Curated By: Business Desk
Last Updated: December 12, 2023, 13:37 IST
OPS was discontinued in 2004.
As per the old pension scheme (OPS), a retired government employee gets access to a life-long stable income after retirement.
The Reserve Bank of India has implemented various provisions to support individuals in their post-retirement phase, introducing schemes to ensure financial stability for retirees. One prominent initiative was the Old Pension Scheme (OPS), providing retired government employees with a lifelong stable income, equivalent to 50% of their last withdrawn salary along with dearness allowances. Although the OPS was discontinued in 2004, recent efforts by several states, including Rajasthan, Chhattisgarh, and Punjab, aim to reintroduce it, with Karnataka contemplating a similar move.
However, a new report from the Reserve Bank of India (RBI) cautions against the widespread reinstatement of OPS. The report, analysing budgets for 2023–24, emphasises that the financial burden on states would surge significantly if all states opt for OPS, reaching 4.5 times that of the New Pension Scheme (NPS). According to the report, the additional expenditure from OPS could amount to 0.9% of GDP by 2060, posing a substantial challenge to states’ financial stability.
While some states have already reintroduced OPS, the RBI report urges caution, stating that such a move could hinder developmental initiatives and divert resources from essential projects. The report identifies OPS as a retrograde step that could undermine the benefits of previous reforms, adversely affecting future generations. The RBI predicts that the last batch of OPS beneficiaries will retire around 2040, receiving pensions until 2060.
With general elections approaching, the RBI advises against implementing OPS to secure public support. Instead, the report encourages states to explore revenue-enhancing measures at the local level. Strengthening tax management to boost collection and prevent evasion emerges as a viable strategy to enhance the financial capacity of states.
The RBI’s report emphasises the potential pitfalls of reinstating OPS, urging states to prioritize fiscal responsibility and explore alternative revenue-generation avenues to ensure sustained development without compromising financial stability.