Don’t Want Pension Scheme That Benefits Few, Is Disastrous For Rest: Finance Secretary

New Delhi:

This year’s Union Budget, which has been at the receiving end of the opposition’s ire because of the alleged preferential treatment given to certain states – especially Andhra Pradesh and Bihar – is not discriminatory and a set formula is in place for the devolution of taxes, Finance Secretary TV Somanathan has said. 

Speaking exclusively to NDTV on Thursday, Mr Somanathan also said that the Agnipath scheme is just a variation of short service commissions, which have existed forever, and is financially prudent. As announced in the Budget, the new pension scheme will be tweaked to address the key issues raised by beneficiaries, he added.

Asked about the opposition’s allegations of discrimination, the senior bureaucrat said he does not want to go into the political aspects of the matter but on the purely financial front, it was a question of following laid-down formulas. Disagreements, he said, could arise in central schemes. 

“When it comes to the finance ministry’s transfers, what are the things that we handle? We handle devolution, which is the share of taxes, and we have the finance commission grants –  both of these are determined by the finance commission, and we don’t deviate. The other new scheme that we operate is special assistance to states for capital investment, which is also largely formulaic. Some part of it is untied. Some part of it is tied to specific reform outcomes, and we have actually disbursed money to almost all the states under that scheme, and I have not heard any complaints on that,” Mr Somanathan said. 

“I think there has been no discrimination, definitely not in the allocations by the finance ministry. And I don’t think even in the case of other ministries. Problems or issues may arise when something is a programme of the central government, where the Centre has the prerogative to decide where and how it is used. So that is a matter where the elected executive at the Centre decides in its domain and the elected executive of the state can ask the Centre what it wants. But final decisions remain with the Centre, and that is a realm where officers like me have very little to say,” he added.

The finance secretary insisted that, putting politics aside, the coordination between the Centre and all states at the administrative level is very smooth. 

“I continue to be in regular touch with the finance secretaries of the state and the chief secretaries. Our dialogue continues to be very professional. So, this country is very resilient. We have some very good federal systems. And the all-India services are an example of a federal system where the same set of officers work both in the states and at the Centre. So, somebody who was my colleague till yesterday in this ministry is now the finance secretary of Andhra Pradesh. We have mechanisms for dealing with these problems which are outside the realm of politics,” he said. 

Agnipath Scheme

The Agnipath scheme has been a contentious issue between the Centre and the opposition and it is also believed to have cost the BJP Lok Sabha seats in some states, especially those from where a large number of youth enrol in the armed forces. 

When Mr Somanathan was asked about speculation that changes are likely in the scheme, which would benefit those who join the Army, Navy or Air Force as Agniveers, he said he is not aware of any such plans. 

“I am not an expert on Agnipath. You will have to ask the defence secretary, but I am not aware of any changes in the Agniveer system. I think it’s a good system. I think a lot of armies across the world have moved to short service commissions. The word Agniveer is new, but short service commissions have existed for ages, not only in India but elsewhere as well. Short service commissions are a useful way of ensuring that you have a youthful infantry. This is especially important given the kind of borders that India has, where there is very difficult terrain,” the finance secretary said. 

“I think there are a number of merits in the scheme. It is also financially very prudent because the armed forces are still on the old pension scheme, which is a very expensive scheme,” he pointed out. 

Pension Tweaks?

Mr Somanathan, who is heading a committee discussing possible changes in the new pension scheme, said an announcement has been made in the Budget by Finance Minister Nirmala Sitharaman and details are being worked out. He said that the government is committed to ensuring that the key areas of concern are addressed but emphasised that it does not want a system which is beneficial for one class of people, but “disastrous” for the rest. 

“We have had four rounds of consultations with our staff associations through the National Council of Joint Consultative Machinery. We have understood what the core concerns are. One thing that I can say as the head of the committee – I can’t speak for the government on this – is that a return to the old pension system is completely not feasible financially… It will be a disaster for those citizens of India who are not government servants. It may be desirable for one class of people, but it will be a disaster for the rest, so that is not feasible,” Mr Somanathan said. 

“But we have understood through these discussions what the core concerns of employees are. They would like an assurance of the amount of pension they would get and not be dependent on market fluctuations. Second, they would like some form of inflation protection for that pension. And the third, for those whose service falls short of the required guaranteed level, could there be a minimum pension for them? I think we will be able to find a way to address these concerns to a satisfactory level. And that is the effort that we are working towards,” he added, stressing that the steps would be taken keeping fiscal prudence in mind. 

Industry On Board With Internship?

Some aspects of the internship programme announced by the government in the Budget as part of its employment generation push have also been criticised and sources clarified on Wednesday that the top 500 companies would not be forced to participate. The finance secretary told NDTV that the government had consulted industry on the broad contours, but admitted that the specific scheme that was announced had not been discussed. 

“It is completely voluntary. We had consulted trade and industry on the broad issues of skilling and they have generally been very forthcoming in terms of saying that this is something they would like to partner on. They have not necessarily been consulted on the specific parameters of the scheme that’s been outlined in the budget, no. But it is not contrary to what they are capable of doing,” he said. 

“The scheme centres around the use of corporate social responsibility (CSR) funds in a focused manner for skilling. We are focusing on those companies which are part of the CSR requirement under the Companies Act. There are about 20,000 companies, very roughly, who spend approximately 26,000 crores on CSR. 500 companies would (account for) nearly two-thirds of that total. So this is a manageable universe which is easy to monitor and work with,” the finance secretary added. 

Stating that the government will pay 90% of the stipend and the relocation and incidental costs, he said the volunteering companies would skill the person in a trade that they are engaged in. They could also use companies in their supply chain for this. 

“Whatever expense they incur will be from their CSR funds. So it doesn’t affect their bottom line in any respect. They do a number of other CSR activities, but those are usually in the domain that the government can also do – the government can also set up schools and build toilets. But the government cannot do industrial skilling. So this is a unique advantage which the private sector has,” he said, stressing that the selection process for such interns would be fair and transparent. 

Thrust On Foreign Direct Investment

Making it clear that the government is welcoming Foreign Direct Investment (FDI) in “every way, shape and form”, the finance secretary pointed to the focus on plug-and-play infrastructure being set up in various places to ease the regulatory compliance burden on companies. 

“We mentioned a number of things in the speech on plug-and-play infrastructure… 100 such places being chosen… 10 nodes on the industrial corridors. So these are all going to make it easier for FDI to come and set up in India without having to go through the entire process of getting regulatory approvals for each step. So a pre-approved package of land, labour, infrastructure, pollution clearance, electricity, roads, water – everything that you need to set up. an industry – should be ready when you come in, and this is the aim we are working on,” he said.