Flaws in OROP concept – Ranson
The concept of One Rank One Pension (OROP) is to bridge the gap between the rate of pension of the current pensioners and the past pensioners, and also future enhancements in the rate of pension to be automatically passed on to the past pensioners. In armed forces, equality in service has two components, namely, rank and length of service.
Hence, two armed personnel in the same rank and equal length of service should get same pension irrespective of date of retirement and any future enhancement in rates of pension be automatically passed on to the past pensioners. The proposal per-se sounds legitimate and reasonable but seems to be lopsided and without much merit.
The OROP concept has been developed with respect to the basic pension and not the residual pension. The pension has two components viz.(a) Basic Pension (b) Residual Pension or better known as monthly carry home pension after deduction of commuted portion of pension. The basic pension is fixed with respect to the last basic pay drawn.
The residual pension is the sum total of basic pension plus dearness relief minus commuted portion of pension. Whatever may be the basic pension but what it matters to a veteran is his monthly carry home pension or residual pension. Therefore the residual pension should be more important and relevant than the basic pension to a veteran.
Hence the concept and approach of OROP with respect to basic pension needs to be changed to remove the basic flaw and more emphasis to be given to the Residual Pension. This will ensure that all veterans of the same rank and seniority irrespective of their date of retirement are given the same rate of monthly residual pension.
After the implementation of 6 CPC in 2006 the veterans retired post 2006 got higher basic pension as compared to pre-2006 veterans. Though post 2006 veterans got higher rate of basic pension but it did not render them higher rate of residual pension (monthly carry home pension after deduction of commuted portion). As a matter of facts, the pre-2006 veterans who are drawing less basic pension than the veterans of post 2006 are in receipt of more residual pension than post 2006 veterans.
This is nothing but true and no pre-2006 veterans would dispute it. But, somehow, the argument for OROP was developed on the basis of all veterans with same rank and seniority must be given same rate of basic pension without realizing that same rate of basic pension for all pre-2006 and post-2006 veterans will vitiate the existing financial parity and unnecessarily tilt the balance to give undue advantage to pre-2006 veterans without any rhyme or reason.
In the existing system old veterans (pre-1.1.2006) are already drawing more residual pension (monthly carry home pension after deduction of commuted portion) and any sort of upgradation in basic pension to them will not only lead to widen the gap and enable the past veterans to get more residual pension than the post 1.1.2006 veterans but also put all post-2006 veterans in great financial loss for no rhyme or reasons. The following two live examples will prove the above point:-
Example- 1. The basic pension of a Lt col who retired on 31.12.2000 was revised to Rs. 26265 as on 1.1.2006 post 6 CPC. The pension Commutation value is Rs. 3624. His present residual pension is Rs. 53896. (B.P.26265 + 119% DA Rs. 31255 – commuted portion Rs. 3624= Rs. 53896)
Example-2. Another Lt.Col who retired on 30.6.2010 draws basic pension of Rs.31350. Commuted portion is Rs. 15675. His present residual pension is Rs. 52982 which is less by Rs. 914 as compared to the veteran who retired in 2000 ( Rs. 53896 – 52982 = Rs. 914 per month).
Note:- For the sake of argument just think of a situation when the basic pension of the Lt col mentioned at example -1 is fixed at par with another Lt col mentioned at example-2 i.e. Rs. 31350. With a basic pension of Rs. 31350, the residual pension works out to Rs. 65033 pm (Rs.31350 plus 119% DR minus Rs.3624 commuted portion = 65033) which higher by 12051 as compared to the residual pension of the Lt col who retired post 2006. In this case will the residual pension of the later be stepped up at par with the former? What are we fighting for? And whose interest is being looked after with present OROP concept? Is there any flaw in the concept of OROP?
From the above illustration one can see that the veteran who retired during 5 CPC draws Rs. 914 more than the veteran retired with higher rate of basic pension post 6 CPC. Further, all those veterans who retired pre-2006 and had completed 15 years of post retirement are already drawing much higher residual pension. This being the factual position on ground how can pre 2006 veterans justify their demands for OROP in its present form. Therefore the hue and cry being made by all pre-2006 veterans is uncalled for and unreasonable.
A very pertinent point to be highlighted here is that though the basic pension of post 2006 veteran is fixed at higher level than the veteran of pre-2006 yet in reality the later gets more carry home pension than the former as given in the above illustration. Besides the above the veteran mentioned at example-1 above will start drawing his full pension from 1.1.2016 by which time his residual pension will be much higher than the pensioners retired post 2006.
This phenomenon will more or less continue till the post 2006 retiree completes 15 years of post retirement period and starts drawing his full pension or until the difference in residual pension get negated by virtue of increases in future dearness relief. This means that the existing rules governing payment of residual pension to all past veterans are in order and are intended to protect the interest of all past veterans. Therefore the question of OROP for all and sundry does not arise in the first place.
However, on completion of 15 years of post retirement by the post 2006 veterans’, the old veterans (pre-2006) will be placed in disadvantageous state and therefore needs to be given financial up gradation at par with post 2006 retiree. The 7 CPC is round the corner and is likely to be implemented very soon. And all veterans retired up to the last date of 6 CPC will be given the same rate of pension as per fixation formula to be accepted. Again all veterans will be back square one again and the same problem will crop up for future retirees.
In the back drop the OROP is presently needed for post 2006 retirees at par with pre 2006 veterans and not vice versa as pre-2006 veterans are in receipt of higher residual pension than the post-2006 retirees. Therefore the basic concept of OROP needs to be revamped totally to ensure that all veterans with same rank and length of service get equal rate of residual pension irrespective of his/her basic pension whether it is higher or lower. Further the basic pension of pre-2006 should only be revised with respect to post 2006 retiree in case the former draws less residual pension than the later.
As far as commutation of pension is concerned it is well known that the commuted amount is refundable with interest to govt. over a period of 15 years after which one starts earning his full pension. Since the commutation value is refundable the old veterans cannot make a stand or argue that they got less commutation value than the post 2006 retirees. After implementation of 7 CPC, the amount payable on account pension commutation to future retirees will be much more than the amount received by a person retired during 6 CPC. The present concept of OROP to ensure same basic pension to a veteran with same rank and length of service is in another way is to hoodwink the government to give pension commutation parity to all pre-2006 veterans at par with post 2006 veterans without having to refund it to government with interest. This is a gross injustice to all post 2006 veterans.
The successive CPCs had already given pension parity as per ranks to all officers’ community. Therefore the need of the hour is to implement the concept of OROP for PBORs, War widows and family pensioners first to remove all kinds of existing anomalies. The pension of old and new veterans (pre-2006 and post 2006) who have completed 15 years of post retirement and drawing full pension need only be revised and not all and sundry. As given in the illustration above, the pre-2006 veterans are already drawing more residual pension than the post 2006 veterans, hence their cases are not required to be looked into and they do not deserve the OROP concept as they are already drawing more residual pension.
I am a post 2006 veteran and draw less residual pension than the veterans retired during 3rd, 4th and 5th CPC. Can the OROP concept ensure that I get the same rate of residual pension as that of the past pensioners? The real concept of OROP, therefore, should be to ensure that all veterans of the same rank and length of service whether pre-2006 or post 2006 retirees get the same amount of carry home pension (residual pension) and not to give any sort of linkage to the basic pension which will give a wrong picture as illustrated above. Also it is not true to believe that higher the basic pension higher the residual pension.
In fact it works other way round that higher the basic pensions lower the residual pension. If the OROP concept is not changed to ensure same level of residual pension for all with the same rank and length of service it will lead to an unhealthy situation where the pre-2006 veterans will attain monetary benefits for no rhyme or reason and the post 2006 veterans will be left high and dry without any monetary gains. The judicial review team may look into these aspects and to ensure that veterans who are already drawing more residual pension than the veterans of post 2006 is not given any financial upgradtion in the name of OROP which is not a well conceived idea and it revolves around basic pension and not the residual pension which is the final amount that a veteran gets from the government every month as his/her pension.
(View and Opinions expressed in this article belong to its writer Mr.Ranson)
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COMMENTS
Flawed and spurious argument by the author.When you commute your pension, the quantum being 50 percent of your pension amount multiplied by 180 instalments(or 15 years) and the interest part deducted(roughly 72 instalments). what you get in hand is a lump sum advance worth 9 years of half pension. This advance is also tax free. If you invest that amount intelligently for 15 years term, you can recover more than what you would have otherwise drawn without commuting(cumulate that 50 percent for 15 years and put it in RD). Choice is yours, whether you want cake in one go/ advance, with a rider that you got to deduct interest amount in case of advance, OR you want in monthly payouts. Note that this is an arrangement purely as an incentive to take care of huge lumpsom financial needs post retirement, and not a must to adhere to. Also, in case a pensioner who has not commuted dies for some reason before 15 years post retirement, his family will be authorised only family pension, not full pension. That is why it makes sense to commute pension for both past and present pensioners, with equal pros and cons. Hence the residual pension argument does not hold water in the context of OROP, since many case would exist s in past and present where many opted for no commutations too. Late retirees enjoy more lumpsome amount as commuted value while past retirees enjoy more residual pension, hence both balance out even before the arguments for OROP is brought on table. In short, and in principle, it is always the past that has to catch up with present, not vice verse.
The OROP is an intractable issue and cannot be implemented without detailed studies. All pre -2006 veterans want parity with post 2006 veterans stating that the basic pension of post 2006 veterans is more than the pre-2006 veterans. But the reality on ground is that the pre-2006 veterans draw more residual pension (monthly carry home pension) than the post-2006 veterans. All veterans including those who retired pre-maturely can be classified into three categories: – (1) All veterans (pre & post 2006 era) who commuted pension as per govt. orders (2) All veterans who did not commute pension as per govt. orders (3) All veterans who had commuted pension partially. If one carries out a study of these three categories of veterans, one would come to the following conclusions:-
(a) Veterans who had availed pension commutation. The present residual pension of pre-2006 veterans is more than the post 2006 veterans. Besides, the pre 2006 veterans enjoyed greater opportunity cost than the later because the market price went up considerably after implementation of 6 CPC benefits. Since pre-2006 veterans are already drawing more residual pension there is no need for immediate hike of pension. The basic pension of pre-2006 veterans need be raised only when the post 2006 veterans starts drawing more residual pension than the former. A large percentage (more than 99%) of veterans comes in this category.
(b)Veterans who had not availed commutation of pension. The percentage of this category is negligible. If you compare the monthly pension, it can be seen that pre-2006 veterans are presently getting less pension than the post 2006 veterans. In fact this is the category which really needs OROP at present and to be given parity immediately.
(c) Veterans who had partially commuted pension. In this category also the pre-2006 veterans are likely to draw more residual pension than the post 2006 veterans. When the govt. permits one to avail full commutation of pension at the time of retirement, one should have availed the full facility and enjoyed the opportunity cost.
Since the commutation of pension is refundable with interest to govt. it is, therefore, futile to discuss on the issue of commutation amount one got it at the time of retirement. Therefore, it is of paramount important to stress upon the residual pension rather than the basic pension. I personally feel that since commutation value is refundable all veterans whether pre or post 2006 era must get same amount of monthly pension.
I request ESM to close this subject and look for GOI,MOD favourable consideration and decision which was awaiting D M arrival to be published this month.
Only basic pension can be compared and Residual is not comparable as it will differ as per amount of commutation one has received. The comment given above by unknown writer is correct. Interest on commuted value is also to be taken into account.
My dear, why are you ignoring commuted pension? Money has a present and future value. Had you considered all facts to make comparison, you would not have posted such views. Who has asked you to raise such non issues when the OROP has already been defined clearly?
MR RANSON, WHO ARE YOU? Clearly you are an enemy of Army Veterans. Has anybody paid money to you for misguiding and confusing a soldier. Present day soldier is no longer a simpleton who could be fooled by back-stabbers like you.
If the writer is a civilian , he should go for a tuition to know about the importance of basic than risidual. If he is an ex or seving soldier, he is a fool only.
Dear Sir,
The author, unfortunately, is a post 2006 Veteran, mentioned by him in the article itself. You can judge his ingenuity from the very first paragraph of the write up where he says " Proposal per-say SOUNDS LEGITIMATE and contradicts himself in the same line.
He wants to hide the amount of commuted value he got as post 2006. A word about the huge hike in gratuity amount post 2006 is also with mention. We as Pre-2006 pensioners couldn't draw full gratuity of 3.5 lakhs due to the illigal deduction of Rank pay.
USELESS CALCULATION AND ARGUMENT OF RESIDUAL PENSION. WHAT ABOUT HUGE AMOUNT OF COMMUTATION AND IF YOU INVEST IN EVEN GOVERNMENT BANK YOU WILL GET MUCH MORE THAN PRE-2006 PENSIONERS , SO PLEASE RETURN THE AMOUNT TO GOVT AND THEN COMPARE THE RESIDUAL AND PENSION. SO FOR ARGUMENT SACK DON'T WRITE ANY ARTICLES.
It is all being played by Modiji & co. It is merely to divide by prolonging as GOI is saving pension and utilising wherever. BJP and pro can make its use.There is no point in argueing.I request ESM to remain united.
It is always Basic Pay which is accounted for for any calculation.
Govt is charging interest on the amount given as commutation and the accounting for your information is the amount is fully recovered in 12 years and the commutation of pension is stopped after 15 years. Once individual is paying interest then you have no right to comment. Before writing such article you should have undergone the superme court decision on commutation of pension
Commutation of pension is not compulsory though every one does it.Also a smaller percentage can be commuted if one desire.If one draws less residual pension he must have got more commuted amount. Also DR is paid inclusive of commuted vlue of pension.
A very valid point by Bala,
The author seems to be unconcerned about the JCOs and OR and the Widows who arethe worst sufferers.
The commuted value collected by the post 2006 is a fortune different from the one collected by pre-2006.Please take that into account and then analyse.
The govt is only feel for officers in OROP. but not think about pbor.govt not yet the OROP table has released. I could not understand why the gov is in nessorly delaying OROP.
Please do not use the term PBOR. Instead you must say JCOs and Other Ranks.
SIR,
A VERY USELESS URGUEMENT.
Sir,
A BASE LESS ARGUMENT.YOU CAN FOOL ALL FOR LONG.
You are enjoying more coo lute lumpur than the older pensioners, if you return it then you can compare yourself with them. The pertinent question is the same basic for all depending on rank and service. Don't be greedy with your logic.