The union cabinet on Wednesday approved changes to the 7th pay Commission report on pay and pensions, enabling higher pension payments to 5.5 million central government pensioners, with effect from 1 January 2016.
The overall additional benefits to pensioners will involve an expenditure of about Rs5,030 crore for the government in 2016-17, an official release stated.
"The cabinet approved modifications in the recommendations of the 7th CPC relating to the method of revision of pension of pre-2016 pensioners and family pensioners based on suggestions made by the committee chaired by secretary (pensions) constituted with the approval of the cabinet.
Earlier, in June 2016, the cabinet had approved implementation of the recommendations with an additional financial outgo of Rs84,933 crore for 2016-17 (including arrears for 2 months of 2015-16).
"The benefit of the proposed modifications will be available with effect from 1 January 2016, ie, the date of implementation of 7th CPC recommendations. It will benefit over 55 lakh pre-2016 civil and defence pensioners and family pensioners," an official statement issued on behalf of the union cabinet, said.
With the increase approved by the cabinet, the annual pension bill alone of the central government is likely to be Rs1,76,071 crore.
The modifications to the 7th CPC recommendations include:
Revision of pension of pre-2016 pensioners and family pensioners, entailing an additional benefit to the pensioners and an additional expenditure of approximately Rs5,031 crore for 2016-17 over and above the expenditure already incurred in revision of pension as per the second formulation based on fitment factor. It will benefit over 55 lakh pre-2016 civil and defence pensioners and family pensioners.
While approving the implementation of the 7th CPC recommendations on 29 June 2016, the cabinet had approved the changed method of pension revision recommended by the 7th CPC for pre-2016 pensioners, comprising two alternative formulations, subject to the feasibility of the first formulation which was to be examined by the Committee.
In terms of the cabinet decision, pensions of pre-2016 pensioners were revised as per the second formulation multiplying existing pension by a fitment factor of 2.57, though the pensioners were to be given the option of choosing the more beneficial of the two formulations as per the 7th CPC recommendations.
The cabinet accepted the proposal to revise the 7th CPC recommendations based on information contained in the pension payment order (PPO), issued to every pensioner, in order to provide a more beneficial option to the pensioners, the release stated.
The revised procedure of fixation of notional pay is more scientific, rational and implementable in all the cases. The Committee reached its findings based on an analysis of hundreds of live pension cases. The modified formulation will be beneficial to more pensioners than the first formulation recommended by the 7th CPC, which was not found to be feasible to implement on account of non-availability of records in a large number of cases and was also found to be prone to several anomalies.
The Cabinet also approved the retention of percentage-based regime of disability pension implemented post 6th CPC, which the 7th CPC had recommended to be replaced by a slab-based system.
The issue of disability pension was referred to the National Anomaly Committee by the ministry of defence on account of the representation received from the defence forces to retain the slab-based system, as it would have resulted in reduction in the amount of disability pension for existing pensioners and a reduction in the amount of disability pension for future retirees when compared to percentage-based disability pension.
The decision which will benefit existing and future defence pensioners would entail an additional expenditure of approximately Rs130 crore per annum.