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Wednesday, December 13, 2017

Penny foolish pound foolish …



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I would like to meet the babu who came up with the apparently brilliant idea of excluding the Pre-Mature Retirees (PMR) from the ambit of OROP – I’m told he’s one of the smarties from PMO. On the face of it, he must have really impressed his political masters. After all, in one stroke the assessed burden of granting OROP has been reduced to less than half. And, since the affected people have chosen to leave the service voluntarily before their superannuation, they can’t complain if they don’t get the same terms as those who serve full time. And this had the potential to cause fissures amongst the veteran community, weakening the movement which has assumed ominous proportions for the government.

Beaming with pride, he must have gone and explained his flash of inspiration to his political masters. In 10 slides, no more, the saving that this would make. With their limited time and even more limited understanding, the political bosses must have leaped at this idea. And so it happened again – the babus managed to make asses out of everyone. In this case it must have been a solace to their wounded egos, ensuring that the victory of the OROP movement was pyrrhic.

What the political masters failed to understand that this doesn’t make sense at many different levels. Forget about the moral / legal argument – that in any case will get settled once the matter is pursued vigorously in court. Let’s just look at the political and financial effect. Politically, as far as the BJP government is concerned, by this simple exclusion, they have allowed Rs 10 Lakh Crore worth of political goodwill to go down the drain. The number of people who are dissatisfied and angry from the outcome far outweigh those (if any) who are happy.

But I’m amazed that not one amongst the intelligent decision makers have realized the obvious long term financial impact of this. To put it very simply, if this decision is enforced, it will strongly dis-incentivise officers from seeking PMR. Presently, a lot of officers who get left out along the way up the steep pyramid of career progression in the forces leave the service after completing 20 years, which entitles them to a pension.

So we have Lt Col Nattha Singh, who unfortunately did not make it to the next rank, and is drawing Rs X as his salary at 20 years. If he chooses to take PMR now, he gets a pension @ Rs .5X. But now, since he doesn’t want to lose out of the OROP scheme, he decides to continue to serve. Since he is 40 years of age as of now, he serves for the next 14 years. So now he continues to draw Rs X plus his yearly increments and allowances, accommodation etc which he would not have got he taken PMR. By the time he reaches superannuation age, he has seen at least one pay commission, and his salary is somewhere in the range of 2.5X – 3X. He now takes pension, WITH OROP, on 1.25X – 1.5X instead of on .5X as he would have if he had taken PMR. In these 14 years, there is neither a motivation nor a compulsion for him to actually work. He can’t be promoted, nor compensated extra in any monetary form if he works hard. On the other hand, as long as he doesn’t break any rules, he can’t be penalized in any way for not working.

Now if I am in Nattha Singh’s place, I would spend 14 years playing golf and holidaying at the government’s expense and then walk away with much more money, and OROP to boot, at the end of it.

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