and speculators gain and workers always lost in that exercise.

Therefore, it is no more a case of pension for a few crore workers in government sector whose rights and money is being looted. It a much bigger market of 46 crore unorganised sector workers who are being allured to pay for their old age security even by remaining half-fed having immense potential of garnering several thousands of crores for fuelling the stock market. Whether the poor contributors will really get old-age security is as uncertain as the stock market. But that question will arise after twenty years. Till that time the dacoity and plunder can go on and that is precisely the game plan of the speculator-captive government at the centre.

Pension will no more remain a secure social security; it will become a funding source for unscrupulous investors, both domestic and foreign, which will be used through speculative share market. In order to please the foreign pension fund operators in the USA, the government has kept the avenue fully open for FDI investment. With this bill, if passed, the hard earned money of crores of unorganised sector workers will be utilised for speculation. Can the working class and the country as a whole tolerate such open and shameless fraud in the name of social security of millions?

Courtesy: www.pd.cpim.org/